Exhibit 10.1

IDENTIPHI, INC.

SECURED PROMISSORY NOTE

Austin, Texas

 

Up to AUD$1,750,000.00

   March 12, 2008

1. Obligation. IdentiPHI, Inc., a Delaware corporation (hereinafter referred to
as the “Maker”), for value received, hereby promises to pay to Zaychan Pty
Limited, a corporation registered under the laws of Australia numbered A.C.N.
080 485 338 (hereinafter referred to as the “Holder”), the principal amount
having been drawn down in writing, in one or more tranches by the Maker in its
sole discretion (pursuant to a Draw Down Request, in the form attached hereto as
Schedule A), up to a maximum of One Million Seven Hundred Fifty Thousand
Australian Dollars (AUD$1,750,000.00), together with interest (calculated from
the date set forth on Schedule B with respect to each entry on Schedule B) on
the unpaid principal balance at a rate equal to 8.0% per annum (computed on the
basis of the actual number of days elapsed and a 365-day year). Principal and
interest (if applicable) shall be payable in Australian dollars at such place as
the Holder may from time to time designate in writing to the Maker.

2. Payments. The entire balance of unpaid principal and accrued but unpaid
interest hereunder will become due and payable on the earlier of the following
events (each, a “Payment Event”):

 

  a. June 29, 2008 (the “Maturity Date”); or

 

  b. Immediately upon the closing of a financing transaction of the Maker
following the date of this Note in which the Maker issues and sells shares of
equity securities or securities convertible into equity securities with gross
proceeds to the Maker of not less than Five Million US dollars (US$5,000,000).

Unless the Holder directs otherwise, all payments made hereunder shall be made
to the Holder, attention: Rear 54 Mountain Street, Engadine NSW 2233, Australia.

3. Prepayment. This Note may be prepaid in whole or in part at any time without
penalty or premium. Any partial prepayment shall be credited first to any
accrued but unpaid interest, and then to the unpaid principal of this Note.

4. Warrants. Upon receipt of each Draw Down Request, the Maker shall issue to
the Holder a common stock purchase warrant, in substantially the form of
attached Exhibit A (each, a “Warrant” and, together, the “Warrants”), which
Warrant shall entitle Holder to purchase a number of shares of the Maker’s
common stock equal to the Warrant Amount (as defined below), divided by 0.80, at
an exercise price of US$0.80 per share. For purposes of this Note

 

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and the Warrants, the “Warrant Amount” shall mean: (i) with respect to the first
one million Australian dollars (AUD$1,000,000) drawn down, in the aggregate, by
the Maker, the product of 0.125 and the principal amount of such Draw Down
Request; and (ii) with respect to the remaining seven hundred fifty thousand
Australian dollars (AUD$750,000) drawn down, in the aggregate, by the Maker, the
product of 0.20 and the principal amount of such Draw Down Request.

5. Secured Note. The Maker grants to Holder a security interest in all of the
Maker’s assets, whether presently existing or hereafter created or acquired,
including but not limited to: (a) all of the Maker’s goods and equipment,
inventory, documents, cash, deposit accounts, financial assets, accounts
receivable and all other forms of obligations owing to the Maker which arise
directly or indirectly out of the sale or lease of goods or the rendition of
services by the Maker, and all product and proceeds thereof, together with all
books, records, files and documents and other information at any time
evidencing, describing or pertaining to the Accounts, and (b) all of the Maker’s
contract rights, intellectual property rights and general intangibles,
including, without limitation, all goodwill, trademarks, servicemarks, trade
styles, trade names, patents, patent applications, copyright rights, copyright
applications, trade secret rights, unpatented inventions, know-how, confidential
information, source code, object code, developed software programs, leases,
license agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights of payment of any kind (collectively,
the “Collateral”), whether now owned or hereafter acquired, to secure the
payment of all of the indebtedness hereunder (the “Secured Obligations”). (Each
capitalized term used in this Section 4 not otherwise defined herein shall have
the meaning given to it by Article 9 of the Uniform Commercial Code in effect
from time to time in the relevant jurisdiction.)

