Document:

Exhibit 10.20

 

CONSULTING AGREEMENT

THIS CONSULTING AGREEMENT (the “Agreement”) is entered into as of _____________, 2017 (the “Effective Date”), between VerifyMe, Inc., a Nevada corporation (the “Company”), and ___________________ (the “Consultant”).

WHEREAS, in its business, the Company has acquired and developed certain trade secrets both as defined by applicable law and the common law, including, but not limited to, proprietary processes, sales methods and techniques, and other like confidential business and technical information, including but not limited to, technical information, design systems, pricing methods, pricing rates or discounts, processes, procedures, formulas, designs of computer software, or improvements, or any portion or phase thereof, whether patented, or not, or unpatentable, that is of any value whatsoever to the Company, as well as information relating to the Company’s Services (as defined), information concerning proposed new Services, market feasibility studies, proposed or existing marketing techniques or plans (whether developed or produced by the Company or by any other person or entity for the Company), other Confidential Information, as defined in Section 9(a), and information about the Company’s executives, officers, and directors, which necessarily will be communicated to the Consultant by reason of his employment by the Company; and

WHEREAS, the Company has strong and legitimate business interests in preserving and protecting its investment in the Consultant, its trade secrets and Confidential Information, and its substantial, significant, or key, relationships with vendors Customers, as defined, whether actual or prospective; and

WHEREAS, the Company desires to preserve and protect its legitimate business interests further by restricting competitive activities of the Consultant during the term of this Agreement and for a reasonable time following the termination of this Agreement; and

WHEREAS, the Company desires to continue to employ the Consultant and to ensure the continued availability to the Company of the Consultant’s services, and the Consultant is willing to accept such employment and render such services, all upon and subject to the terms and conditions contained in this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth in this Agreement, and intending to be legally bound, the Company and the Consultant agree as follows:

1.            Representations and Warranties.  The Consultant hereby represents and warrants to the Company that he (i) is not subject to any non-solicitation or non-competition agreement affecting his employment with the Company (other than any prior agreement with the Company), (ii) is not subject to any confidentiality or nonuse/nondisclosure agreement affecting his  employment with the Company (other than any prior agreement with the Company), and (iii) has brought to the Company no trade secrets, confidential business information, documents, or other personal property of a prior employer.

 

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2.            Term.

 

(a)           Term.  The Company hereby retains the Consultant, and the Consultant hereby agrees to perform consulting services with the Company for a period of three years commencing as of the Effective Date (such period, as it may be extended or renewed, the “Term”), unless sooner terminated in accordance with the provisions of Section 6.  The Term shall be automatically renewed for successive one-year terms unless notice of non-renewal is given by either party at least 30 days before the end of the Term.

 

(b)           Continuing Effect.  Notwithstanding any termination of this Agreement, at the end of the Term or otherwise, the provisions of Sections 6(e), 7, 8, 9, 10, 12 15, 18, 19, and 22 shall remain in full force and effect and the provisions of Section 9 shall be binding upon the legal representatives, successors and assigns of the Consultant.

 

3.            Duties.

 

(a)           General Duties.  The Consultant shall serve as an advisor to the Company’s senior management and act as Chief Executive Officer at times when that position is otherwise vacant, with duties and responsibilities that are customary for such an executive.  The Consultant shall report to the Company’s Chief Executive Officer and the Board of Directors (the “Board”).  The Consultant shall also perform services for such subsidiaries of the Company as may be necessary.  The Consultant shall use his best efforts to perform his duties and discharge his responsibilities pursuant to this Agreement competently, carefully and faithfully. In determining whether or not the Consultant has used his best efforts hereunder, the Consultant’s and the Company’s delegation of authority and all surrounding circumstances shall be taken into account and the best efforts of the Consultant shall not be judged solely on the Company’s earnings or other results of the Consultant’s performance, except as specifically provided to the contrary by this Agreement. Subject to the actions of the Company’s shareholders, the Company shall appoint the Consultant to the Board of the Company, and he shall serve as a director for no additional compensation.

 

(b)           Devotion of Time.  Subject to the last sentence of this Section 3(b), the Consultant shall devote such time, attention and energies to the affairs of the Company and its subsidiaries and affiliates as are necessary to perform his duties and responsibilities pursuant to this Agreement.

 

(c)           Adherence to Inside Information Policies.  The Consultant acknowledges that the Company is publicly-held and, as a result, has implemented inside information policies designed to preclude its executives and those of its subsidiaries from violating the federal securities laws by trading on material, non-public information or passing such information on to others in breach of any duty owed to the Company, or any third party.  The Consultant shall promptly execute any agreements generally distributed by the Company to its employees requiring such employees to abide by its inside information policies.

 

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4.            Compensation and Expenses.

 

(a)           Fees.  For the services of the Consultant to be rendered under this Agreement, the Company shall pay the Consultant a monthly fee of $12,500 payable on the first and 16th calendar days (or the next business day) of each month. Provided, however, the fees shall accrue until the Company has raised at least $500,000 in its private placement offering currently being conducted (the “Offering”).

 

(b)           Expenses.  In addition to any compensation received pursuant to this Section 4, the Company will reimburse or advance funds to the Consultant for all reasonable documented travel (including travel expenses incurred by the Consultant related to his travel to the Company’s  offices), entertainment and miscellaneous expenses incurred in connection with the performance of his duties under this Agreement, provided that the Consultant properly provides a written accounting of such expenses to the Company in accordance with the Company’s practices.  Such reimbursement or advances will be made in accordance with policies and procedures of the Company in effect from time to time relating to reimbursement of, or advances to, its executive officers and employees.

 

(c)          Benefits.  The Consultant shall not be an employee and therefore not entitled to any benefits the Company’s executive officers and employees may receive. The Company shall reimburse the Consultant for up to $1,000 per month for health insurance including Medicare premiums and other medical expenses.

 

(d)           Option Grant.  To provide the Consultant with an appropriate incentive and compensate him for his past services which were critical to the survival of the Company, the Company grants the Consultant a number of stock options equal to 10% of outstanding shares of common stock on a fully diluted basis following the Offering. In order to permit the Consultant to file a Form 4 with the Securities and Exchange Commission, the number of stock options shall be 10,000,000 exercisable at $0.07 per share; provided, however, the Consultant shall not exercise any options to the extent that such options exceed the 10% threshold. The stock options shall be fully vested upon execution of the Company’s standard Stock Option Agreement and shall be exercisable for five year, provided that in no event shall any option be exercisable beyond its term.

