Document:

ex4-1.htm

    
      

    

    EXHIBIT
4.1

    

    FORM
OF PROMISSORY NOTE

    

    THIS NOTE
AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS.  THIS NOTE AND THE COMMON SHARES ISSUABLE UPON
CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IDO
SECURITY INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

    

    Principal
Amount
$___________                                                                                                Issue
Date: _______________

    

    SECURED CONVERTIBLE
PROMISSORY NOTE

    

    FOR VALUE RECEIVED, IDO SECURITY INC.,
a Nevada corporation (hereinafter called "Borrower"), hereby promises to pay to
______________________________,
______________________________________________________________ (the "Holder") or
order, without demand, the sum of __________________________________ Dollars
($_________) (“Principal Amount”), with simple and unpaid interest accruing
thereon, on ___________ (the "Maturity Date"), if not retired
sooner.

    

    This Note
has been entered into pursuant to the terms of a subscription agreement between
the Borrower and the Holder, dated of even date herewith (the “Subscription
Agreement”), and shall be governed by the terms of such Subscription
Agreement.  Unless otherwise separately defined herein, all
capitalized terms used in this Note shall have the same meaning as is set forth
in the Subscription Agreement.  The following terms shall apply to
this Note:

    

    ARTICLE
I

    

    INTEREST:
AMORTIZATION; SECURITY AGREEMENT

    

                          1.1. 
Interest
Rate.   Subject to Section 6.7 hereof, interest payable on
this Note shall accrue on the outstanding Principal Amount at a rate per annum
(the "Interest Rate") of ten percent (10%).  Interest on the
outstanding Principal Amount shall accrue from the date of this Note and shall
be payable in arrears together with, at the same time and in the same manner as
payment of Principal Amount and on the Maturity Date, whether by acceleration or
otherwise.  For purposes of calculating the conversion price pursuant
to Section 2.1(ii)(B), each interest due date shall be deemed the Repayment
Date, as defined in Section 1.2.

    

    1.2.    Minimum Monthly Principal
Payments.   Amortizing payments of the outstanding
Principal Amount of this Note and accrued interest shall commence on the fourth
month anniversary date of this Note and on the same day of each month thereafter
(each a “Repayment Date”) until the Principal Amount has been repaid in full,
whether by the payment of cash or by the conversion of such Principal Amount and
interest into Common Stock pursuant to the terms hereof.  Subject to
Section 2.1 and Article 3 below, on each Repayment Date, the Borrower shall make
payments to the Holder in an amount equal to 5% of the initial Principal Amount,
the amount of accrued but unpaid or unconverted interest on the entire Principal
Amount as of such Repayment Date, and any other amounts which are then owing
under this Note that have not been paid (collectively, the “Monthly
Amount”).  Amounts of conversions of Principal Amount and made by the
Holder or Borrower pursuant to Section 2.1 or Article III and amounts redeemed
pursuant to Section 2.3 of this Note shall
be applied first against outstanding fees and damages, then outstanding already
payable accrued interest and then to Principal Amounts of not yet due Monthly
Amounts commencing with the last Monthly Amount next payable and thereafter to
Monthly Amounts in reverse chronological order.  Any Principal Amount,
interest and any other sum arising under this Note and the Subscription
Agreement that remains outstanding on the Maturity Date shall be due and payable
on the Maturity Date.

     

    
      
        
        

      

      
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    1.3.  Default Interest
Rate.  Following the occurrence and during the continuance of
an Event of Default (as defined in Article IV), which, if susceptible to cure is
not cured within five (5) days, otherwise then from the first date of such
occurrence, the annual interest rate on this Note shall (subject to Section 4.7)
be fifteen percent (15%).  Such interest shall be due and payable
together with regular scheduled Monthly Amounts.

    

    ARTICLE
II

    

    CONVERSION
REPAYMENT

    

                  2.1.   Payment of Monthly Amount in
Cash or Common Stock.  Subject
to Section 3.2 hereof, the Borrower, at the Borrower’s election, shall pay the
Monthly Amount (i) in cash in an amount equal to 110% of the Principal Amount
component of the Monthly Amount and 100% of all other components of the Monthly
Amount, within four (4) business days after the applicable Repayment Date, or
(ii) in registered Common Stock at an applied conversion rate equal to the
lesser of (A) the Fixed Conversion Price (as defined in section 3.1 hereof), or
(B) seventy-five percent (75%) of the average of the closing bid price of the
common stock as reported by Bloomberg L.P. for the Principal Market for the ten
trading days preceding the date a Notice of Conversion, if any, [as described in
Section 3(a)] is given to the Borrower by Holder after Borrower notifies Holder
of its election to pay the Monthly Amount with shares of Common Stock pursuant
to the following sentence.  The Borrower must send notice to the
Holder by confirmed telecopier not later than 6:00 P.M., New York City time on
the twenty-second trading day preceding a Repayment Date notifying Holder of
Borrower’s election to pay the Monthly Redemption Amount in cash or Common
Stock.  The Notice must state the amount of cash to be paid and
include supporting calculations.  If the Borrower elects to pay the
Monthly Amount with Common Stock and if the Holder does not give Notice of
Conversion then the Repayment Date shall be deemed the Conversion Date and the
Conversion Price shall be the lessor of (A) the Fixed Conversion Price (as
defined in section 3.1 hereof) or (B) seventy five (75%) of the average of the
closing bid price for the five trading days preceding the Repayment
Date.  Until fifteen (15) trading days after notice is given by the
Borrower that the Borrower has elected to pay the Monthly Amount with Common
Stock, the holder may elect to defer such payment of Common Stock until the
Holder has elected to deliver a Notice of Conversion with respect to such
Monthly Amount.  The Conversion Price with respect to such deferred
Monthly Amount shall be the Conversion Price set forth above in subsection (ii)
of this Section 2.1.  Amounts paid with shares of Common Stock must be
delivered to the Holder as described in Section
3.3(b).    Elections by the Borrower must be made to all
Other Holders in proportion to the relative Note principal held by the Holder
and the Other Holders.  If such notice is not timely sent or if the
Monthly Redemption Amount is not timely delivered, then Holder shall have the
right, instead of the Company, to elect at any time from when such notice was
required to be given until the applicable Repayment Date whether to be paid in
cash or Common Stock.  Such Holder’s election shall not be construed
to be a waiver of any default by Borrower relating to non-timely compliance by
Borrower with any of its obligations under this Note.