6. Waiver. The Maker hereby waives presentment, demand, protest, notices of
protest, dishonor and non-payment of this Note and all other notices of every
kind. No delay or omission on the part of the Holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note. The release of any party liable on this Note shall not operate to
release any other party liable hereon.

7. Notice. Any notice or other communication that the Holder may send to the
Maker, or which the Maker may send to the Holder, shall be deemed delivered
three (3) days following deposit of such notice or other communication in the
United States Mail, certified, return receipt requested, postage prepaid, or one
day after deposit with a commercially recognized overnight courier service, in
either case addressed to (a) the holder of this Note at the address set forth in
Section 1 above or at such other address as the Holder may direct in writing, or
(b) the Maker at its principal offices.

8. Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of Delaware.

9. Expenses. The Maker shall pay the reasonable fees for the Holder’s legal
counsel in connection with the preparation, execution and delivery of this Note
and the Warrants.

 

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10. Amendment Provisions; Entire Agreement; Non-Assignment. This Note may not be
amended or modified, nor may any of its terms be waived, except by written
instruments signed by the Maker and the Holder. This Note represents the final
agreement of the Maker and the Holder as to all matters addressed herein and
supersedes all previous agreements, negotiations, and discussions by the parties
regarding the subject matters addressed herein. This Note shall be binding upon,
and shall inure to the benefit of the Maker and the Holder and their respective
successors and assigns.

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the Maker has caused this Note to be issued as of the date
first written above.

 

MAKER: IDENTIPHI, INC. By:     Name:      Title:    

 

 

AGREED AND ACCEPTED: HOLDER: ZAYCHAN PTY LIMITED By:     Name:      Title:    

 

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EXHIBIT A

Form of Common Stock Purchase Warrant

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

COMMON STOCK PURCHASE WARRANT

To Purchase __________ Shares of Common Stock of

IDENTIPHI, INC.

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value
received, _____________ (the “Holder”), is entitled, upon the terms and subject
to the limitations on exercise and the conditions hereinafter set forth, at any
time on or after the date hereof (the “Initial Exercise Date”) and on or prior
to the close of business on the fifth (5th) year anniversary of the Initial
Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and
purchase from IdentiPHI, Inc., a Delaware corporation (the “Company”), up to
______ shares (the “Warrant Shares”) of Common Stock, par value $0.01 per share,
of the Company (the “Common Stock”). The purchase price of one share of Common
Stock under this Warrant shall be equal to US$0.80 (the “Exercise Price”).

Section 1. Definitions. In addition to the terms defined elsewhere in this
Warrant, capitalized terms used and not otherwise defined herein shall have the
meanings set forth in that certain Secured Promissory Note (the “Note”), by and
between the Company and the Holder, or as set forth in this Section 1.

“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.

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“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to
employees, consultants, officers or directors of the Company pursuant to any
stock or option plan duly adopted by a majority of the non-employee members of
the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose, (b) securities
upon the exercise or exchange of or conversion of the Warrants and/or other
securities exercisable or exchangeable for or convertible into shares of Common
Stock issued and outstanding on the date of this Warrant, provided that such
securities have not been amended since the date of this Warrant to increase the
number of such securities or to decrease the exercise, exchange or conversion
price of any such securities, and (c) securities issued pursuant to acquisitions
or strategic transactions approved by a majority of the disinterested directors,
provided any such issuance shall only be to a Person which is, itself or through
its subsidiaries, an operating company in a business synergistic with the
business of the Company and in which the Company receives benefits in addition
to the investment of funds, but shall not include a transaction in which the
Company is issuing securities primarily for the purpose of raising capital or to
an entity whose primary business is investing in securities.

“Outstanding Common Stock” means, at any given time, the aggregate amount of
outstanding shares of Common Stock, assuming full exercise, conversion or
exchange (as applicable) of all options, warrants and other Securities which are
convertible into or exercisable or exchangeable for, and any right to subscribe
for, shares of Common Stock that are outstanding at such time.

