WAIVER, AMENDMENT AND EXCHANGE AGREEMENT

THIS WAIVER, AMENDMENT AND EXCHANGE AGREEMENT (the “ Agreement ”), dated as of September __, 2009, is entered into by and among Innovative Card Technologies, Inc., a Delaware corporation (the “ Company ”), and the persons identified as “Holders” on the signature pages hereto (the “ Holders ”).  Defined terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreements (as defined below).

WHEREAS, pursuant to those certain Securities Purchase Agreements, dated January 8, 2008 and April 15, 2008 (the “ Purchase Agreements ”), among the Company and the applicable Holders, the Holders purchased from the Company an aggregate of $8,500,000 in principal amount of 8% Senior Secured Convertible Debentures of the Company (the “ Debentures ”) and were issued warrants exercisable for shares of Common Stock (the “ Warrants ”); and

WHEREAS, certain Events of Defaults (as defined under the Debentures) as set forth on Annex A attached hereto have occurred and continue to occur  on and prior to the date hereof (“ Existing Defaults ”); and

WHEREAS, the Company and the Holders have agreed to waive the Existing Defaults for the consideration granted by the Company to the Holders as set forth hereunder.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each Holder hereby agrees as follows:

1.            Waiver .  Subject to the terms and conditions hereunder, each Holder hereby waives its right to exercise or enforce its rights under the Transaction Documents, including the Debentures, solely on account of the Existing Defaults as they exist on the date hereof provided that this waiver shall not apply to any future Events of Default that may occur after the date hereof or prior existing Events of Default that are not included as Existing Defaults, whether known or unknown to the Company as of the date hereof.  Additionally, each Holder hereby agrees to waive any late fees, increased interest or liquidated damages that have accrued prior to the date hereof provided that this waiver shall not apply to any future late fees, increased interest or liquidated damages that may occur after the date hereof.   For purposes of clarity, the parties hereto agree that no interest currently due and payable or payable in the future under the Debentures shall be waived.

2.            Amendments and other Agreements .

(a)            Amended and Exchanged Debentures and Warrants .  The Company hereby agrees to issue each Holder an amended and restated Debenture, in the form of Exhibit A attached hereto (the “ Amended and Exchanged Debenture(s) ”) with a principal amount equal to the principal amount of such Holder’s current Debenture plus any accrued but unpaid interest as of the date hereof and any future interest to be accrued on and before April 1, 2010 and accrued but unpaid liquidated damages, if any, as set forth on Annex B and an amended and restated warrant, in the form of Exhibit B attached hereto (“ Amended and Exchanged Warrant(s) ”).  Other than as amended thereunder, the rights and obligations of the Holders and of the Company with respect to the Amended and Exchanged Debentures, the Amended and Exchanged Warrants and any securities underlying such securities (including the replacement common stock purchase warrants issuable pursuant to the Amended and Exchange Warrants) shall be identical in all respects to the rights and obligations of the Holders and of the Company with respect to the Debentures, the Warrants and the Underlying Shares issued and issuable pursuant to the Purchase Agreements.  For clarity, the Purchase Agreements and all Transaction Documents thereunder are hereby amended so that the term “Debentures” includes the Amended and Exchanged Debentures, the term “Warrants” includes the Amended and Exchanged Warrants (and common stock purchase warrants issued thereunder) and the term “Underlying Shares” includes the shares of Common Stock issuable upon conversion and issuance thereof, and the term “Transaction Documents” shall be amended to include this Agreement.  The Amended and Exchanged Debentures and Amended and Exchanged Warrants are being issued in substitution for and not in satisfaction of the Debentures and Warrants, as applicable; provided , however , the Holder acknowledges and agrees that upon the issuance and acceptance of the certificate evidencing its Amended and Exchanged Debenture and Amended and Exchanged Warrants issued pursuant to this Section, the original certificate evidencing its Debenture and Warrants will be deemed cancelled.

(b)            Amendments to the Purchase Agreements .

(i)           clause (a) of the term “Exempt Issuance” in the Purchase Agreements is hereby amended to increase the number of shares issuable thereunder from 100,000 to 500,000, in the aggregate, during any 12 month period for issuances with a bona-fide effective price per share of Common Stock of at least $0.25 and an additional 500,000, in the aggregate, during any 12 months period for issuances with a bona-fide effective price per share of Common stock of at least $0.50, all prices and share numbers reference above subject to adjustment for reverse and forward stock splits and the like.