     

    
      
        
        

      

      
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                  2.2. 
No Effective
Registration.   Notwithstanding anything to the contrary
herein, no amount payable hereunder may be paid in shares of Common Stock by the
Borrower without the consent of 66.67% of the Holders of the outstanding
principal amounts of the Notes, unless (a) either (i) an effective current
Registration Statement covering the shares of Common Stock to be issued in
satisfaction of such obligations exists,  (ii) an exemption from
registration of the Common Stock is available pursuant to Rule 144(k) of the
1933 Act without volume restriction, or (iii) such shares can be under Rule 144
within the volume limitations specified in subsection (e) thereof, and (b) no
Event of Default hereunder (or an event that with the passage of time or the
giving of notice could become an Event of Default), exists and is continuing,
unless such event or Event of Default is cured within any applicable cure period
or is otherwise waived in writing by the Holder in whole or in part at the
Holder's option.   Shares issued pursuant to sections (ii) and
(iii) in the immediately preceding sentence must be immediately resellable and
transferable by the Holder without any additional holding
period.  Such shares, when delivered to the Holder, must be
accompanied by an opinion of Borrower’s counsel reasonably acceptable to Holder
and the Borrower’s transfer agent that all such shares are immediately
resellable or transferable pursuant to Rule 144 of the 1933 Act, by each Holder
who receives such shares.

     

        2.3.
 Optional
Redemption of Principal Amount.  Provided an Event of Default
or an event which with the passage of time or the giving of notice could become
an Event of Default has not occurred, whether or not such Event of Default has
been cured, the Borrower will have the option of prepaying the outstanding
Principal amount of this Note ("Optional Redemption"), in whole or in part, by
paying to the Holder its pro-rata portion of a sum of money equal to one hundred
and fifteen percent (115%) of the Principal amount to be redeemed, together with
accrued but unpaid interest thereon and any and all other sums due, accrued or
payable to the Holder arising under this Note or any Transaction Document
through the Redemption Payment Date as defined below (the "Redemption
Amount").  Borrower’s election to exercise its right to prepay must be
by notice in writing (“Notice of Redemption”).  The Notice of
Redemption shall specify the date for such Optional Redemption (the "Redemption
Payment Date"), which date shall be thirty (30) business days after the date of
the Notice of Redemption (the "Redemption Period"). A Notice of Redemption shall
not be effective with respect to any portion of the Principal Amount for which
the Holder has a pending election to convert, or for conversions initiated or
made by the Holder during the Redemption Period.   On the
Redemption Payment Date, the Redemption Amount, less any portion of the
Redemption Amount against which the Holder has exercised its conversion rights,
shall be paid in good funds to the Holder. In the event the Borrower fails to
pay the Redemption Amount on the Redemption Payment Date as set forth herein,
then (i) such Notice of Redemption will be null and void, (ii) Borrower will
have no right to deliver another Notice of Redemption, and (iii) Borrower’s
failure may be deemed by Holder to be a non-curable Event of
Default.  A Redemption Notice may be given only at a time a
Registration Statement is effective.  A Notice of Redemption may not
be given nor may the Borrower effectuate a Redemption without the consent of the
Holder, if at any time during the Redemption Period an Event of Default or an
Event which with the passage of time or giving of notice could become an Event
of Default (whether or not such Event of Default has been cured), has occurred
or the Registration Statement registering the Registrable Securities is not
effective each day during the Redemption Period.

     

               
2.4   Mandatory
Conversion.  Provided an Event of Default or an event which
with the passage of time or giving of notice could become an Event of Default
has not occurred, then, commencing after the Actual Effective Date, the Borrower
will have the option by written notice to the Holder (“Notice of Mandatory
Conversion”) of compelling the Holder to convert all or a portion of the
outstanding and unpaid principal of the Note and accrued interest, thereon, into
Common Stock at the Conversion Price then in affect (“Mandatory Conversion”).
The Notice of Mandatory Conversion, which notice must be given on the first day
following twenty (20) consecutive trading days (“Lookback Period”) during which
the closing price for the Common Stock as reported by Bloomberg, LP for the
Principal Market shall be greater than

     

     

    
      
        
        

      

      
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    Five Dollars ($5.00) each such
trading day and during which twenty (20) trading days, the daily trading volume
as reported by Bloomberg L.P. for the Principal Market is greater than 100,000
shares. The date the Notice of Mandatory Conversion is given is the “Mandatory
Conversion Date.” The Notice of Mandatory Conversion shall specify the aggregate
principal amount of the Note which is subject to Mandatory
Conversion.  Mandatory Conversion Notices must be given
proportionately to all Holders of Notes. The Borrower shall reduce the amount of
Note principal subject to a Notice of Mandatory Conversion by the amount of Note
Principal and interest for which the Holder had delivered a Notice of Conversion
to the Borrower during the twenty (20) trading days preceding the Mandatory
Conversion Date. Each Mandatory Conversion Date shall be a deemed Conversion
Date and the Borrower will be required to deliver the Common Stock issuable
pursuant to a Mandatory Conversion Notice in the same manner and time period as
described in Section 2.1 above and the Subscription Agreement.  A
Notice of Mandatory Conversion may be given only in connection with an amount of
Common Stock which would not cause a Holder to exceed the 4.99% (or if
increased, 9.99%) beneficial ownership limitation set forth in Section 3.2 of
this Note.  A Notice of Mandatory Conversion may be given only in
connection with Common Stock that has been included for resale in an effective
Registration Statement during the entire Lookback Period and through the
Mandatory Conversion Date.

     

    ARTICLE
III

    

    CONVERSION
RIGHTS

     

                       
3.1.    Holder's Conversion
Rights.   Subject to Section 3.2, the Holder shall have
the right, but not the obligation at all times, to convert all or any portion of
the then aggregate outstanding Principal Amount of this Note, into shares of
Common Stock, subject to the terms and conditions set forth in this Article III
at the rate of $1.00 per share of Common Stock (“Fixed Conversion Price”) as
same may be adjusted pursuant to this Note and the Subscription Agreement. The
Holder may exercise such right by delivery to the Borrower of a written Notice
of Conversion pursuant to Section 3.3.  After the occurrence of an
Event of Default, the Fixed Conversion Price shall be the lesser of the Fixed
Conversion Price or 75% of the average of the closing bid prices of the Common
Stock for the five trading days prior to a Conversion Date.