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

“Subsidiary” means any subsidiary of the Company.

“Trading Day” means a day on which the Common Stock is traded on a Trading
Market.

“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the Nasdaq
Capital Market, the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or the OTC Bulletin Board.

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg Financial L.P.
(based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
(b) if the Common Stock is not then listed or quoted on a Trading Market and if
prices for the Common Stock are then reported in the “Pink Sheets” published by
Pink Sheets, LLC (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (c) in all other cases, the fair market value of a
share of Common Stock as determined by an independent appraiser selected in good
faith by the Holder and reasonably acceptable to the Company.

 

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Section 2. Exercise.

a) Exercise of Warrant. Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by delivery to the
Company of a duly executed facsimile copy of the Notice of Exercise Form annexed
hereto (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of such Holder
appearing on the books of the Company); provided, however, within five
(5) Trading Days of the date said Notice of Exercise is delivered to the
Company, the Holder shall have surrendered this Warrant to the Company and the
Company shall have received payment of the aggregate Exercise Price of the
shares thereby purchased by wire transfer or cashier’s check drawn on a United
States bank.

b) Cashless Exercise. This Warrant may also be exercised at such time by means
of a “cashless exercise” in which the Holder shall be entitled to receive a
certificate for the number of Warrant Shares equal to the quotient obtained by
dividing [(A-B) (X)] by (A), where:

 

  (A) = the VWAP on the Trading Day immediately preceding the date of such
election;

 

  (B) = the Exercise Price of this Warrant, as adjusted; and

 

  (X) = the number of Warrant Shares issuable upon exercise of this Warrant in
accordance with the terms of this Warrant by

        means of a cash exercise rather than a cashless exercise.

c) Mechanics of Exercise.

i. Authorization of Warrant Shares. The Company covenants that all Warrant
Shares which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this
Warrant, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges imposed by the Company in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).

ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been
exercised in part, the Company shall, at the time of delivery of the certificate
or certificates representing Warrant Shares, deliver to Holder a new Warrant
evidencing the rights of Holder to purchase the unpurchased Warrant Shares
called for by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.

iii. No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the Exercise Price.

 

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iv. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares
shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such certificate, all of
which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by an assignment
form duly executed by the Holder; and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.

Section 3. Certain Adjustments.

a) Stock Dividends and Splits. If the Company, at any time while this Warrant is
outstanding: (A) pays a stock dividend or otherwise makes a distribution or
distributions on shares of Common Stock or any other equity or equity equivalent
securities payable in shares of Common Stock (which, for avoidance of doubt,
shall not include any shares of Common Stock issued by the Company pursuant to
this Warrant), (B) subdivides outstanding shares of Common Stock into a larger
number of shares, (C) combines (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or
(D) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding immediately before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event. Any adjustment made pursuant to
this Section 3(a) shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification.

b) Subsequent Equity Sales. If the Company or any Subsidiary thereof, as
applicable, at any time while this Warrant is outstanding, shall offer, sell,
grant any option to purchase or offer, sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce any offer, sale, grant
or any option to purchase or other disposition) any Common Stock or Common Stock
Equivalents entitling any Person to acquire shares of Common Stock, at an
effective price per share less than the then Exercise Price (such Common Stock
or Common Stock Equivalents, the “Additional Shares” and, such issuances
collectively, a “Dilutive Issuance”), as adjusted hereunder (if the holder of
the Common Stock or Common Stock Equivalents so issued shall at any time,
whether by operation of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to warrants,
options or rights per share which is issued in connection with such issuance, be
entitled to receive shares of Common Stock at an effective price per share which
is less than the Exercise Price, such issuance shall be deemed to have occurred
for less than the Exercise Price on such

 