 

5.            Termination.

 

(a)           Death or Disability.  Except as otherwise provided in this Agreement, this Agreement shall automatically terminate upon the death or disability of the Consultant.  For purposes of this Section 6(a), “disability” shall mean (i) the Consultant is unable to engage in his customary duties by reason of any medically determinable physical or mental impairment that can be expected to result in death, or last for a continuous period of not less than 12 months; (ii) the Consultant is, by reason of any medically determinable physical or mental impairment that can be expected to result in death, or last for continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company; or (iii) the Consultant is determined to be totally disabled by the Social Security Administration.  Any question as to the existence of a disability shall be determined by the written opinion of the Consultant’s regularly attending physician (or his guardian) (or the Social Security Administration, where applicable). In the event that the Consultant’s employment is terminated by reason of Consultant’s death or disability, the Company shall pay the following to the Consultant or his personal representative: (i) any accrued but unpaid consulting fees for services rendered to the date of termination, and (ii) accrued but unpaid expenses required to be reimbursed under this Agreement.  The Consultant (or his estate) shall receive the payments provided herein at such times as he would have received them if there was no death or disability.  Additionally, if this Agreement is terminated because of disability, any benefits (except perquisites) to which the Consultant may be entitled pursuant to Section 5(b) hereof shall continue to be paid or provided by the Company, as the case may be, for one year, subject to the terms of any applicable plan or insurance contract and applicable law provided that such benefits are exempt from Section 409A of the Code by reason of Treasury Regulation 1.409A-1(a)(5) or otherwise.  In the event all or a portion of the benefits to which the Consultant was entitled pursuant to Section 5(b) hereof are subject to 409A of the Code, the Consultant shall not be entitled to the benefits that are subject to Section 409A of the Code subsequent to the “applicable 2 1⁄2 month period” (as such term is defined under Treasury Regulation Section 1.409A-1(b)(4)(i)(A)).

  

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(b)           Termination by the Company for Cause.  The Company may terminate the Consultant pursuant to the terms of this Agreement at any time for Cause (as defined below) by giving the Consultant written notice of termination.  Such termination shall become effective upon the giving of such notice.  Upon any such termination for Cause, the Consultant shall have no right to compensation, or reimbursement under Section 4, for any period subsequent to the effective date of termination.  For purposes of this Agreement, “Cause” shall mean: (i) the Consultant is convicted of, or pleads guilty or nolo contendere to, a felony related to the business of the Company; (ii) the Consultant, in carrying out his duties hereunder, has acted with gross negligence or intentional misconduct resulting, in any case, in material harm to the Company; (iii) the Consultant misappropriates Company funds or otherwise defrauds the Company in a matter involving a material amount of money or property; (iv) the Consultant breaches his fiduciary duty to the Company resulting in material profit to him, directly or indirectly; (v) the Consultant materially breaches any agreement with the Company and fails to cure such breach within 10 days of receipt of notice, unless the act is incapable of being cured; (vi) the Consultant breaches any provision of Section 8 or Section 9; (vii) the Consultant becomes subject to a preliminary or permanent injunction issued by a United States District Court enjoining the Consultant from violating any securities law administered or regulated by the Securities and Exchange Commission; (viii) the Consultant becomes subject to a cease and desist order or other order issued by the Securities and Exchange Commission after an opportunity for a hearing; (ix) the Consultant refuses to carry out a resolution adopted by the Company’s Board at a meeting in which the Consultant was offered a reasonable opportunity to argue that the resolution should not be adopted; or (x) the Consultant abuses alcohol or drugs in a manner that interferes with the successful performance of his duties.

 

(c)           Termination by the Company Without Cause or Automatic Termination Upon a Change of Control or at the end of a Term after the Company provides notice of Non-Renewal.

 

(1)           This Agreement may be terminated: (i) by the Company without Cause, (ii) upon any Change of Control event as defined in Treasury Regulation Section 1.409A-3(i)(5) provided, that, within one year of the Change of Control event (A) the Company terminates the Consultant or (B) the Consultant terminates this Agreement or ceases performing services or (iii) at the end of a Term after the Company provides the Consultant with notice of non-renewal.

 

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(2)           In the event this Agreement is terminated by the Company without Cause, the Consultant shall be entitled to the following:

 

(A)          any accrued but unpaid consulting fees for services rendered to the date of termination;

 

(B)          any accrued but unpaid expenses required to be reimbursed under this Agreement;

 

(C)          a payment equal to 12 months of consulting fees (“Severance Amount”); and

 

(D)          any benefits (except perquisites) to which the Consultant was entitled pursuant to Section 5(c) hereof shall continue to be paid or provided by the Company, as the case may be, for one year, subject to the terms of any applicable plan or insurance contract and applicable law provided that such benefits are exempt from Section 409A of the Code by reason of Treasury Regulation 1.409A-1(a)(5) or otherwise.  In the event all or a portion of the benefits to which the Consultant was entitled pursuant to Section 5(c) hereof are subject to 409A of the Code, the Consultant shall not be entitled to the benefits that are subject to Section 409A of the Code subsequent to the “applicable 2 1⁄2 month period” (as such term is defined under Treasury Regulation Section 1.409A-1(b)(4)(i)(A)).

 

(3)           In the event of a Change of Control during the Term and  the Consultant terminates this Agreement within one year of the Change of Control, he shall be entitled to receive each of the provisions of Section 6(c)(2)(A) – (D) above except the Severance Amount shall equal to 18 months of consulting fees and the benefits under Section 6(c)(2)(F) shall continue for an 18 month period provided that such benefits are exempt from Section 409A of the Code by reason of Treasury Regulation 1.409A-1(a)(5) or otherwise.  In the event all or a portion of the benefits under Section 6(c)(2)(F) are subject to 409A of the Code, the Consultant shall not be entitled to the benefits that are subject to Section 409A of the Code subsequent to the “applicable 2 1⁄2 month period” (as such term is defined under Treasury Regulation Section 1.409A-1(b)(4)(i)(A)).

 

(4)           In the event this Agreement is terminated at the end of a Term after the Company provides the Consultant with notice of non-renewal and the Consultant remains as a consultant until the end of the Term, the Consultant shall be entitled to the following:

 

(A)          any accrued but unpaid consulting fees for services rendered to the date of termination;

 

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(B)          any accrued but unpaid expenses required to be reimbursed under this Agreement; and

 

(C)          any benefits to which the Consultant was entitled pursuant to Section 5(c) hereof shall continue to be paid or provided by the Company, as the case may be, for six months, subject to the terms of any applicable plan or insurance contract and applicable law provided that such benefits are exempt from Section 409A of the Code by reason of Treasury Regulation 1.409A-1(a)(5) or otherwise.  In the event all or a portion of the benefits to which the Consultant was entitled pursuant to Section 5(c) hereof are subject to 409A of the Code, the Consultant shall not be entitled to the benefits that are subject to Section 409A of the Code subsequent to the “applicable 2 1⁄2 month period” (as such term is defined under Treasury Regulation Section 1.409A-1(b)(4)(i)(A)).

 

Provided, however, that the Consultant shall only be entitled to receive each of the provisions of this Section 6(c)(4) if the Consultant is willing and able (i) to execute a new agreement providing terms and conditions substantially similar to those in this Agreement and (ii) to continue providing such services, and therefore, the Company’s non-renewal of the Term will be considered an “involuntary separation from service” within the meaning of Treasury Regulation Section 1.409A-1(n).

(5)           In the event of a termination without Cause, the payment of the Severance Amount shall be made at the same times as the Company pays consulting fees under this Agreement and any other payments owed under Section 6(c) shall be promptly paid.  Provided, however, that any balance of the Severance Amount remaining due on the “applicable 2 1⁄2 month period” (as such term is defined under Treasury Regulation Section 1.409A-1(b)(4)(i)(A)) after the end of the tax year in which the Consultant is terminated or the Term ends shall be paid on the last day of the applicable 21⁄2 month period.

 

(d)           Any termination made by the Company under this Agreement shall be approved by the Board.

 

(e)           Upon (1) voluntary or involuntary termination of this Agreement or (2) the Company’s request at any time, the Consultant shall (i) provide or return to the Company, all Company documents and materials belonging to the Company and stored in any fashion, including but not limited to those that constitute or contain any Confidential Information or work product, that are in the possession or control of the Consultant, whether they were provided to the Consultant by the Company or any of its business associates or created by the Consultant in connection with his services for the Company; and (ii) delete or destroy all copies of any such documents and materials not returned to the Company that remain in the Consultant’s possession or control, including those stored on any non-Company devices, networks, storage locations and media in the Consultant’s possession or control.

 

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6.            Non-Competition Agreement.

 

(a)           Competition with the Company. Until termination of this Agreement and for a period of one year commencing on the date of termination, the Consultant (individually or in association with, or as a shareholder, director, officer, consultant, employee, partner, joint venture, member, or otherwise, of or through any person, firm, corporation, partnership, association or other entity) shall not, directly or indirectly, compete with the Company (which for the purpose of this Agreement also includes any of its subsidiaries or affiliates) by acting as an officer (or comparable position) of, owning an interest in, or providing services to any entity within any metropolitan area in the United States or other country in which the Company was actually engaged in business as of the time of termination of this Agreement or where the Company reasonably expected to engage in business within three months of the date of termination of this Agreement.  For purposes of this Agreement, the term “compete with the Company” shall refer to any business activity in which the Company was engaged as of the termination of this Agreement or reasonably expected to engage in within three months of termination of this Agreement; provided, however, the foregoing shall not prevent the Consultant from (i) accepting employment or acting as a consultant to an enterprise engaged in two or more lines of business, one of which is the same or similar to the Company’s business (the “Prohibited Business”) if the Consultant’s services are totally unrelated to the Prohibited Business, (ii) competing in a country where as of the time of the alleged violation the Company has ceased engaging in business, or (iii) competing in a line of business which as of the time of the alleged violation the Company has either ceased engaging in or publicly announced or disclosed that it intends to cease engaging in; provided, further, the foregoing shall not prohibit the Consultant from owning up to five percent of the securities of any publicly-traded enterprise provided as long as the Consultant is not a director, officer, consultant, employee, partner, joint venture, manager, or member of, or to such enterprise, or otherwise compensated for services rendered thereby.

 

(b)           Solicitation of Customers. During the periods in which the provisions of Section 8(a) shall be in effect, the Consultant, directly or indirectly, will not seek nor accept Prohibited Business from any Customer (as defined below) on behalf of any enterprise or business other than the Company, refer Prohibited Business from any Customer to any enterprise or business other than the Company or receive commissions based on sales or otherwise relating to the Prohibited Business from any Customer, or any enterprise or business other than the Company.  For purposes of this Agreement, the term “Customer” means any person, firm, corporation, partnership, limited liability company, association or other entity to which the Company or any of its affiliates sold or provided goods or services during the 24-month period prior to the time at which any determination is required to be made as to whether any such person, firm, corporation, partnership, limited liability company, association or other entity is a Customer, or who or which was approached by or who or which has approached an employee of the Company for the purpose of soliciting business from the Company or the third party, as the case may be.  Provided, however, the goods or services must be competitive in some respect to the Company’s business during such time

 

(c)           Solicitation of Employees.  During the period in which the provisions of Section 8(a) and (b) shall be in effect, the Consultant agrees that he shall not, directly or indirectly, request, recommend or advise any employee of the Company to terminate his or her employment with the Company, for the purposes of providing services for a Prohibited Business, or solicit for employment or recommend to any third party the solicitation for employment of any individual who was employed by the Company or any of its subsidiaries and affiliates at any time during the one year period preceding the Consultant’s termination of employment.

      

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(d)           Non-disparagement.  The Consultant agrees that, after the termination of this Agreement, he will refrain from making, in writing or orally, any unfavorable comments about the Company, its operations, policies, or procedures that would be likely to injure the Company’s reputation or business prospects; provided, however, that nothing herein shall preclude the Consultant from responding truthfully to a lawful subpoena or other compulsory legal process or from providing truthful information otherwise required by law.

      

(e)           No Payment.  The Consultant acknowledges and agrees that no separate or additional payment will be required to be made to him in consideration of his undertakings in this Section 8, and confirms he has received adequate consideration for such undertakings.

 

(f)            References.  References to the Company in this Section 8 shall include the Company’s subsidiaries and affiliates.

 

7.            Non-Disclosure of Confidential Information.

 

(a)           Confidential Information.  For purposes of this Agreement, “Confidential Information” includes, but is not limited to, trade secrets under any applicable statute or the common law, patents, patent applications, processes, policies, procedures, techniques, designs, drawings, know-how, show-how, technical information, specifications, computer software and source code, information and data relating to the development, research, testing, costs, marketing, and uses of the Services (as defined herein), the Company’s budgets and strategic plans, and the identity and special needs of Customers vendors, subjects and databases, data, and all technology relating to the Company’s businesses, systems, methods of operation, and Customer lists and information, solicitation leads, marketing and advertising materials, methods and manuals and forms, all of which pertain to the activities or operations of the Company, the names, home addresses and all telephone numbers and e-mail addresses of the Company’s directors, employees, officers, executives, former executives, and Customer contacts.  Confidential Information also includes, without limitation, Confidential Information received from the Company’s subsidiaries and affiliates.  For purposes of this Agreement, the following will not constitute Confidential Information (i) information which is or subsequently becomes generally available to the public through no act or fault of the Consultant, (ii) information set forth in the written records of the Consultant prior to disclosure to the Consultant by or on behalf of the Company which information is given to the Company in writing as of or prior to the date of this Agreement, and (iii) information which is lawfully obtained by the Consultant in writing from a third party (excluding any affiliates of the Consultant) who lawfully acquired the confidential information and who did not acquire such confidential information or trade secret, directly or indirectly, from the Consultant or the Company or its subsidiaries or affiliates and who has not breached any duty of confidentiality. As used herein, the term “Services” shall include all services offered for sale and marketed by the Company during the Term.

 

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(b)           Legitimate Business Interests.  The Consultant recognizes that the Company has legitimate business interests to protect and as a consequence, the Consultant agrees to the restrictions contained in this Agreement because they further the Company’s legitimate business interests.  These legitimate business interests include, but are not limited to (i) trade secrets; (ii) valuable confidential business, technical, and/or professional information that otherwise may not qualify as trade secrets, including, but not limited to, all Confidential Information; (iii) substantial, significant, or key relationships with specific prospective or existing Customers, vendors or suppliers; (iv) Customer  goodwill associated with the Company’s business; and (v) specialized training relating to the Company’s technology, Services, methods, operations and procedures.  Notwithstanding the foregoing, nothing in this Section 9(b) shall be construed to impose restrictions greater than those imposed by other provisions of this Agreement.

 

(c)           Confidentiality.  During the Term of this Agreement and following termination of this Agreement, for any reason, the Confidential Information shall be held by the Consultant in the strictest confidence and shall not, without the prior express written consent of the Company, be disclosed to any person other than in connection with the Consultant’s services for the Company.  The Consultant further acknowledges that such Confidential Information as is acquired and used by the Company or its subsidiaries or affiliates is a special, valuable and unique asset.  The Consultant shall exercise all due and diligent precautions to protect the integrity of the Company’s Confidential Information and to keep it confidential whether it is in written form, on electronic media, oral, or otherwise.  The Consultant shall not copy any Confidential Information except to the extent necessary to the performance of his services nor remove any Confidential Information or copies thereof from the Company’s premises except to the extent necessary.  All records, files, materials and other Confidential Information obtained by the Consultant in the course of his services as a consultant to the Company are confidential and proprietary and shall remain the exclusive property of the Company.  The Consultant shall not, except in connection with and as required by his performance of his duties under this Agreement, for any reason use for his own benefit or the benefit of any person or entity other than the Company or disclose any such Confidential Information to any person, firm, corporation, association or other entity for any reason or purpose whatsoever without the prior express written consent of an executive officer of the Company (excluding the Consultant).