(ii)          As to any Holder that does not participate ratably in that certain Debenture and Warrant Purchase Agreement, dated as of September __, 2009 by and among the Company and certain Holders, the Holders hereby amend the Purchase Agreement such that, as to such Holders only, the issuance of the Amended and Exchanged Debentures, Amended and Exchanged Warrants, shares of Common Stock issued and issuable thereto, including the issuance and exercise of an replacement common stock purchase warrants issuable thereunder, are here deemed to be an “Exempt Issuance” under the Purchase Agreement and accordingly no adjustments shall be made to the Debentures, Warrants, Amended and Exchanged Debentures or the Amended and Exchanged Warrants pursuant to the anti-dilution provisions thereunder solely as a result of such issuances.  For those Holders that do participate ratably in such transaction, the conversion and exercise price of their respective Amended and Exchanged Debentures and Amended and Exchanged Warrants shall be adjusted pursuant to the anti-dilution provisions set forth therein.

(iii)         The obligation of the Company to obtain Shareholder Approval (as defined in the Purchase Agreements) as set forth in the second, third and fourth sentences of Section 4.11(c) of the Purchase Agreements and the restrictions on obtaining financing prior to obtaining Shareholder Approval set forth in Section 4.13(c) of the Purchase Agreements are no longer of any force or effect and shall be deleted in their entirety.  Additionally, the Amended and Exchanged Debentures do not include any restriction on issuances based on Shareholder Approval.

(iv)         The definition of “Trading Market” as defined and used in the Transaction Documents shall hereafter be deemed to include the OTC Bulletin Board.

(c)            Amendment to the Security Agreements, Guarantee and Intercreditor Agreement .  Section 20(c) of the Security Agreements (as defined in the respective Purchase Agreements) and Section 5(a) of the Guarantees (as defined in the applicable Security Agreements) and Section 4.5 of that certain Inter-Creditor Agreement by and among the Holder regarding the Debentures (the “ Inter-Creditor Agreement ”) shall be amended such that Holders holding 70% of the principal amount of Amended and Restated Debentures may amend, modify, supplement or amend the terms of such agreements if in writing and further, that upon a request in writing by the Company of any such amendment, modification, supplement or amendment to any such agreements (or any Transaction Documents), the failure of a Holder to respond in writing within 5 Trading Days shall be deemed for such purposes an irrevocable affirmative election by such Holder.  Notwithstanding anything herein to the contrary, each Holder shall be provided with equal opportunity to participate in any such amendment, waiver, modification or supplement on the same terms and conditions as every other Holder.  The parties hereby agree to remove Paul T. Dacier as Agent under the Security Agreements and appoint in his place John W. Galuchie, Jr.

(d)            Consent to Debt Exchange .  The Holders hereby consent to the exchange of no more than $1,000,000 of unsecured debt into an equal principal amount of Amended and Exchanged Debenture with a conversion price of $1.00, subject to adjustment thereunder otherwise,  and no more than 200,000 common stock purchase warrants and agree that such new holder of the Amended and Exchanged Debenture shall be added as a party to the Security Agreement and the Inter-Creditor Agreement and shall otherwise have all rights of a Holder under the Transaction Documents.

(e)            Prohibition on Stock Splits .  The Company shall not undertake a reverse or forward stock split or reclassification of the Common Stock without the prior written consent of Holders holding at least 75% of the Amended and Exchanged Debentures.

(f)             Replacement Warrants .  Upon each cash exercise of an Amended and Exchanged Warrant and in the time periods set forth for the delivery of the Warrant Shares pursuant to Section 2(e)(i) of the Amended and Exchanged Warrant, the Company shall issue to the holder thereof a new common stock purchase warrant (“ Replacement Warrant ”) for the same number of Warrant Shares subject to such exercise and in the form of the Amended and Exchanged Warrant provided that (i) such Replacement Warrant shall (i) have an Initial Issuance Date of the date such Replacement Warrant is issued and Termination Date which is 5 years from such Initial Issuance Date, (ii) have an exercise price equal to the greater of (A) $0.25, subject to adjustment for reverse and forward stock splits, recapitalizations, stock divide