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date of the Dilutive Issuance), then, the Exercise Price shall be adjusted to
that price determined by multiplying the Exercise Price then in effect by a
fraction: (A) the numerator of which shall be equal to the sum of the number of
shares of Outstanding Common Stock immediately prior to the Dilutive Issuance
plus the number of shares of Common Stock which the aggregate consideration for
the total number of Additional Shares so issued would purchase at a price per
share equal to the Exercise Price then in effect; and (B) the denominator of
which shall be equal to the number of shares of Outstanding Common Stock
immediately after the Dilutive Issuance. Such adjustment shall be made whenever
such Common Stock or Common Stock Equivalents are issued. Notwithstanding the
foregoing, no adjustments shall be made, paid or issued under this Section 3(b)
in respect of an Exempt Issuance. The Company shall notify the Holder in writing
as promptly as reasonably possible following the issuance of any Common Stock or
Common Stock Equivalents subject to this section, indicating therein the
applicable issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms (such notice the “Dilutive Issuance
Notice”). For purposes of clarification, whether or not the Company provides a
Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of
any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
entitled to the adjusted Exercise Price regardless of whether the Holder
accurately refers to such adjusted Exercise Price in the Notice of Exercise.

c) Fundamental Transaction. If, at any time while this Warrant is outstanding,
(A) the Company effects any merger or consolidation of the Company with or into
another Person, (B) the Company effects any sale of all or substantially all of
its assets in one or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a “Fundamental Transaction”),
then, upon any subsequent exercise of this Warrant, the Holder shall have the
right to receive, for each Warrant Share that would have been issuable upon such
exercise immediately prior to the occurrence of such Fundamental Transaction, at
the option of the Holder, (a) upon exercise of this Warrant, the number of
shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration
(the “Alternate Consideration”) receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a Holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event or (b) if the Company is acquired in
an all cash transaction, cash equal to the value of this Warrant as determined
in accordance with the Black-Scholes option pricing formula. For purposes of any
such exercise, the determination of the Exercise Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the Exercise Price
among the Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any exercise of this
Warrant following such Fundamental Transaction. To the extent necessary to
effectuate the foregoing provisions, any

 

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successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new warrant consistent with the foregoing provisions
and evidencing the Holder’s right to exercise such warrant into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this Section 3(d) and insuring
that this Warrant (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.

d) Calculations. All calculations under this Section 3 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 3, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding treasury shares, if any) issued and outstanding.

e) Voluntary Adjustment By Company. The Company may at any time during the term
of this Warrant reduce the then current Exercise Price to any amount and for any
period of time deemed appropriate by the Board of Directors of the Company.

f) Notice to Holders.

i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted
pursuant to this Section 3, the Company shall promptly mail to each Holder a
notice setting forth the Exercise Price after such adjustment and setting forth
a brief statement of the facts requiring such adjustment. If the Company issues
a variable rate security the Company shall be deemed to have issued Common Stock
or Common Stock Equivalents at the lowest possible conversion or exercise price
at which such securities may be converted or exercised.

ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a
dividend (or any other distribution) on the Common Stock; (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common
Stock; (C) the Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights; (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the Common
Stock, any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be mailed to the Holder
at its last address as it shall appear upon the Warrant Register of the Company,
at least five (5) calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of

 

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record to be entitled to such dividend, distributions, redemption, rights or
warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange;
provided, that the failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate action required
to be specified in such notice. The Holder is entitled to exercise this Warrant
during the 5-day period commencing on the date of such notice to the effective
date of the event triggering such notice.

Section 4. Transfer of Warrant.

a) Transferability. Subject to compliance with any applicable securities laws
and the conditions set forth in Sections 5(a) and 4(c) hereof, this Warrant and
all rights hereunder are transferable, in whole or in part, upon surrender of
this Warrant at the principal office of the Company, together with a written
assignment of this Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new Warrant evidencing the portion of this Warrant
not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of Warrant
Shares without having a new Warrant issued.

b) New Warrants. This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with Section 4(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.