 

(d)           References.  References to the Company in this Section 9 shall include the Company’s subsidiaries and affiliates.

 

(e)           Whistleblowing.  Nothing contained in this Agreement shall be construed to prevent the Consultant from reporting any act or failure to act to the Securities and Exchange Commission or other governmental body or prevent the Consultant from obtaining a fee as a “whistleblower” under Rule 21F-17(a) under the Securities Exchange Act of 1934 or other rules or regulations implemented under the Dodd-Frank Wall Street Reform Act and Consumer Protection Act.

 

8.            Equitable Relief.

 

(a)           The Company and the Consultant recognize that the services to be rendered under this Agreement by the Consultant are special, unique and of extraordinary character, and that in the event of the breach by the Consultant of the terms and conditions of this Agreement or if the Consultant, without the prior express consent of the Board, shall terminate this Agreement for any reason and/or take any action in violation of Section 8 and/or Section 9, the Company shall be entitled to institute and prosecute proceedings in any court of competent jurisdiction referred to in Section 10(b) below, to enjoin the Consultant from breaching the provisions of Section 8 and/or Section 9.

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(b)           Any action arising from or under this Agreement must be commenced only in the appropriate state court located in Montgomery County, PA or federal court in Philadelphia, PA.  The Consultant and the Company irrevocably and unconditionally submit to the exclusive jurisdiction of such courts and agree to take any and all future action necessary to submit to the jurisdiction of such courts.  The Consultant and the Company irrevocably waive any objection that they now have or hereafter may have to the laying of venue of any suit, action or proceeding brought in any such court and further irrevocably waive any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  Final judgment against the Consultant or the Company in any such suit shall be conclusive and may be enforced in other jurisdictions by suit on the judgment, a certified or true copy of which shall be conclusive evidence of the fact and the amount of any liability of the Consultant or the Company therein described, or by appropriate proceedings under any applicable treaty or otherwise.

 

9.            Conflicts of Interest.  While acting as consultant to the Company, the Consultant shall not, unless approved by the Board, directly or indirectly:

 

(a)           participate as an individual in any way in the benefits of transactions with any of the Company’s Customers or vendors, including, without limitation, having a financial interest in the Company’s Customers or vendors, or making loans to, or receiving loans, from, the Company’s Customers or  vendors;

 

(b)           realize a personal gain or advantage from a transaction in which the Company has an interest or use information obtained in connection with the Consultant’s employment with the Company for the Consultant’s personal advantage or gain; or

 

(c)           accept any offer to serve as an officer, director, partner, consultant, manager with, provide services to or to be employed by, a person or entity which does business with the Company.

 

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10.          Inventions, Ideas, Processes, and Designs.  All inventions, ideas, processes, programs, software, and designs (including all improvements) (i) conceived or made by the Consultant during the course of his services for the Company (whether or not actually conceived during regular business hours) and for a period of six months subsequent to the termination (whether by expiration of the Term or otherwise) of such services for the Company, and (ii) related to the business of the Company, shall be disclosed in writing promptly to the Company and shall be the sole and exclusive property of the Company, and the Consultant hereby assigns any such inventions to the Company.  An invention, idea, process, program, software, or design (including an improvement) shall be deemed related to the business of the Company if (a) it was made with the Company’s funds, personnel, equipment, supplies, facilities, or Confidential Information, (b) results from work performed by the Consultant for the Company, or (c) pertains to the current business or demonstrably anticipated research or development work of the Company.  The Consultant shall cooperate with the Company and its attorneys in the preparation of patent and copyright applications for such developments and, upon request, shall promptly assign all such inventions, ideas, processes, and designs to the Company.  The decision to file for patent or copyright protection or to maintain such development as a trade secret, or otherwise, shall be in the sole discretion of the Company, and the Consultant shall be bound by such decision. The Consultant hereby irrevocably assigns to the Company, for no additional consideration, the Consultant’s entire right, title and interest in and to all work product and intellectual property rights, including the right to sue, counterclaim and recover for all past, present and future infringement, misappropriation or dilution thereof, and all rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Company's rights, title or interest in any work product or intellectual property rights so as to be less in any respect than the Company would have had in the absence of this Agreement.  If applicable, the Consultant shall provide as a schedule to this Agreement, a complete list of all inventions, ideas, processes, and designs, if any, patented or unpatented, copyrighted or otherwise, or non-copyrighted, including a brief description, which he made or conceived prior to his employment with the Company and which therefore are excluded from the scope of this Agreement. References to the Company in this Section 10 shall include the Company, its subsidiaries and affiliates.

 

11.          Indebtedness.  If, during the course of the Consultant’s services under this Agreement, the Consultant becomes indebted to the Company for any reason, the Company may, if it so elects, and if permitted by applicable law, set off any sum due to the Company from the Consultant and collect any remaining balance from the Consultant unless the Consultant has entered into a written agreement with the Company.

 

12.          Assignability.  The rights and obligations of the Company under this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company, provided that such successor or assign shall acquire all or substantially all of the securities or assets and business of the Company.  The Consultant’s obligations hereunder may not be assigned or alienated and any attempt to do so by the Consultant will be void.

 

13.          Severability.

 

(a)           The Consultant expressly agrees that the character, duration and geographical scope of the non-competition provisions set forth in this Agreement are reasonable in light of the circumstances as they exist on the date hereof.  Should a decision, however, be made at a later date by a court of competent jurisdiction that the character, duration or geographical scope of such provisions is unreasonable, then it is the intention and the agreement of the Consultant and the Company that this Agreement shall be construed by the court in such a manner as to impose only those restrictions on the Consultant’s conduct that are reasonable in the light of the circumstances and as are necessary to assure to the Company the benefits of this Agreement.  If, in any judicial proceeding, a court shall refuse to enforce all of the separate covenants deemed included herein because taken together they are more extensive than necessary to assure to the Company the intended benefits of this Agreement, it is expressly understood and agreed by the parties hereto that the provisions of this Agreement that, if eliminated, would permit the remaining separate provisions to be enforced in such proceeding shall be deemed eliminated, for the purposes of such proceeding, from this Agreement.

 

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(b)           If any provision of this Agreement otherwise is deemed to be invalid or unenforceable or is prohibited by the laws of the state or jurisdiction where it is to be performed, this Agreement shall be considered divisible as to such provision and such provision shall be inoperative in such state or jurisdiction and shall not be part of the consideration moving from either of the parties to the other.  The remaining provisions of this Agreement shall be valid and binding and of like effect as though such provisions were not included.

 

14.          Notices and Addresses.  All notices, offers, acceptance and any other acts under this Agreement (except payment) shall be in writing, and shall be sufficiently given if delivered to the addressees in person, by FedEx or similar receipted delivery, or next business day delivery to the addresses detailed below (or to such other address, as either of them, by notice to the other may designate from time to time), or by e-mail delivery (in which event a copy shall immediately be sent by FedEx or similar receipted delivery), as follows:

	 	
To the Company: 

	
Scott McPherson

Chief Financial Officer

VerifyMe, Inc.

409 Boot Road,

Downingtown, PA 19335

Email: samcpherson@mcphersoncpa.com

	 	
With a copy to: 

	
Nason, Yeager, Gerson White & Lioce, P.A.

3001 PGA Blvd., Suite 305

Palm Beach Gardens, Florida 33410

Attention: Michael D. Harris, Esq.

Email: mharris@nasonyeager.com

	 	
To the Consultant: 

	
________________________

________________________

________________________

Email: _____________________

15.          Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.  The execution of this Agreement may be by actual or facsimile signature.

 

16.          Attorneys’ Fees.  In the event that there is any controversy or claim arising out of or relating to this Agreement, or to the interpretation, breach or enforcement thereof, and any action or proceeding is commenced to enforce the provisions of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and expenses (including such fees and costs on appeal).

 

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17.          Governing Law.  This Agreement shall be governed or interpreted according to the internal laws of the State of Pennsylvania without regard to choice of law considerations and all claims relating to or arising out of this Agreement, or the breach thereof, whether sounding in contract, tort, or otherwise, shall also be governed by the laws of the State of Pennsylvania without regard to choice of law considerations.

 

18.          Entire Agreement.  This Agreement constitutes the entire Agreement between the parties and supersedes all prior oral and written agreements between the parties hereto with respect to the subject matter hereof.  Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, except by a statement in writing signed by the party or parties against which enforcement or the change, waiver discharge or termination is sought.

 

19.          Section and Paragraph Headings.  The section and paragraph headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

 

20.          Section 409A Compliance.

 

(a)           This Agreement is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), or an exemption thereunder.  This Agreement shall be construed and administered in accordance with Section 409A.  Notwithstanding any other provision of this Agreement to the contrary, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption.  Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service (including a voluntary separation from service for good reason that is considered an involuntary separation for purposes of the separation pay exception under Treasury Regulation 1.409A-1(n)(2)) or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible.  For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment.  Any payments to be made under this Agreement upon a termination of this Agreement shall only be made if such termination constitutes a “separation from service” under Section 409A.  Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest, or other expenses that may be incurred by the Consultant on account of non-compliance with Section 409A.

 

(b)           Notwithstanding any other provision of this Agreement, if at the time of the termination of this Agreement, the Consultant is considered a "specified employee", determined in accordance with Section 409A, any payments and benefits provided under this Agreement that constitute "nonqualified deferred compensation" subject to Section 409A (e.g., payments and benefits that do not qualify as a short-term deferral or as a separation pay exception) that are provided to the Consultant on account of the Consultant’s separation from service shall not be paid until the first payroll date to occur following the six-month anniversary of the Consultant's termination date ("Specified Employee Payment Date").  The aggregate amount of any payments that would otherwise have been made during such six-month period shall be paid in a lump sum on the Specified Employee Payment Date without interest and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.  If the Consultant dies during the six-month period, any delayed payments shall be paid to the Consultant's estate in a lump sum upon the Consultant's death.

 

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(c)           To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following:

 

(1)           the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year;

 

(2)           any reimbursement of an eligible expense shall be paid to the Consultant on or before the last day of the calendar year following the calendar year in which the expense was incurred; and

 

(3)           any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit.

 

(d)           In the event the Company determines that the Consultant is considered a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code at the time of the Consultant’s separation from service, then to the extent any payment or benefit that the Consultant becomes entitled to under this Agreement on account of the Consultant’s separation from service would be considered deferred compensation subject to Section 409A as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (i) six months and one day after the Consultant’s separation from service, or (ii) the Consultant’s death (the “Six Month Delay Rule”).

 

(1)           For purposes of this subparagraph, amounts payable under the Agreement should not provide for a deferral of compensation subject to Section 409A to the extent provided in Treasury Regulation Section 1.409A-1(b)(4) (e.g., short-term deferrals), Treasury Regulation Section 1.409A-1(b)(9) (e.g., separation pay plans, including the exception under subparagraph (iii)), and other applicable provisions of the Treasury Regulations.

 

(2)           To the extent that the Six Month Delay Rule applies to payments otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of the Six Month Delay Rule, and the balance of the installments shall be payable in accordance with their original schedule.

 

(3)           To the extent that the Six Month Delay Rule applies to the provision of benefits (including, but not limited to, life insurance and medical insurance), such benefit coverage shall nonetheless be provided to the Consultant during the first six months following his separation from service (the “Six Month Period”), provided that, during such Six-Month Period, the Consultant pays to the Company, on a monthly basis in advance, an amount equal to the Monthly Cost (as defined below) of such benefit coverage.  The Company shall reimburse the Consultant for any such payments made by the Consultant in a lump sum not later than 30 days following the sixth month anniversary of the Consultant’s separation from service.  For purposes of this subparagraph, “Monthly Cost” means the minimum dollar amount which, if paid by the Consultant on a monthly basis in advance, results in the Consultant not being required to recognize any federal income tax on receipt of the benefit coverage during the Six Month Period.

 

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(e)           The parties intend that this Agreement will be administered in accordance with Section 409A.  To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A.  The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.

 

(f)           The Company makes no representation or warranty and shall have no liability to the Consultant or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A but do not satisfy an exemption from, or the conditions of, such Section.

 

[Signature Page To Follow]

 

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IN WITNESS WHEREOF, the Company and the Consultant have executed this Agreement as of the date and year first above written.

	 	
VerifyMe, Inc.

	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	
By:

	 	 
	 	 	
Larry Schafran

Director & Member of Executive

Committee

	 
	 	 	 	 
	 	 	 	 
	 	
Consultant:

	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 
	 	
 

	
[Print Name and Title] 

	 

 

16Exhibit 10.29

 

THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”), OR ANY OTHER SECURITIES LAWS, HAVE BEEN TAKEN FOR INVESTMENT, AND MAY NOT BE SOLD OR TRANSFERRED OR OFFERED FOR SALE OR TRANSFER UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS WITH RESPECT TO SUCH SECURITIES IS THEN IN EFFECT, OR IN THE OPINION OF COUNSEL TO THE ISSUER OF THESE SECURITIES, SUCH REGISTRATION UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS IS NOT REQUIRED.

 

Date: _______, 2017

 

$ 0.15 WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK OF VERIFYME, INC.

 

THIS IS TO CERTIFY that, for value received, _________________, its successors and assigns (the “Holder”), is entitled to purchase, subject to the terms and conditions hereinafter set forth, _______ shares of VerifyMe, Inc., a Nevada corporation (the “Company”) common stock, $0.001 par value per share (“Common Stock”), and to receive  certificates for the Common Stock so purchased.  The exercise price of this Warrant is $0.15 per share, subject to adjustment as provided below (the “Exercise Price”).

 

1.          Exercise Period and Vesting.  This Warrant is vested and shall be exercisable at any time by the Holder beginning on the date listed above (the “Issuance Date”), and ending at 5:00 p.m., New York, New York time, on the date that is the fifth anniversary of the date of this Warrant (the “Exercise Period”).  This Warrant will terminate automatically and immediately upon the expiration of the Exercise Period.

2.          Exercise of Warrant; Cashless Exercise.

(a)  Exercise.  This Warrant may be exercised, in whole or in part, at any time and from time to time during the Exercise Period.  Such exercise shall be accomplished by tender to the Company of an amount equal to the Exercise Price multiplied by the number of underlying shares being purchased (the “Purchase Price”), by wire transfer or by certified check or bank cashier’s check, payable to the order of the Company, or by a cashless exercise as provided in Section 2(b).  As a condition of exercise, the Holder shall where applicable execute a customary investment letter and accredited investor questionnaire.  The Holder’s right to exercise this Warrant is subject to compliance with any applicable laws and rules including Section 5 of the Securities Act of 1933.

(b)  Cashless Exercise.  Provided, however, the Holder may exercise this Warrant by surrendering such number of shares of Common Stock received upon exercise of this Warrant with an aggregate Fair Market Value (as defined below) equal to the Purchase Price, as described in the following paragraph (a “Cashless Exercise”).

 

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If the Holder elects to conduct a Cashless Exercise, the Company shall cause to be delivered to the Holder a certificate or certificates representing the 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 portion of the Warrant (in number of shares of Common Stock) being exercised by the Holder (at the date of such calculation);

A = the Fair Market Value (as defined below) of one share of Common Stock; and

B = Exercise Price (as adjusted to the date of such calculation).

    

For purposes of this Warrant, Fair Market Value shall mean: (i) if the principal trading market for such securities is a national securities exchange, or the OTCQB (or a similar system then in use), the average of the last five reported sales prices on the principal market the last five trading days immediately prior to such Exercise Date (as defined in Section 2(c) below); or (ii) if (i) is not applicable, and if bid and ask prices for shares of Common Stock are reported by the principal trading market, the average of the high bid and low asked prices so reported for the trading day immediately prior to such Exercise Date.  Notwithstanding the foregoing, if there is no last reported sales price or bid and ask prices, as the case may be, for the day in question, then Fair Market Value shall be determined as of the latest day prior to such day for which such last reported sales price or bid and asked prices, as the case may be, are available, unless such securities have not been traded on an exchange or in the over-the-counter market for 30 or more days immediately prior to the day in question, in which case the Fair Market Value shall be determined in good faith by and reflected in a formal resolution of the board of directors of the Company.

(c)  Upon receipt of the Purchase Price in Section 2(a) or the shares of Common Stock in Section 2(b), together with presentation and surrender to the Company of this Warrant with an executed subscription form in substantially the form attached hereto as Exhibit A (the “Subscription”), the Company will deliver to the Holder, as promptly as possible, a certificate or certificates representing the shares of Common Stock so purchased, registered in the name of the Holder or its transferee (as permitted under Section 3 below).  With respect to any exercise of this Warrant, the Holder will for all purposes be deemed to have become the holder of record of the number of shares of Common Stock purchased hereunder on the date a properly executed Subscription and payment of the Purchase Price is received by the Company (the “Exercise Date”), irrespective of the date of delivery of the certificate evidencing such shares, except that, if the date of such receipt is a date on which the stock transfer books of the Company are closed, such person will be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.  Fractional shares of Common Stock will not be issued upon the exercise of this Warrant.  In lieu of any fractional shares that would have been issued but for the immediately preceding sentence, the Holder will be entitled to receive cash equal to the current market price of such fraction of a share of Common Stock on the trading day immediately preceding the Exercise Date.  In the event this Warrant is exercised in part, the Company shall issue a New Warrant (defined below) to the Holder covering the aggregate number of shares of Common Stock as to which this Warrant remains exercisable for.  The Company acknowledges and agrees that this Warrant was issued on the Issuance Date.

 

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3.          Transferability and Exchange.

(a)  This Warrant, and the Common Stock issuable upon the exercise hereof, may not be sold, transferred, pledged or hypothecated unless the Company shall have been provided with an opinion of counsel reasonably satisfactory to the Company that such transfer is not in violation of the Securities Act of 1933 (the “Securities Act”), and any applicable state securities laws.  Subject to the satisfaction of this condition, this Warrant and the underlying shares of Common Stock if not eligible to be sold under Rule 144 of the Securities Act shall be transferable from time to time by the Holders upon written notice to the Company.  If this Warrant is transferred, in whole or in part, the Company may request the transferee to sign an investment letter and shall, upon surrender of this Warrant to the Company, deliver to each transferee a Warrant evidencing the rights of such transferee to purchase the number of shares of Common Stock that such transferee is entitled to purchase pursuant to such transfer.  The Company may place a legend similar to the legend at the top of this Warrant on any replacement Warrant and on each certificate representing shares issuable upon exercise of this Warrant or any replacement Warrants. Only registered Holder may enforce the provisions of this Warrant against the Company.  A transferee of the original registered Holder becomes a registered Holder only upon delivery to the Company of the original Warrant and an original Assignment, substantially in the form set forth in Exhibit B attached hereto.

(b)  This Warrant is exchangeable upon its surrender by the Holder to the Company for new Warrants of like tenor and date representing in the aggregate the right to purchase the number of shares purchasable hereunder, each of such new Warrants to represent the right to purchase such number of shares as may be designated by the Holder at the time of such surrender (not to exceed the aggregate number of shares underlying this Warrant).

4.          Adjustments to Exercise Price and Number of Shares Subject to Warrant.  The Exercise Price and the number of shares of Common Stock purchasable upon the exercise of this Warrant are subject to adjustment from time to time upon the occurrence of any of the events specified in this Section 4.  For the purpose of this Section 4, “Common Stock” means shares now or hereafter authorized of any class of common stock of the Company, however designated, that has the right to participate in any distribution of the assets or earnings of the Company without limit as to per share amount (excluding, and subject to any prior rights of, any class or series of preferred stock).

(a)  In case the Company shall (i) pay a dividend or make a distribution in shares of Common Stock to holders of shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iv) issue by reclassification of its shares of Common Stock other securities of the Company, then the Exercise Price in effect at the time of the record date for such dividend or on the effective date of such subdivision, combination or reclassification, and/or the number and kind of securities issuable on such date, shall be proportionately adjusted so that the Holder of the Warrant thereafter exercised shall be entitled to receive the aggregate number and kind of shares of Common Stock (or such other securities other than Common Stock) of the Company, at the same aggregate Exercise Price, that, if such Warrant had been exercised immediately prior to such date, the Holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, distribution, subdivision, combination or reclassification.  Such adjustment shall be made successively whenever any event listed above shall occur.

 

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(b)  In case the Company shall fix a record date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the surviving corporation) of cash, evidences of indebtedness or assets, or subscription rights or warrants, the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Fair Market Value per share of Common Stock on such record date, less the amount of cash so to be distributed or the Fair Market Value (as determined in good faith by, and reflected in a formal resolution of, the board of directors of the Company) of the portion of the assets or evidences of indebtedness so to be distributed, or of such subscription rights or warrants, applicable to one share of Common Stock, and the denominator of which shall be the Fair Market Value per share of Common Stock.  Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Exercise Price shall again be adjusted to be the Exercise Price which would then be in effect if such record date had not been fixed.  When determining Fair Market Value of the Company’s Common Stock, Fair Market Value shall mean: (i) if the principal trading market for such securities is a national securities exchange including The Nasdaq Stock Market, or the OTCQB (or a similar system then in use), the last reported sales price on the principal market the trading day immediately prior to such record date; or (ii) if subsection (i) is not applicable, and if bid and ask prices for shares of Common Stock are reported by the principal trading market or the OTC Markets, the average of the high bid and low ask prices so reported for the trading day immediately prior to such record date.  Notwithstanding the foregoing, if there is no last reported sales price or bid and ask prices, as the case may be, for the day in question, then Fair Market Value shall be determined as of the latest day prior to such day for which such last reported sales price or bid and ask prices, as the case may be, are available, unless such securities have not been traded on an exchange or in the over-the-counter market for 30 or more days immediately prior to the day in question, in which case the Fair Market Price shall be determined in good faith by, and reflected in a formal resolution of, the board of directors of the Company.

     

(c)  Notwithstanding any provision herein to the contrary, no adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Exercise Price; provided, however, that any adjustments which by reason of this Section 4(c) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.  All calculations under this Section 4 shall be made to the nearest cent or the nearest one-hundredth of a share, as the case may be.

(d)  In the event that at any time, as a result of an adjustment made pursuant to Section 4(a) above, the Holder of any Warrant thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, thereafter the number of such other shares so receivable upon exercise of any Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Common Stock contained in this Section 4, and the other provisions of this Warrant shall apply on like terms to any such other shares.

 

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(e)  If the Company merges or consolidates into or with another corporation or entity, or if another corporation or entity merges into or with the Company (excluding such a merger in which the Company is the surviving or continuing corporation and which does not result in any reclassification, conversion, exchange, or cancellation of the outstanding shares of Common Stock), or if all or substantially all of the assets or business of the Company are sold or transferred to another corporation, entity, or person, then, as a condition to such consolidation, merger, or sale (any a “Transaction”), lawful and adequate provision shall be made whereby the Holder shall have the right from and after the Transaction to receive, upon exercise of this Warrant and upon the terms and conditions specified herein and in lieu of the shares of the Common Stock that would have been issuable if this Warrant had been exercised immediately before the Transaction, such shares of stock, securities, or assets as the Holder would have owned immediately after the Transaction if the Holder had exercised this Warrant immediately before the effective date of the Transaction.

(f)  In case any event shall occur as to which the other provisions of this Section 4 are not strictly applicable but the failure to make any adjustment would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles hereof, then, in each such case, the Company shall effect such adjustment, on a basis consistent with the essential intent and principles established in this Section 4, as may be necessary to preserve, without dilution, the purchase rights represented by this Warrant.  No adjustment shall be required if the Company issues any Common Stock or Common Stock equivalents where the Common Stock is sold at, or the Common Stock equivalent is convertible into, exercisable for or exchangeable for,  a price, less than the Exercise Price.

5.          Registration Rights.

(a)  No Registration Under the Securities Act. Issuance of this Warrant has not been registered under the Securities Act.  When exercised, the stock certificates shall bear the following legend unless one year has elapsed since the date of issuance of this Warrant.

“The securities represented by this certificate have not been registered under the Securities Act of 1933 (the “Securities Act”), and may not be offered for sale or sold except pursuant to (i) an effective registration statement under the Securities Act, or (ii) an opinion of counsel to the issuer of these securities that an exemption from registration under the Securities Act is available.”

 

6.          Reservation of Shares.  The Company agrees at all times to reserve and hold available out of its authorized but unissued shares of Common Stock the number of shares of Common Stock issuable upon the full exercise of this Warrant.  The Company further covenants and agrees that all shares of Common Stock that may be delivered upon the exercise of this Warrant will, upon delivery, be fully paid and nonassessable and free from all taxes, liens and charges with respect to the purchase thereof hereunder.

 

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7.          Notices to Holder.  Upon any adjustment of the Exercise Price (or number of shares of Common Stock issuable upon the exercise of this Warrant) pursuant to Section 4, the Company shall promptly thereafter cause to be given to the Holder written notice of such adjustment.  Such notice shall include the Exercise Price (and/or the number of shares of Common Stock issuable upon the exercise of this Warrant) after such adjustment, and shall set forth in reasonable detail the Company’s method of calculation and the facts upon which such calculations were based.  Where appropriate, such notice shall be given in advance and included as a part of any notice required to be given under the other provisions of this Section 7.

In the event of (a) any fixing by the Company of a record date with respect to the holders of any class of securities of the Company for the purpose of determining which of such holders are entitled to dividends or other distributions, or any rights to subscribe for, purchase or otherwise acquire any shares of capital stock of any class or any other securities or property, or to receive any other right, (b) any capital reorganization of the Company, or reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all of the assets or business of the Company to, or consolidation or merger of the Company with or into, any other entity or person, or (c) any voluntary or involuntary dissolution or winding up of the Company, then and in each such event the Company will give the Holder a written notice specifying, as the case may be (i) the record date for the purpose of such dividend, distribution, or right, and stating the amount and character of such dividend, distribution, or right; or (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, conveyance, dissolution, liquidation, or winding up is to take place and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such capital stock or securities receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other securities) for securities or other property deliverable upon such event.  Any such notice shall be given at least 10 days prior to the earliest date therein specified.

 

8.          No Rights as a Shareholder.  This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company, nor to any other rights whatsoever except the rights herein set forth. Provided, however, the Company shall not enter into any merger agreement in which it is not the surviving entity, or sell all or substantially all of its assets unless the Company shall have first provided the Holder with 20 days’ prior written notice.

9.          Additional Covenants of the Company.  For so long as the Common Stock is listed for trading or trades on any national securities exchange or is quoted on any over the counter market, the Company shall, upon issuance of any shares of Common Stock for which this Warrant is exercisable, at its expense, promptly obtain and maintain the listing or qualifications for trading or quotation of such shares to the extent required.

The Company shall comply with the reporting requirements of Sections 13 and 15(d) of the Securities Exchange Act of 1934 for so long as and to the extent that such requirements apply to the Company.

 

The Company shall not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance 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.  Without limiting the generality of the foregoing, the Company (a) shall comply with Section 6 of this Agreement and have available sufficient shares of Common Stock to be issued from time to time upon exercise of this Warrant except as provided in Section 6, (b) will not increase the par value of any shares of Common Stock issuable upon exercise of this Warrant above the amount payable therefor upon such exercise, and (c) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable stock.

 

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10.          Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the Company, the Holder and their respective successors and permitted assigns.

11.          Notices.  The Company agrees to maintain a ledger of the ownership of this Warrant (the “Ledger”).  Any notice hereunder shall be given by Federal Express or other overnight delivery service for delivery on the next business day if to the Company, at its principal executive office and, if to the Holder, to his address shown in the Ledger of the Company; provided, however, that either the Company or the Holder may at any time on three days’ written notice to the other designate or substitute another address where notice is to be given.  Notice shall be deemed given and received after a Federal Express or other overnight delivery service is delivered to the carrier.

12.          Severability.  Every provision of this Warrant is intended to be severable.  If any term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the remainder of this Warrant.

13.          Governing Law.  This Warrant shall be governed by and construed in accordance with the laws of the State of Nevada  without giving effect to the principles of choice of laws thereof.

14.          Attorneys’ Fees.  In any action or proceeding brought to enforce any provision of this Warrant, the prevailing party shall be entitled to recover reasonable attorneys’ fees in addition to its costs and expenses and any other available remedies.

15.          Entire Agreement.  This Warrant (including the Exhibits attached hereto) constitutes the entire understanding between the Company and the Holder with respect to the subject matter hereof, and supersedes all prior negotiations, discussions, agreements and understandings relating to such subject matter.

 

(Signature Page Follows)

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer as of the date first set forth above.

   

	 	
VerifyMe, Inc.

	 	 	 
	 	 	 
	 	 	 
	 	
By:

	 
	 	
Norman Gardner, Chairman

 

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Exhibit A

SUBSCRIPTION FORM

(To be Executed by the Holder to Exercise the Rights To Purchase Common Stock Evidenced by the Within Warrant)

    

The undersigned, pursuant to the provisions set forth in the attached Warrant, hereby notifies the Company that it is exercising this warrant pursuant to:  [please check one]

 

________ Section 1 - Cash Exercise

________ Section 2 - Cashless Exercise

    

        

Section 1 - Cash Exercise. If Section 1 is selected above, please complete the following:

I am exercising my right to purchase all of the shares of Common Stock which I am entitled to purchase under this warrant. The number of shares of Common Stock is __________.

I am exercising my right to purchase ________ shares of Common Stock, and request that the Company deliver to me or as I shall designate below a new Warrant representing the right to purchase _______ shares of Common Stock.

     

     

I am making payment of the full exercise price for such shares at an Exercise Price per share of $_______ as provided for in such Warrant. The total exercise price payable is $___________. Such payment takes the form of (check applicable box or boxes):

___ $__________ in certified or official bank check payable to the order of the Company; or

___ $__________ by wire transfer of immediately available funds   

          

Section 2 - Cashless Exercise. If Section 2 is selected above, please complete the following:

   

The current Fair Market Value of the shares of Common Stock, as defined in this Warrant, is $___________.

I am exercising my right to purchase ___________ shares of Common Stock, being the maximum number of shares of Common Stock covered by such Warrant pursuant to the cashless exercise procedure set forth in Section 2.

I am exercising my right to purchase _________ shares of Common Stock, and requesting that the Company deliver to me or as I shall request a new Warrant representing the right to purchase _______ shares of Common Stock.

      

   

Note - if a Holder choosing to use the Cashless Exercise option provided for in Section 2 of this Warrant is using a combination of cash and cashless means to make payment of the Warrant Exercise Price payable by such Holder, such Holder shall attach a separate schedule which provides such Holder’s calculation of the amount of cash being paid, and the number of shares of Common Stock being delivered as payment.  Any such cash component takes form of (check applicable box or boxes):     

     

___ $__________ in certified or official bank check payable to the order of the Company; or

___ $__________ by wire transfer of immediately available funds

   

Exhibit. A

 

I request that a certificate for the Common Stock be issued in the name of the undersigned and be delivered to the undersigned at the address stated below.  If the Common Stock is not all of the shares purchasable pursuant to the Warrant, I request that a new Warrant of like tenor for the balance of the remaining shares purchasable thereunder be delivered to me at the address stated below.

In connection with the issuance of the Common Stock, if the Common Stock may not be immediately publicly sold, I hereby represent to the Company that I am acquiring the Common Stock for my own account for investment and not with a view to, or for resale in connection with, a distribution of the shares within the meaning of the Securities Act of 1933 (the “Securities Act”).

I am______ am not ______ [please initial one] an accredited investor for at least one of the reasons on Exhibit A-1 to the Warrant.  If the SEC has amended the rule defining the definition of accredited investor, I acknowledge that as a condition to exercise the Warrant, the Company may request updated information regarding the Holder’s status as an accredited investor.  My exercise of the Warrant shall be in compliance with the applicable exemptions under the Securities Act and applicable state law

I understand that if at this time the Common Stock has not been registered under the Securities Act, I must hold such Common Stock indefinitely unless the Common Stock is subsequently registered and qualified under the Securities Act or is exempt from such registration and qualification.  I shall make no transfer or disposition of the Common Stock unless (a) such transfer or disposition can be made without registration under the Securities Act by reason of a specific exemption from such registration and such qualification, or (b) a registration statement has been filed pursuant to the Securities Act and has been declared effective with respect to such disposition.  I agree that each certificate representing the Common Stock delivered to me shall bear substantially the same as set forth on the front page of the Warrant.

I further agree that the Company may place stop transfer orders with its transfer agent same effect as the above legend.  The legend and stop transfer notice referred to above shall be removed only upon my furnishing to the Company of an opinion of counsel to the Company to the effect that such legend may be removed.

	
Date:

	
 

	
 

	
Signed:

	
 

	
 

	
 

	
 

	
Print Name: 

	
 

	 	 	 	
Address:

	 
	 	 	 	 	 
	
Date:

	
 

	
 

	
Signed:

	
 

	 	 	
 

	
Print Name: 

	
 

	 	 	 	
Address:

	 

 

Exhibit. A

 

Exhibit A-1

   

For Individual Investors Only:

 

1.          A person who has an individual net worth, or combined net worth (with his or her spouse) who has, in excess of $1,000,000.  For purposes of this question, “net worth” means the excess of total assets at fair market value, including all real property except the investor’s primary residence, home furnishings and automobiles, over total liabilities. For purposes of calculating “net worth”, (i) the primary residence shall not be included as an asset, (ii) to the extent that the indebtedness that is secured by the primary residence is in excess of the fair market value of the primary residence, the excess amount shall be included as a liability, and (iii) if the amount of outstanding indebtedness that is secured by the primary residence exceeds the amount outstanding 60 days prior to the execution of this investment letter, other than as a result of the acquisition of the primary residence, the amount of that increase in indebtedness shall be included as a liability.

2a. A person who had individual income (exclusive of any income attributable to the person’s spouse) of more than who has $200,000 in each of the two most recently completed years and who reasonably expects to have an individual income in excess of $200,000 this year.

2b. Alternatively, a person, who with his or her spouse, has joint income in excess of $300,000 in each applicable year.

3. A director or executive officer of the Company.

Other Investors:

 

4. Any bank as defined in Section 3(a)(2) of the Securities Act of 1933 (“Securities Act”) whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; insurance company as defined in Section 2(13) of the Securities Act; investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of $5,000,000, or if a self-directed plan, with investment decisions made solely by persons that are accredited investors.

5. A private business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940.

 

Exhibit. A-1

 

6. An organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000.  

     

7. A trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of the Securities Act.

 

8. An entity in which all of the equity owners are accredited investors.

   

Exhibit. A-1

    

Exhibit B

ASSIGNMENT

(To be Executed by the Holder to Effect Transfer of the Attached Warrant)

For Value Received __________________________ hereby sells, assigns and transfers to _________________________ the Warrant attached hereto and the rights represented thereby to purchase _________ shares of Common Stock in accordance with the terms and conditions hereof, and does hereby irrevocably constitute and appoint ___________________________ as attorney to transfer such Warrant on the books of the Company with full power of substitution.

	
Dated:

	 	 
	
Signed:

	 	 

	
Please print or typewrite

name and address of

 assignee:

	
Please insert Social Security

or other Tax Identification

 Number of Assignee:

   

   

	
Dated:

	 	 
	
Signed:

	 	 

	
Please print or typewrite

name and address of

 assignee:

	
Please insert Social Security

or other Tax Identification

 Number of Assignee:

 

Exhibit. B

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