    

    3.2.    Conversion
Limitation.   The Holder shall not be entitled to convert
on a Conversion Date that amount of the Note in connection with that number of
shares of Common Stock which would be in excess of the sum of (i) the number of
shares of Common Stock beneficially owned by the Holder and its affiliates on a
Conversion Date, (ii) any Common Stock issuable in connection with the
unconverted portion of the Note, and (iii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made on a Conversion Date, which would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock of the Borrower on such Conversion
Date.  For the purposes of the provision to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder.  Subject to the foregoing, the Holder shall be limited to
aggregate conversions of 4.99%.  The Holder shall have the authority
and obligation to determine whether the restriction contained in this Section
2.3 will limit any conversion hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of the Notes are convertible shall be the
responsibility and obligation of the Holder.   The Holder may
waive the conversion limitation described in this Section 2.3, in whole or in
part, upon and effective after 61 days prior written notice to the Borrower to
increase such percentage to up to 9.99%.  In all circumstances, the
delivery by the Holder of a Notice of Conversion as provided below shall be
deemed to be the Holder’s representation that such conversion conforms to the
provisions of this Section 3.2 and the Company shall be under no obligation to
verify or ascertain compliance by the Holder with this provision.

     

    
      
        
        

      

      
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 3.3.  Mechanics of Holder's
Conversion.

    

                          (a)    In
the event that the Holder elects to convert any amounts outstanding under this
Note into Common Stock, the Holder shall give notice of such election by
delivering an executed and completed notice of conversion (a "Notice of
Conversion") to the Borrower, which Notice of Conversion shall provide a
breakdown in reasonable detail of the Principal Amount, accrued interest and
amounts being converted.  The original Note is not required to be
surrendered to the Borrower until all sums due under the Note have been
paid.  On each Conversion Date (as hereinafter defined) and in
accordance with its Notice of Conversion, the Holder shall make the appropriate
reduction to the Principal Amount, accrued interest and fees as entered in its
records.  Each date on which a Notice of Conversion is delivered or
telecopied to the Borrower in accordance with the provisions hereof shall be
deemed a "Conversion Date." A form of Notice of Conversion to be employed by the
Holder is annexed hereto as Exhibit A.

    

                          (b)   Pursuant
to the terms of a Notice of Conversion, the Borrower will issue instructions to
the transfer agent accompanied by an opinion of counsel, if so required by the
Borrower's transfer agent and shall cause the transfer agent to transmit the
certificates representing the Conversion Shares to the Holder by crediting the
account of the Holder's designated broker with the Depository Trust Corporation
("DTC") through its Deposit Withdrawal Agent Commission ("DWAC") system within
four (4) business days after receipt by the Borrower of the Notice of Conversion
(the "Delivery Date"). In the case of the exercise of the conversion rights set
forth herein the conversion privilege shall be deemed to have been exercised and
the Conversion Shares issuable upon such conversion shall be deemed to have been
issued upon the date of receipt by the Borrower of the Notice of Conversion. The
Holder shall be treated for all purposes as the record holder of such shares of
Common Stock, unless the Holder provides the Borrower written instructions to
the contrary.   Notwithstanding the foregoing to the contrary,
the Borrower or its transfer agent shall only be obligated to issue and deliver
the shares to the DTC on the Holder’s behalf via DWAC (or certificates free of
restrictive legends) if the registration statement providing for the resale of
the shares of Common Stock issuable upon the conversion of this Note is
effective and the Holder has complied with all applicable securities laws in
connection with the sale of the Common Stock, including, without limitation, the
prospectus delivery requirements.  In the event that Conversion Shares
cannot be delivered to the Holder via DWAC, the Borrower shall deliver physical
certificates representing the Conversion Shares by the Delivery
Date.

    

                  3.4.  Conversion
Mechanics.

    

                          (a)           The
number of shares of Common Stock to be issued upon each conversion of this Note
pursuant to this Article III shall be determined by dividing that portion of the
Principal Amount and interest and fees to be converted, if any, by the then
applicable Fixed Conversion Price.

     

                         
(b)           The Fixed
Conversion Price and number and kind of shares or other securities to be issued
upon conversion shall be subject to adjustment from time to time upon the
happening of certain events while this conversion right remains outstanding, as
follows:

    

    A.           Merger, Sale of Assets,
etc.  If the Borrower at any time shall consolidate with or
merge into or sell or convey all or substantially all its assets to any other
corporation, this Note, as to the unpaid principal portion thereof and accrued
interest thereon, shall thereafter be deemed to evidence the right to purchase
such number and kind of shares or other securities and property as would have
been issuable or distributable on account of such consolidation, merger, sale or
conveyance, upon or with respect to the securities subject to the conversion or
purchase right immediately prior to such consolidation, merger, sale or
conveyance.  The foregoing provision shall similarly apply to
successive transactions
of a similar nature by any such successor or purchaser.  Without
limiting the generality of the foregoing, the anti-dilution provisions of this
Section shall apply to such securities of such successor or purchaser after any
such consolidation, merger, sale or conveyance.

     

    
      
        
        

      

      
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    B.           Reclassification,
etc.  If the Borrower at any time shall, by reclassification or
otherwise, change the Common Stock into the same or a different number of
securities of any class or classes, this Note, as to the unpaid principal
portion thereof and accrued interest thereon, shall thereafter be deemed to
evidence the right to purchase an adjusted number of such securities and kind of
securities as would have been issuable as the result of such change with respect
to the Common Stock immediately prior to such reclassification or other
change.

    

    C.           Stock Splits, Combinations
and Dividends.  If the shares of Common Stock are subdivided or
combined into a greater or smaller number of shares of Common Stock, or if a
dividend is paid on the Common Stock in shares of Common Stock, the Conversion
Price shall be proportionately reduced in case of subdivision of shares or stock
dividend or proportionately increased in the case of combination of shares, in
each such case by the ratio which the total number of shares of Common Stock
outstanding immediately after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event.

    

                                    D.           Share
Issuance.   So long as this Note is outstanding, if the
Borrower shall issue any Common Stock except for the Excepted Issuances (as
defined in the Subscription Agreement), prior to the complete conversion or
payment of this Note, for a consideration less than the Fixed Conversion Price
that would be in effect at the time of such issue, then, and thereafter
successively upon each such issuance, the Fixed Conversion Price shall be
reduced to such other lower issue price.  For purposes of this
adjustment, the issuance of any security or debt instrument of the Borrower
carrying the right to convert such security or debt instrument into Common Stock
or of any warrant, right or option to purchase Common Stock shall result in an
adjustment to the Fixed Conversion Price upon the issuance of the
above-described security, debt instrument, warrant, right, or option and again
upon the issuance of shares of Common Stock upon exercise of such conversion or
purchase rights if such issuance is at a price lower than the then applicable
Conversion Price.  The reduction of the Fixed Conversion Price
described in this paragraph is in addition to the other rights of the Holder
described in the Subscription Agreement.

    

    (c)           Whenever
the Conversion Price is adjusted pursuant to Section 3.4(b) above, the Borrower
shall promptly mail to the Holder a notice setting forth the Conversion Price
after such adjustment and setting forth a statement of the facts requiring such
adjustment.

    

    3.5.           Reservation.   During
the period the conversion right exists, Borrower will reserve from its
authorized and unissued Common Stock not less than 125% of the number of shares
to provide for the issuance of Common Stock upon the full conversion of this
Note. Borrower shall reserve Common Stock issuable upon conversion of this Note
as described in the Subscription Agreement.  Borrower represents that
upon issuance, such shares will be duly and validly issued, fully paid and
non-assessable.  Borrower agrees that its issuance of this Note shall
constitute full authority to its officers, agents, and transfer agents who are
charged with the duty of executing and issuing stock certificates to execute and
issue the necessary certificates for shares of Common Stock upon the conversion
of this Note.

    

    3.6           Issuance of Replacement
Note.  Upon any partial conversion of this Note, a replacement
Note containing the same date and provisions of this Note shall, at the written
request of the Holder, be issued by the Borrower to the Holder for the
outstanding Principal Amount of this Note and accrued interest which shall not
have been converted or paid, provided Holder has surrendered an original Note to
the Company. In the event that the Holder elects not to surrender a Note for
reissuance upon partial payment
or conversion, the Holder hereby indemnifies the Borrower against any and all
loss or damage attributable to a third-party claim in an amount in excess of the
actual amount then due under the Note.

     

    
      
        
        

      

      
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    ARTICLE
IV

    

    SECURITY
INTEREST

    

    4.         Security Interest/Waiver of
Automatic Stay.   This Note is secured by a security
interest granted to the Collateral Agent for the benefit of the Holder pursuant
to a Security Agreement, as delivered by Borrower to Holder.  The
Borrower acknowledges and agrees that should a proceeding under any bankruptcy
or insolvency law be commenced by or against the Borrower, or if any of the
Collateral (as defined in the Security Agreement) should become the subject of
any bankruptcy or insolvency proceeding, then the Holder should be entitled to,
among other relief to which the Holder may be entitled under the Transaction
Documents and any other agreement to which the Borrower and Holder are parties
(collectively, "Loan Documents") and/or applicable law, an order from the court
granting immediate relief from the automatic stay pursuant to 11 U.S.C. Section
362 to permit the Holder to exercise all of its rights and remedies pursuant to
the Loan Documents and/or applicable law.  TO THE EXTENT PERMITTED BY
LAW, THE BORROWER EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY
11 U.S.C. SECTION 362.  FURTHERMORE, THE BORROWER EXPRESSLY
ACKNOWLEDGES AND AGREES THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION
OF THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION,
11 U.S.C. SECTION 105) SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN
ANY WAY THE ABILITY OF THE HOLDER TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES
UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW.  The Borrower hereby
consents to any motion for relief from stay that may be filed by the Holder in
any bankruptcy or insolvency proceeding initiated by or against the Borrower
and, further, agrees not to file any opposition to any motion for relief from
stay filed by the Holder.  The Borrower represents, acknowledges and
agrees that this provision is a specific and material aspect of the Loan
Documents, and that the Holder would not agree to the terms of the Loan
Documents if this waiver were not a part of this Note. The Borrower further
represents, acknowledges and agrees that this waiver is knowingly, intelligently
and voluntarily made, that neither the Holder nor any person acting on behalf of
the Holder has made any representations to induce this waiver, that the Borrower
has been represented (or has had the opportunity to he represented) in the
signing of this Note and the Loan Documents and in the making of this waiver by
independent legal counsel selected by the Borrower and that the Borrower has
discussed this waiver with counsel.

    

    ARTICLE
V

    

    EVENTS
OF DEFAULT

    

    The
occurrence of any of the following events of default ("Event of Default") shall,
at the option of the Holder hereof, make all sums of principal and interest then
remaining unpaid hereon and all other amounts payable hereunder immediately due
and payable, upon demand, without presentment, or grace period, all of which
hereby are expressly waived, except as set forth below:

    

    5.1           Failure to Pay Principal or
Interest.  The Borrower fails to pay any installment of
Principal Amount, interest or other sum due under this Note or any Transaction
Document when due and such failure continues for a period of five (5) business
days after the due date.

     

    
      
        
        

      

      
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    5.2           Breach of
Covenant.  The Borrower breaches any material covenant or other
material term or condition of the Subscription Agreement, this Note, or other
Transaction Document in any material respect and such breach, if subject to
cure, continues for a period of ten (10) business days after written notice to
the Borrower from the Holder.

    

    5.3           Breach of Representations
and Warranties.  Any material representation or warranty of the
Borrower made herein, in the Subscription Agreement, Transaction Document or in
any agreement, statement or certificate given in writing pursuant hereto or in
connection herewith or therewith shall be false or misleading in any material
respect as of the date made and the Closing Date.

    

    5.4           Receiver or
Trustee.  The Borrower or any Subsidiary of Borrower shall make
an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for them or for a substantial part of their
property or business; or such a receiver or trustee shall otherwise be
appointed.

    

    5.5           Judgments.  Any
money judgment, writ or similar final process shall be entered or filed against
Borrower or any subsidiary of Borrower or any of their property or other assets
for more than $500,000, and shall remain unpaid, unvacated, unbonded or unstayed
for a period of forty-five (45) days.

    

    5.6           Non-Payment.   A
default by the Borrower under any one or more obligations in an aggregate
monetary amount in excess of two hundred thousand dollars ($200,000.00) for more
than twenty days after the due date unless the Borrower is contesting the
validity of such obligation in good faith, beyond any applicable grace
period;

    

    5.7           Bankruptcy.  Bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings or
relief under any bankruptcy law or any law, or the issuance of any notice in
relation to such event, for the relief of debtors shall be instituted by or
against the Borrower or any Subsidiary of Borrower and if instituted against
them are not dismissed within sixty (60) days of initiation.

    

    5.8           Delisting.   Failure
of the Common Stock to be quoted or listed on the OTC Bulletin Board (“Bulletin
Board”) or other Principal Market; failure to comply with the requirements for
continued listing on the Bulletin Board for a period of 15 consecutive trading
days.

    

    5.9           Stop
Trade.  An SEC or judicial stop trade order or Principal Market
trading suspension with respect to Borrower’s Common Stock that lasts for five
or more consecutive trading days.

    

    5.10         Failure to Deliver Common
Stock or Replacement Note.  Borrower's failure to timely
deliver Common Stock to the Holder pursuant to and in the form required by this
Note and Sections 7 and 11 of the Subscription Agreement, and, if required, a
replacement Note, within 10 business days following the required delivery
date.

    

    5.11         Non-Registration
Event.  The occurrence of a Non-Registration Event as described
in the Subscription Agreement, subject to Section 11.1(v)  of the
Subscription Agreement.

    

    5.12         Reverse
Splits.   The Borrower effectuates a reverse split of its
Common Stock without twenty days prior written notice to the
Holder.

    

    5.13         Reservation
Default.  Failure by the Borrower to have reserved for issuance
upon conversion of the Note the amount of Common Stock as set forth in this Note
and the Subscription Agreement.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    5.14         Restated
Numbers.  A material restatement by the Borrower of any prior
financial statements included in any of the Reports.

    

    5.15         Material Breach of Security
Agreement.   Any default by the Company of any of its
material obligations pursuant to the Security Agreement.

    

    5.16         Cross
Default.  A default by the Borrower of a material term,
covenant, warranty or undertaking of any Transaction Document or other agreement
to which the Borrower and Holder are parties, or the occurrence of a material
event of default under any such other agreement which is not cured after any
required notice and/or cure period.

    

    ARTICLE
VI

    

    MISCELLANEOUS

    

    6.1           Failure or Indulgence Not
Waiver.  No failure or delay on the part of Holder hereof in
the exercise of any power, right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.  All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.

    

    6.2           Notices.  All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.  The
addresses for such communications shall be: (i) if to the Borrower to: IDO
Security Inc., 17 State Street, New York, NY 10004, Fax: (646) 285-0026, with a
copy by telecopier only to: Aboudi & Brounstein, 3 Gavish St., Kfar Saba,
Israel, Fax: 972-9-764-4834, and (ii) if to the Holder, to the name, address and
telecopy number set forth on the front page of this Note, with a copy by
telecopier only to Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601,
New York, New York 10176, Fax: (212) 697-3575.

    

    6.3           Amendment
Provision.  The term "Note" and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or
supplemented.

    

    6.4           Assignability.  This
Note shall be binding upon the Borrower and its successors and assigns, and
shall inure to the benefit of the Holder and its successors and
assigns.

    

    6.5           Cost of
Collection.  If default is made in the payment of this Note,
Borrower shall pay the Holder hereof reasonable costs of collection, including
reasonable attorneys' fees.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    6.6           Governing
Law.  This Note shall be governed by and construed in
accordance with the laws of the State of New York.  Any action brought
by either party against the other concerning the transactions contemplated by
this Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York.  Both parties and the
individual signing this Agreement on behalf of the Borrower agree to submit to
the jurisdiction of such courts.  The prevailing party shall be
entitled to recover from the other party its reasonable attorney's fees and
costs.

    

    6.7           Maximum
Payments.  Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law.  In the event that
the rate of interest required to be paid or other charges hereunder exceed the
maximum permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Borrower to the Holder and thus refunded to
the Borrower.

    

    6.8           Construction.   Each
party acknowledges that its legal counsel participated in the preparation of
this Note and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Note to favor any party against the
other.

    

    6.9           Remedies.   This
Note shall be deemed an unconditional obligation of Borrower for the payment of
money and, without limitation to any other remedies available to
Holder.  This Note may be enforced against Borrower by summary
proceeding pursuant to N.Y. Civil Procedure Law and rules Sect. 3213 or any
similar rule or statute in the jurisdiction where enforcement is
sought.

    

    

    [THIS
SPACE INTENTIONALLY LEFT BLANK]

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

    IN WITNESS WHEREOF, Borrower
has caused this Note to be signed in its name by an authorized officer as of the
____ day of __________.

    

     

    
      	 	 	IDO SECURITY
      INC.	 
	 	 	 	 
	 	 	 	 

    

     

    
      	 	 	By:	 	 

    

    
      	 	 	 	Name:	 
	 	 	 	Title:	 
	WITNESS:	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 

    

    
      	 	 	 	 

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    NOTICE OF
CONVERSION

    

    (To be
executed by the Registered Holder in order to convert the Note)

    

    

    The
undersigned hereby elects to convert $_________ of the principal and $_________
of the interest due on the Note issued by IDO Security Inc. on _____________
into Shares of Common Stock of IDO Security Inc. (the "Borrower") according to
the conditions set forth in such Note, as of the date written
below.

    

    

    

    Date of
Conversion:____________________________________________________________________

    

    

    Conversion
Price:______________________________________________________________________

    

    

    Shares To
Be
Delivered:_________________________________________________________________

    

    

    Signature:____________________________________________________________________________

    

    

    Print
Name:__________________________________________________________________________

    

    

    Address:_____________________________________________________________________________

    

                     _____________________________________________________________________________

     

     

    12ex4-3.htm

    
      

    

    EXHIBIT
4.3

    

    

    THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT AND
THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IDO SECURITY INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.

    
      

      
      

      
        	 	 	 	Right to Purchase
      ________ shares of Common Stock of IDO
	 	 	 	Security Inc.
      (subject to adjustment as provided
herein)

      

    

    
    

    

    FORM
OF CLASS A, CLASS B AND FINDER’S

    COMMON
STOCK PURCHASE WARRANT

    

    
      	No. 2007-001	 	Issue
      Date:_________________	 

    

                                                                                                    

    IDO
SECURITY INC., a corporation organized under the laws of the State of Nevada
(the “Company”), hereby certifies that, for value received,
__________________________,
__________________________________________________________, or its assigns (the
“Holder”), is entitled, subject to the terms set forth below, to purchase from
the Company at any time after the Issue Date until 5:00 p.m., E.S.T on
the fifth anniversary of the Issue Date: [Actual Effective Date (as defined in
Section 11.1(iv) of the Subscription Agreement) for Class A Warrants, and Issue
Date for Class B Warrants] (the “Expiration
Date”), ________ fully paid and nonassessable shares of Common Stock at a per
share purchase price of $______ [$2.00 for Class A Warrants, $3.00 for Class B Warrants, $1.00 for Finder’s Warrants].  The
aforedescribed purchase price per share, as adjusted from time to time as herein
provided, is referred to herein as the “Purchase Price.”  The number
and character of such shares of Common Stock and the Purchase Price are subject
to adjustment as provided herein.  The Company may reduce the Purchase
Price without the consent of the Holder.  Capitalized terms used and
not otherwise defined herein shall have the meanings set forth in that certain
Subscription Agreement (the “Subscription Agreement”),
dated _______________, entered into by the Company and Holders.

    

    As used
herein the following terms, unless the context otherwise requires, have the
following respective meanings:

     

    (a)           The
term “Company” shall mean IDO Security Inc. and any corporation which shall
succeed or assume the obligations of IDO Security Inc. hereunder.

     

    (b)           The
term “Common Stock” includes (a) the Company’s common stock, $0.001 par
value per share, as authorized on the date of the Subscription Agreement, and
(b) any Other Securities into which or for which any of the securities described
in (a) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or
otherwise.

     

    (c)           The
term “Other Securities” refers to any stock (other than Common Stock) and other
securities of the Company or any other person (corporate or otherwise) which the
holder of the Warrant at any time shall be entitled to receive, or shall have
received, on the exercise of the Warrant, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
Section 5 or otherwise.

     

    (d)           The
term “Warrant Shares” shall mean the Common Stock issuable upon exercise of this
Warrant.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

      1.           Exercise of
Warrant.

     

    1.1.           Number of Shares Issuable
upon Exercise.  From and after the Issue Date through and
including the Expiration Date, the Holder hereof shall be entitled to receive,
upon exercise of this Warrant in whole in accordance with the terms of
subsection 1.2 or upon exercise of this Warrant in part in accordance with
subsection 1.3, Common Stock of the Company, subject to adjustment pursuant
to Section 4.

     

    1.2.           Full
Exercise.  This Warrant may be exercised in full by the Holder
hereof by delivery of an original or facsimile copy of the form of subscription
attached as Exhibit A hereto (the “Subscription Form”) duly executed by
such Holder and delivery within two days thereafter of payment, in cash, wire
transfer or by certified or official bank check payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price then in
effect.  The original Warrant is not required to be surrendered to the
Company until it has been fully exercised.

     

    1.3.           Partial
Exercise.  This Warrant may be exercised in part (but not for a
fractional share) by surrender of this Warrant in the manner and at the place
provided in subsection 1.2 except that the amount payable by the Holder on
such partial exercise shall be the amount obtained by multiplying (a) the
number of whole shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect.  On
any such partial exercise provided the Holder has surrendered the original
Warrant, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may request, the whole number of shares of Common
Stock for which such Warrant may still be exercised for the balance
of.

     

    1.4.           Fair Market Value.
Fair Market Value of a share of Common Stock as of a particular date (the
“Determination Date”) shall mean:

     

    (a)           If
the Company’s Common Stock is traded on an exchange or is quoted on the National
Association of Securities Dealers, Inc. Automated Quotation (“NASDAQ”), National
Market System, the NASDAQ Capital Market or the American Stock Exchange, Inc.,
then the closing or last sale price, respectively, reported for the last
business day immediately preceding the Determination Date;

     

    (b)           If
the Company’s Common Stock is not traded on an exchange or on the NASDAQ
National Market System, the NASDAQ Capital Market or the American Stock
Exchange, Inc., but is traded in the over-the-counter market, then the average
of the closing bid and ask prices reported for the last business day immediately
preceding the Determination Date;

     

    (c)           Except
as provided in clause (d) below, if the Company’s Common Stock is not
publicly traded, then as the Holder and the Company agree, or in the absence of
such an agreement, by arbitration in accordance with the rules then standing of
the American Arbitration Association, before a single arbitrator to be chosen
from a panel of persons qualified by education and training to pass on the
matter to be decided; or

     

    (d)           If
the Determination Date is the date of a liquidation, dissolution or winding up,
or any event deemed to be a liquidation, dissolution or winding up pursuant to
the Company’s charter, then all amounts to be payable per share to holders of
the Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Common Stock in liquidation under the charter, assuming for the
purposes of this clause (d) that all of the shares of Common Stock then
issuable upon exercise of all of the Warrants are outstanding at the
Determination Date.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

                                     
1.5.           Company
Acknowledgment. The Company will, at the time of the exercise of the
Warrant, upon the request of the Holder hereof acknowledge in writing its
continuing obligation to afford to such Holder any rights to which such Holder
shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to such Holder any such rights.

    

     

    1.6.           Trustee for Warrant
Holders. In the event that a qualified bank or trust company shall have
been appointed as trustee for the Holder of the Warrants pursuant to
Subsection 3.2, such bank or trust company shall have all the powers and
duties of a warrant agent (as hereinafter described) and shall accept, in its
own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.

     

                    1.7.           Delivery of Stock
Certificates, etc. on Exercise. The Company agrees that the shares of
Common Stock purchased upon exercise of this Warrant shall be deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid. As soon as practicable after the
exercise of this Warrant in full or in part, and in any event within three (3)
business days thereafter (“Warrant Share Delivery Date”), the Company at its
expense (including the payment by it of any applicable issue taxes) will cause
to be issued in the name of and delivered to the Holder hereof, or as such
Holder (upon payment by such Holder of any applicable transfer taxes) may direct
in compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such Holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share of Common Stock, together with any other stock or
other securities and property (including cash, where applicable) to which such
Holder is entitled upon such exercise pursuant to Section 1 or
otherwise.  The Company understands that a delay in the delivery of
the Warrant Shares after the Warrant Share Delivery Date could result in
economic loss to the Holder.  As compensation to the Holder for such
loss, the Company agrees to pay (as liquidated damages and not as a penalty) to
the Holder for late issuance of Warrant Shares upon exercise of this Warrant the
amount of $100 per business day after the Warrant Share Delivery Date for each
$10,000 of Purchase Price of Warrant Shares for which this Warrant is exercised
which are not timely delivered.  The Company shall pay any payments
incurred under this Section in immediately available funds upon
demand.  Furthermore, in addition to any other remedies which may be
available to the Holder, in the event that the Company fails for any reason to
effect delivery of the Warrant Shares by the Warrant Share Delivery Date,
the Holder may revoke all or part of the relevant Warrant exercise by delivery
of a notice to such effect to the Company whereupon the Company and the Holder
shall each be restored to their respective positions immediately prior to the
exercise of the relevant portion of this Warrant, except that the liquidated
damages described above shall be payable through the date notice of revocation
or rescission is given to the Company.

     

    2.            
Cashless
Exercise.

     

    (a)           Commencing
six months after the Closing Date (as defined in the Subscription
Agreement), payment upon exercise may be made at the option of the Holder
either in (i) cash, wire transfer or by certified or official bank check
payable to the order of the Company equal to the applicable aggregate Purchase
Price, (ii) by cashless exercise in accordance with Section (b) below
or (iii) by a combination of any of the foregoing methods, for the number
of shares of Common Stock specified in such form (as such exercise number shall
be adjusted to reflect any adjustment in the total number of shares of Common
Stock issuable to the Holder per the terms of this Warrant) and the Holder shall
thereupon be entitled to receive the number of duly authorized, validly issued,
fully-paid and non-assessable shares of Common Stock (or Other Securities)
determined as provided herein.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (b)           If
the Fair Market Value of one share of Common Stock is greater than the Purchase
Price (at the date of calculation as set forth below), in lieu of exercising
this Warrant for cash, the Holder may elect to receive shares equal to the value
(as determined below) of this Warrant (or the portion thereof being cancelled)
by surrender of this Warrant at the principal office of the Company together
with the properly endorsed Subscription Form in which event the Company shall
issue to the Holder a number of shares of Common Stock computed using the
following formula:

     

    
      	 	X=Y
    (A-B)	 

    

    
      	 	 	A
	 	 	 
	                               
      Where	X= 	the number of shares
      of Common Stock to be issued to the holder
	 	 	 
	 	Y=	the
      number of shares of Common Stock purchasable under the Warrant or, if only
      a portion of the Warrant is being exercised, the portion of the Warrant
      being exercised (at the date of such calculation)
	 	 	 
	 	

              A=

            	the
      average of the closing sale prices of the Common Stock for the five (5)
      Trading Days immediately prior to (but not including) the Exercise
      Date
	 	 	 
	 	B=	Purchase
      Price (as adjusted to the date of such calculation)
	 	 	 

    

    (c)           The
Holder may employ the cashless exercise feature described in Section (b) above
only during the pendency of a Non-Registration Event as described in Section 11
of the Subscription Agreement.

     

    For
purposes of Rule 144 promulgated under the 1933 Act, it is intended, understood
and acknowledged that the Warrant Shares issued in a cashless exercise
transaction shall be deemed to have been acquired by the Holder, and the holding
period for the Warrant Shares shall be deemed to have commenced, on the date
this Warrant was originally issued pursuant to the Subscription
Agreement.

     

    3.           Adjustment for Reorganization,
Consolidation, Merger, etc.

     

    3.1.           Reorganization,
Consolidation, Merger, etc.  In case at any time or from time
to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person where the Company is
not the surviving entity or (c) transfer all or substantially all of its
properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case, as a
condition to the consummation of such a transaction, proper and adequate
provision shall be made by the Company whereby the Holder of this Warrant, on
the exercise hereof as provided in Section 1, at any time after the
consummation of such reorganization, consolidation or merger or
the effective date of such dissolution, as the case may be, shall receive,
in lieu of the Common Stock (or Other Securities) issuable on such exercise
prior to such consummation or such effective date, the stock and other
securities and property (including cash) to which such Holder would have been
entitled upon such consummation or in connection with such dissolution, as the
case may be, if such Holder had so exercised this Warrant, immediately prior
thereto, all subject to further adjustment thereafter as provided in
Section 4.

     

    3.2.           Dissolution.  In
the event of any dissolution of the Company following the transfer of all or
substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock and
other securities and property (including cash, where applicable) receivable in
accordance with Section 3.1 by the Holder upon their exercise after the
effective date of such dissolution pursuant to this Section 3 to a bank or
trust company (a “Trustee”) having its principal office in New York, NY, as
trustee for the Holder.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    3.3.           Continuation of
Terms.  Upon any reorganization, consolidation, merger or
transfer (and any dissolution following any transfer) referred to in this
Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the Other Securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any Other
Securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company,
whether or not such person shall have expressly assumed the terms of this
Warrant as provided in Section 4.  In the event this Warrant does
not continue in full force and effect after the consummation of the transaction
described in this Section 3, then only in such event will the Company’s
securities and property (including cash, where applicable) receivable by the
Holder of the Warrants be delivered to the Trustee as contemplated by
Section 3.2.

     

    3.4           Share
Issuance.  Until the Expiration Date, if the Company shall
issue any Common Stock except for the Excepted Issuances (as defined in the
Subscription Agreement), prior to the complete exercise of this Warrant for a
consideration less than the Purchase Price that would be in effect at the time
of such issue, then, and thereafter successively upon each such issue, the
Purchase Price shall be reduced to such other lower purchase
price.  For purposes of this adjustment, the issuance of any security
or debt instrument of the Company carrying the right to convert such security or
debt instrument into Common Stock or of any warrant, right or option to purchase
Common Stock shall result in an adjustment to the Purchase Price upon the
issuance of the above-described security, debt instrument, warrant, right, or
option if such issuance is at a price lower than the Purchase Price in effect
upon such issuance.  The reduction of the Purchase Price described in
this Section 3.4 is subject to the provisions of, and in addition to the other
rights of the Holder described in, the Subscription Agreement.

     

    4.             Extraordinary Events
Regarding Common Stock.  In the event that the Company shall
(a) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this
Section 4. The number of shares of Common Stock that the Holder of this
Warrant shall thereafter, on the exercise hereof as provided in Section 1,
be entitled to receive shall be adjusted to a number determined by multiplying
the number of shares of Common Stock that would otherwise (but for the
provisions of this Section 4) be issuable on such exercise by a fraction of
which (a) the numerator is the Purchase Price that would otherwise (but for
the provisions of this Section 4) be in effect, and (b) the
denominator is the Purchase Price in effect on the date of such
exercise.

     

    5.             Certificate as to
Adjustments.  In each case of any adjustment or readjustment in
the shares of Common Stock issuable on the exercise of the Warrants, the
Company at its expense will promptly cause its Chief Financial Officer or other
appropriate designee to compute such adjustment or readjustment in accordance
with the terms of the Warrant and prepare a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock issued or sold or deemed to have been issued or
sold, (b) the number of shares of Common Stock outstanding or
deemed to be outstanding, and (c) the Purchase Price and the number of
shares of Common Stock to be received upon exercise of this Warrant, in effect
immediately prior to such adjustment or readjustment and as adjusted or
readjusted as provided in this Warrant. The Company will forthwith mail a copy
of each such certificate to the Holder of the Warrant and any Warrant Agent of
the Company (appointed pursuant to Section 11 hereof).

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    6.             Reservation of
Stock, etc.
Issuable on Exercise of Warrant; Financial
Statements.   The Company will at all times reserve and
keep available, solely for issuance and delivery on the exercise of the
Warrants, all shares of Common Stock from time to time issuable on the exercise
of the Warrant.  This Warrant entitles the Holder hereof to receive
copies of all financial and other information distributed or required to be
distributed to the holders of the Company’s Common Stock.

     

    7.            
Assignment; Exchange
of Warrant.  Subject to compliance with applicable securities
laws, this Warrant, and the rights evidenced hereby, may be transferred by any
registered holder hereof (a “Transferor”). On the surrender for exchange of this
Warrant, with the Transferor’s endorsement in the form of Exhibit B
attached hereto (the “Transferor Endorsement Form”) and together with an opinion
of counsel reasonably satisfactory to the Company that the transfer of this
Warrant will be in compliance with applicable securities laws, the Company at
its expense, twice, only, but with payment by the Transferor of any applicable
transfer taxes, will issue and deliver to or on the order of the Transferor
thereof a new Warrant or Warrants of like tenor, in the name of the Transferor
and/or the transferee(s) specified in such Transferor Endorsement Form (each a
“Transferee”), calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
so surrendered by the Transferor.  No such transfers shall result in a
public distribution of the Warrant.

     

    8.            
Replacement of
Warrant.  On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction of this Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of this Warrant, the Company at its expense, twice only, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.

     

    9.             Registration
Rights.  The Holder of this Warrant has been granted certain
registration rights by the Company.  These registration rights are set
forth in the Subscription Agreement.  The terms of the Subscription
Agreement are incorporated herein by this reference.

     

    10.           Maximum
Exercise.  The Holder shall not be entitled to exercise this
Warrant on an exercise date, in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates on an exercise
date, and (ii) the number of shares of Common Stock issuable upon the
exercise of this Warrant with respect to which the determination of this
limitation is being made on an exercise date, which would result in beneficial
ownership by the Holder and its affiliates of more than 4.99% of the outstanding
shares of Common Stock on such date.  For the purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934,
as amended, and Regulation 13d-3 thereunder.  Subject to the
foregoing, the Holder shall not be limited to aggregate exercises which would
result in the issuance of more than 4.99%.  The restriction described
in this paragraph may be waived, in whole or in part, upon sixty-one (61)
days prior notice from the Holder to the Company to increase such percentage to
up to 9.99%, but not in excess of 9.99%.  The Holder may decide
whether to convert a Convertible Note or exercise this Warrant to achieve an
actual 4.99% or up to 9.99% ownership position as described above, but not in
excess of 9.99%.

     

    11.           Warrant
Agent.  The Company may, by written notice to the Holder of the
Warrant, appoint an agent (a “Warrant Agent”) for the purpose of issuing Common
Stock on the exercise of this Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 7, and replacing this Warrant
pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such Warrant Agent.

     

    12.           Transfer on the
Company’s
Books.  Until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the
contrary.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    13.           Notices.   All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur or (c) three
business days after deposited in the mail if delivered pursuant to subsection
(ii) above.  The addresses for such communications shall be: (i) if to
the Company to: IDO Security Inc., 17 State Street, New York, NY 10004, Fax:
(646) 285-0026, with a copy by telecopier only to: Aboudi & Brounstein, 3
Gavish St., Kfar Saba, Israel, Fax: 972-9-764-4834, (ii) if to the Holder, to
the addresses and telecopier number set forth in the first paragraph of this
Warrant, with an additional copy by telecopier only to: Grushko & Mittman,
P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, Fax: (212)
697-3575.

    

    14.           Miscellaneous.  This
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. This Warrant shall
be construed and enforced in accordance with and governed by the laws of New
York.  Any dispute relating to this Warrant shall be adjudicated in
New York County in the State of New York.  The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof.  The invalidity or unenforceability of
any provision hereof shall in no way affect the validity or enforceability of
any other provision.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.

     

    
    

     

    
      	 	 	IDO SECURITY
      INC.	 

    

     

     

    
      	 	 	By:  	 

    

    
      	 	 	 	Name:	 
	 	 	 	Title:	 
	 	 	 	 	 
	 	 	 	 	 
	

              

               

              Witness:

               

            	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    

    Exhibit A

    FORM OF
SUBSCRIPTION

    (to be
signed only on exercise of Warrant)

    TO:  IDO
Security Inc.

     

    The
undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable
box):

    

    ___           ________
shares of the Common Stock covered by such Warrant; or

    ___           the
maximum number of shares of Common Stock covered by such Warrant pursuant to the
cashless exercise procedure set forth in Section 2.

    

    The
undersigned herewith makes payment of the full purchase price for such shares at
the price per share provided for in such Warrant, which is
$___________.  Such payment takes the form of (check applicable box or
boxes):

    ___           $__________
in lawful money of the United States; and/or

              

    ___          
the cancellation of the Warrant to the extent necessary, in accordance with the
formula set forth in Section 2, to exercise this Warrant with respect to
the maximum number of shares of Common Stock purchasable pursuant to the
cashless exercise procedure set forth in Section 2.

    

    The
undersigned requests that the certificates for such shares be issued in the name
of, and delivered to _____________________________________________________ whose
address is 

    ____________________________________________________________________________________________________________________________________________

    
      ____________________________________________________________________________________________________________________________________________

    

    Number of Shares of Common Stock Beneficially Owned on
the date of exercise: Less than five
percent (5%) of the outstanding Common Stock of IDO Security
Inc.

    

    The
undersigned represents and warrants that the representations and warranties in
Section 4 of the Subscription Agreement (as defined in this Warrant) are true
and accurate with respect to the undersigned on the date hereof.

    

    The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable upon exercise of the within Warrant shall be made
pursuant to registration of the Common Stock under the Securities Act of 1933,
as amended (the “Securities Act”), or pursuant to an exemption from registration
under the Securities Act.

    
      	Dated:__________________,
      ______________	
               

            
	
               

            	
              (Signature
      must conform to name of holder as specified on the face of the
      Warrant)

            
	 	 
	 	 
	 	 
	 	 
	 	(Address)

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    Exhibit B

     

    FORM OF
TRANSFEROR ENDORSEMENT

    (To be
signed only on transfer of Warrant)

     

    For value
received, the undersigned hereby sells, assigns, and transfers unto the
person(s) named below under the heading “Transferees” the right represented by
the within Warrant to purchase the percentage and number of shares of Common
Stock of IDO Security Inc. to which the within Warrant relates specified under
the headings “Percentage Transferred” and “Number Transferred,” respectively,
opposite the name(s) of such person(s) and appoints each such person Attorney to
transfer its respective right on the books of IDO Security Inc. with full power
of substitution in the premises.

     

    
      	
              Transferees

            	
              Percentage
      Transferred

            	
              Number
      Transferred

            
	 
      	 	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      

    

    

    

    
      	Dated: 	___________________,
      _____________ 	 	 
	 	 	 	(Signature must
      conform to name of holder as specified on the face of the
    warrant)

    

     

    
      	Signed in the
      presence of:	 	 
	 	 	 	 
	 	 	 
	    (Name)	 	 
	 	 	 	    (address)
	ACCEPTED AND
      AGREED:	 	 
	[TRANSFEREE]	 	 
	 	 	 	 
	 	 	    (address)
	    (Name)

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