c) Transfer Restrictions. If, at the time of the surrender of this Warrant in
connection with any transfer of this Warrant, the transfer of this Warrant shall
not be registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the “Securities Act”), and under applicable
state securities or blue sky laws, the Company may require, as a condition of
allowing such transfer (i) that the Holder or transferee of this Warrant, as the
case may be, furnish to the Company a written opinion of counsel (which opinion
shall be in form, substance and scope customary for opinions of counsel in
comparable transactions) to the effect that such transfer may be made without
registration under the Securities Act and under applicable state securities or
blue sky laws, (ii) that the holder or transferee execute and deliver to the
Company an investment letter in form and substance acceptable to the Company and
(iii) that the transferee be an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities
Act or a qualified institutional buyer as defined in Rule 144A(a) under the
Securities Act.

 

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Section 5. Miscellaneous.

a) Title to Warrant. Prior to the Termination Date and subject to compliance
with applicable laws and Section 4 of this Warrant, this Warrant and all rights
hereunder are transferable, in whole or in part, at the office or agency of the
Company by the Holder in person or by duly authorized attorney, upon surrender
of this Warrant together with a properly endorsed assignment form. The
transferee shall sign an investment letter in form and substance reasonably
satisfactory to the Company.

b) No Rights as Shareholder Until Exercise. This Warrant does not entitle the
Holder to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof. Upon the surrender of this Warrant and the payment
of the aggregate Exercise Price (or by means of a cashless exercise), the
Warrant Shares so purchased shall be and be deemed to be issued to such Holder
as the record owner of such shares as of the close of business on the later of
the date of such surrender or payment.

c) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that
upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant or any stock certificate
relating to the Warrant Shares, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor and dated
as of such cancellation, in lieu of such Warrant or stock certificate.

d) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.

e) Authorized Shares. The Company covenants that during the period the Warrant
is outstanding, it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which the Common
Stock may be listed.

Except and to the extent as waived or consented to by the Holder, the Company
shall not by any action, including, without limitation, amending its certificate
of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all

 

8

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times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment. Without
limiting the generality of the foregoing, the Company will (a) not increase the
par value of any Warrant Shares above the amount payable therefor upon such
exercise immediately prior to such increase in par value, (b) take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares upon the exercise
of this Warrant, and (c) use commercially reasonable efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.

f) Jurisdiction. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Note.

g) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon
the exercise of this Warrant, if not registered, will have restrictions upon
resale imposed by state and federal securities laws.

h) Notices. Any notice, request or other document required or permitted to be
given or delivered to the Holder by the Company shall be delivered in accordance
with the notice provisions of the Note.

i) Limitation of Liability. No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant or purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.

j) Successors and Assigns. Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and
permitted assigns of Holder. The provisions of this Warrant are intended to be
for the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Shares.

k) Amendment. This Warrant may be modified or amended or the provisions hereof
waived with the written consent of the Company and the Holder.

l) Severability. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.

m) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.

********************

 

9

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.

Dated: _________ __, ____

 

IDENTIPHI, INC. By:     Name:     Title:    

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NOTICE OF EXERCISE

TO: IDENTIPHI, INC.

(1) The undersigned hereby elects to purchase ________ Warrant Shares of the
Company pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full, together with
all applicable transfer taxes, if any.

(2) Payment shall take the form of (check applicable box):

 

  ¨ in lawful money of the United States; or

 

  ¨ the cancellation of such number of Warrant Shares as is necessary, in
accordance with the formula set forth in subsection 2(c), to exercise this
Warrant with respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in subsection 2(c).

(3) Please issue a certificate or certificates representing said Warrant Shares
in the name of the undersigned or in such other name as is specified below:

                          

The Warrant Shares shall be delivered to the following:

                                                                                

(4) Accredited Investor. The undersigned is an “accredited investor” as defined
in Regulation D promulgated under the Securities Act of 1933, as amended.

[SIGNATURE OF HOLDER]

 

Name of Investing Entity:

    

Signature of Authorized Signatory of Investing Entity:

    

Name of Authorized Signatory:

    

Title of Authorized Signatory:

    

Date: