Exhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made and entered into
as of February 26, 2004, by and among Saflink Corporation, a Delaware
corporation (the “Company”), and the purchasers listed on Schedule I hereto (the
“Purchasers”).

 

This Agreement is being entered into pursuant to the Common Stock Purchase
Agreement dated as of the date hereof among the Company and the Purchasers (the
“Purchase Agreement”).

 

The Company and the Purchasers hereby agree as follows:

 

1. Definitions.

 

Capitalized terms used and not otherwise defined herein shall have the meanings
given such terms in the Purchase Agreement. As used in this Agreement, the
following terms shall have the following meanings:

 

“Affiliate” means, with respect to any Person, any other Person that directly or
indirectly controls or is controlled by or under common control with such
Person. For the purposes of this definition, “control,” when used with respect
to any Person, means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms of “affiliated,” “controlling” and “controlled” have meanings correlative
to the foregoing.

 

“Board” shall have meaning set forth in Section 3(n).

 

“Business Day” means any day except Saturday, Sunday and any day which shall be
a legal holiday or a day on which banking institutions in the state of New York
generally are authorized or required by law or other government actions to
close.

 

“Closing Date” means the date of the closing of the purchase and sale of the
Shares pursuant to the Purchase Agreement.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the Company’s Common Stock, par value $0.01 per share.

 

“Effectiveness Date” means with respect to the Registration Statement the
earlier of the 90th day following the Closing Date or the date which is within
five (5) Business Days of the date on which the Commission informs the Company
(i) that the Commission will not review the Registration Statement or (ii) that
the Company may request the acceleration of the effectiveness of the
Registration Statement and the Company makes such request.

 

“Effectiveness Period” shall have the meaning set forth in Section 2.

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“Event” shall have the meaning set forth in Section 7(e).

 

“Event Date” shall have the meaning set forth in Section 7(e).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Filing Date” means the 45th day following the Closing Date.

 

“Holder” or “Holders” means the holder or holders, as the case may be, from time
to time of Registrable Securities.

 

“Indemnified Party” shall have the meaning set forth in Section 5(c).

 

“Indemnifying Party” shall have the meaning set forth in Section 5(c).

 

“Losses” shall have the meaning set forth in Section 5(a).

 

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

 

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

 

“Prospectus” means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference in such Prospectus.

 

“Registrable Securities” means (i) the shares of Common Stock issued to the
Purchasers pursuant to the Purchase Agreement and (ii) the shares of Common
Stock issuable upon exercise of the Warrants.

 

“Registration Statement” means the registration statements and any additional
registration statements contemplated by Section 2, including (in each case) the
Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference in such registration statement.

 

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“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

 

“Rule 158” means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

 

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Special Counsel” means one special counsel to the Holders, for which the
Holders will be reimbursed by the Company pursuant to Section 4.

 

2. Resale Registration.

 

On or prior to the Filing Date the Company shall prepare and file with the
Commission a Registration Statement covering the resale of the Registrable
Securities as would permit or facilitate the sale and distribution of all the
Registrable Securities in the manner reasonably requested by the Holders. The
Registration Statement shall be on Form S-3 (except if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3, in which
case such registration shall be on another appropriate form in accordance with
the Securities Act and the rules promulgated thereunder). The Company shall (i)
not permit any securities other than the Registrable Securities to be included
in the Registration Statement and (ii) use its reasonable best efforts to cause
the Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to the
Effectiveness Date, and to keep such Registration Statement continuously
effective under the Securities Act until such date as is the earlier of (x) the
date when all Registrable Securities covered by such Registration Statement have
been sold; (y) the date on which the Registrable Securities may be sold without
any restriction pursuant to Rule 144 as determined by the counsel to the Company
pursuant to a written opinion letter, addressed to the Company’s transfer agent
to such effect, or (z) the third (3rd) anniversary of the Closing Date (the
“Effectiveness Period”).

 

3. Registration Procedures.

 

In connection with the Company’s registration obligations hereunder, the Company
shall:

 

(a) Prepare and file with the Commission on or prior to the Filing Date, a
Registration Statement on Form S-3 (or if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3 such registration
shall be on another appropriate form in accordance with the Securities Act and
the rules and regulations promulgated thereunder) in accordance with the method
or methods of distribution thereof as specified by the Holders (except if
otherwise directed by the Holders), and use its reasonable best efforts to cause
the Registration Statement to become effective and remain effective as provided
herein.

 

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(b) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be necessary to
keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and file with
the Commission such additional Registration Statements, if necessary, in order
to register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or supplemented by
any required Prospectus supplement, and as so supplemented or amended to be
filed pursuant to Rule 424 (or any similar provisions then in force) promulgated
under the Securities Act; (iii) respond as promptly as possible, but in no event
later than fifteen (15) business days, to any comments received from the
Commission with respect to the Registration Statement or any amendment thereto
and as promptly as possible provide the Holders true and complete copies of all
correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.

 

(c) Notify the Holders of Registrable Securities to be sold as promptly as
possible (and, in the case of (i)(A) below, not less than three (3) days prior
to such filing) and (if requested by any such Person) confirm such notice in
writing no later than one (1) Business Day following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is filed; (B) when the Commission notifies the Company
whether there will be a “review” of such Registration Statement and whenever the
Commission comments in writing on such Registration Statement and (C) with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event that makes any statement made in
the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.

 

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(d) Use its reasonable best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of, (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any U.S.
jurisdiction, at the earliest practicable moment.

 

(e) If requested by the Holders of a majority of the Registrable Securities, (i)
promptly incorporate in a Prospectus supplement or post-effective amendment to
the Registration Statement such information as the Company reasonably agrees
should be included therein and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment.

 

(f) Furnish to each Holder, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, and, to the extent requested by such Person, all
documents incorporated or deemed to be incorporated therein by reference, and
all exhibits (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.

 

(g) Promptly deliver to each Holder, without charge, as many copies of the
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request; and the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto.

 

(h) Prior to any public offering of Registrable Securities, use its reasonable
best efforts to register or qualify or cooperate with the selling Holders in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the United
States as any Holder requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement; provided, however, the Company shall in no event be
required to (x) qualify to do business in any state where it is not then
qualified or (y) take any action that would subject it to tax or to the general
service of process in any such state where it is not then subject, or (z) comply
with state securities or “blue sky” laws of any state for which registration by
coordination is unavailable to the Company.

 

(i) Cooperate with the Holders to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold pursuant to a
Registration Statement, which certificates shall be free of all restrictive
legends (provided that the issuance of such unlegended certificates is in
compliance with applicable securities laws), and to enable such Registrable
Securities to be in such denominations and registered in such names as any
Holder may request at least two (2) Business Days prior to any sale of
Registrable Securities.

 

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(j) Upon the occurrence of any event contemplated by Section 3(c)(vi), promptly
prepare a supplement or amendment, including a post-effective amendment, to the
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, neither the
Registration Statement nor such Prospectus will contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.

 

(k) Use its reasonable best efforts to cause all Registrable Securities relating
to the Registration Statement to be listed on The Nasdaq SmallCap Market, OTC
Bulletin Board or any other securities exchange, quotation system or market, if
any, on which similar securities issued by the Company are then listed or traded
as and when required pursuant to the Purchase Agreement.

 

(l) Comply in all material respects with all applicable rules and regulations of
the Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) commencing
on the first day of the first fiscal quarter of the Company after the effective
date of the Registration Statement, which statement shall conform to the
requirements of Rule 158.

 

(m) The Company may require each selling Holder to furnish to the Company
information regarding such Holder and the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration Statement,
and the Company may exclude from such registration the Registrable Securities of
any such Holder who fails to furnish such information within a reasonable time
after receiving such request.

 

If the Registration Statement refers to any Holder by name or otherwise as the
holder of any securities of the Company, then such Holder shall have the right
to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force) the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.

 

Each Holder covenants and agrees that (i) it will not sell any Registrable
Securities under the Registration Statement until it has received copies of the
Prospectus as then amended or supplemented as contemplated in Section 3(g) and
notice from the Company that such Registration Statement and any post-effective
amendments thereto have become effective as contemplated by Section 3(c) and
(ii) it and its officers, directors or Affiliates, if any, will comply with the
prospectus delivery requirements of the Securities Act as applicable to them in
connection with sales of Registrable Securities pursuant to the Registration
Statement.

 

Each Holder agrees by its acquisition of such Registrable Securities that, upon
receipt of a notice from the Company of the occurrence of any event of the kind
described in

 

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Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v), 3(c)(vi) or 3(n), such Holder
will forthwith discontinue disposition of such Registrable Securities under the
Registration Statement until such Holder’s receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 3(j), or until it is advised in writing by the Company that the use of
the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus or Registration Statement.

 

(n) If (i) there is material non-public information regarding the Company which
the Company’s Board of Directors (the “Board”) reasonably determines not to be
in the Company’s best interest to disclose and which the Company is not
otherwise required to disclose, or (ii) there is a significant business
opportunity (including, but not limited to, the acquisition or disposition of
assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or other similar transaction) available to the
Company which the Board reasonably determines not to be in the Company’s best
interest to disclose, then the Company may postpone or suspend filing or
effectiveness of a registration statement for a period not to exceed thirty (30)
consecutive days, provided that the Company may not postpone or suspend its
obligation under this Section 3(n) for more than forty-five (45) days in the
aggregate during any 12 month period; provided, however, that no such
postponement or suspension shall be permitted for consecutive thirty (30) day
periods, arising out of the same set of facts, circumstances or transactions.

 

4. Registration Expenses.

 

All fees and expenses incident to the performance of or compliance with this
Agreement by the Company (excluding underwriters’ discounts and commissions),
except as and to the extent specified in this Section 4, shall be borne by the
Company whether or not the Registration Statement is filed or becomes effective
and whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with The Nasdaq SmallCap Market and each other securities
exchange or market on which Registrable Securities are required hereunder to be
listed, (B) with respect to filings required to be made with the National
Association of Securities Dealers, Inc. and the NASD Regulation, Inc. and (C) in
compliance with state securities or Blue Sky laws, (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the holders of a majority of the Registrable
Securities included in the Registration Statement), (iii) messenger, telephone
and delivery expenses, (iv) fees and disbursements of counsel for the Company
and Special Counsel for the Holders, in the case of the Special Counsel, up to a
maximum amount of $5,000, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement, including, without limitation, the Company’s
independent public accountants (including the expenses of any comfort letters or
costs associated with the delivery by independent public accountants of a
comfort letter or comfort letters). In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without

 

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limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit, the fees and
expenses incurred in connection with the listing of the Registrable Securities
on any securities exchange as required hereunder.

 

5. Indemnification.

 

(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless the Purchaser, its
permitted assignees, officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees, each Person who controls any such Purchaser or permitted assignee
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, agents and employees of each such
controlling Person, and the respective successors, assigns, estate and personal
representatives of each of the foregoing, to the fullest extent permitted by
applicable law, from and against any and all claims, losses, damages,
liabilities, penalties, judgments, costs (including, without limitation, costs
of investigation) and expenses (including, without limitation, reasonable
attorneys’ fees and expenses) (collectively, “Losses”), arising out of or
relating to any untrue or alleged untrue statement of a material fact contained
in the Registration Statement, any Prospectus, as supplemented or amended, if
applicable, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except (i) to the extent, but only to the extent, that
such untrue statements or omissions are based upon information regarding the
Holder furnished in writing to the Company by the Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto, which information was reasonably relied on by
the Company for use therein or to the extent that such information relates to
such Holder or such Holder’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder or
(ii) as a result of the failure of the Holder to deliver a Prospectus, as
amended or supplemented, to a purchaser in connection with an offer or sale. The
Company shall notify the Holder promptly of the institution, threat or assertion
of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of an
Indemnified Party (as defined in Section 6(c) hereof) and shall survive the
transfer of the Registrable Securities by the Holder.

 

(b) Indemnification by Purchasers. Each Purchaser and its permitted assignees
shall, severally and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, and the respective successors, assigns, estate and personal
representatives of each of the foregoing, to the fullest extent permitted by
applicable law, from and against all Losses, as incurred, arising out of or
relating to any untrue or alleged untrue statement of a material fact contained
in the Registration Statement, any Prospectus, as supplemented or amended, if
applicable, or arising out of or

 

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relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or supplement thereto, in the light of the circumstances under which
they were made) not misleading, to the extent, but only to the extent, that such
untrue statement or omission is contained in or omitted from any information so
furnished in writing by the Holder to the Company specifically for inclusion in
the Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or to the extent that such information relates to the Holder or
the Holder’s proposed method of distribution of Registrable Securities and was
furnished in writing by the Holder expressly for use in the Registration
Statement, such Prospectus or such Prospectus Supplement. Notwithstanding
anything to the contrary contained herein, the Purchasers shall be liable under
this Section 5(b) for only that amount as does not exceed the net proceeds to
such Purchaser as a result of the sale of Registrable Securities pursuant to
such Registration Statement.

 

(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought
or asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party promptly shall notify the Person from whom
indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying
Party shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all fees and
expenses incurred in connection with defense thereof; provided, that the failure
of any Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except (and
only) to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.

 

An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; or (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel (which shall be reasonably acceptable to the Indemnifying Party) that
a conflict of interest is likely to exist if the same counsel were to represent
such Indemnified Party and the Indemnifying Party (in which case, the
Indemnifying Party shall be responsible for reasonable fees and expenses of no
more than one counsel for Indemnified Parties. The Indemnifying Party shall not
be liable for any settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld or delayed. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.

 

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All fees and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing to
defend such Proceeding in a manner not inconsistent with this Section) shall be
paid to the Indemnified Party, as incurred, within ten (10) Business Days of
written notice thereof to the Indemnifying Party (regardless of whether it is
ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).

 

(d) Contribution. If a claim for indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such Indemnifying, Party or
Indemnified Party, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys’ or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.

 

The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.

 

The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties. Notwithstanding anything to the contrary contained herein,
the Holders shall be liable under this Section 5(d) for only that amount as does
not exceed the net proceeds to such Holder as a result of the sale of
Registrable Securities pursuant to such Registration Statement.

 

6. Rule 144.

 

As long as any Holder owns any Registrable Securities, the Company covenants to
timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all

 

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reports required to be filed by the Company after the date hereof pursuant to
Section 13(a) or 15(d) of the Exchange Act and to promptly furnish the Holders
with true and complete copies of all such filings. As long as any Holder owns
any Registrable Securities, if the Company is not required to file reports
pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and
furnish to the Holders and make publicly available in accordance with Rule
144(c) promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial statements
in form and substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or 15(d) of the
Exchange Act, as well as any other information required thereby, in the time
period that such filings would have been required to have been made under the
Exchange Act. The Company further covenants that it will take such further
action as any Holder may reasonably request, all to the extent required from
time to time to enable such Person to sell the Shares without registration under
the Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including providing any legal opinions
relating to such sale pursuant to Rule 144. Upon the request of any Holder, the
Company shall deliver to such Holder a written certification of a duly
authorized officer as to whether it has complied with such requirements.

 

7. Miscellaneous.

 

(a) Remedies. In the event of a breach by the Company or by a Holder, of any of
their obligations under this Agreement, each Holder or the Company, as the case
may be, in addition to being entitled to exercise all rights granted by law and
under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

 

(b) No Inconsistent Agreements. Neither the Company nor any of its subsidiaries
has, as of the date hereof entered into and currently in effect, nor shall the
Company or any of its subsidiaries, on or after the date of this Agreement,
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof. The Company nor any of its subsidiaries has
previously granted any registration rights that conflict with the registration
rights granted under this Agreement. Without limiting the generality of the
foregoing, without the written consent of the Holders of a majority of the then
outstanding Registrable Securities, the Company shall not grant to any Person
the right to request the Company to register any securities of the Company,
under the Securities Act unless the rights so granted are subject in all
respects to the prior rights in full of the Holders set forth herein, and are
not otherwise in conflict with the provisions of this Agreement.

 

(c) No Piggyback on Registrations. Neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto or as disclosed
on Schedule 2.1(c) of the Purchase Agreement or Schedule II hereto) may include
securities of the

 

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Company in the Registration Statement, and the Company shall not after the date
hereof enter into any agreement providing such right to any of its
securityholders, unless the right so granted is subject in all respects to the
prior rights in full of the Holders set forth herein, and is not otherwise in
conflict with the provisions of this Agreement.

 

(d) Intentionally Omitted.

 

(e) Failure to File Registration Statement and Other Events. The Company and the
Purchasers agree that the Holders will suffer damages if the Registration
Statement is not filed on or prior to the Filing Date and not declared effective
by the Commission on or prior to the Effectiveness Date and maintained in the
manner contemplated herein during the Effectiveness Period or if certain other
events occur. The Company and the Holders further agree that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly, if
(A) the Registration Statement is not filed on or prior to the Filing Date, or
(B) the Registration Statement is not declared effective by the Commission on or
prior to the 120th day after the Closing Date, or (C) the Company fails to file
with the Commission a request for acceleration in accordance with Rule 461
promulgated under the Securities Act within five (5) Business Days of the date
that the Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be “reviewed” (including,
without limitation, any form of “modified” or “limited” review), or not subject
to further review, or (D) the Registration Statement is filed with and declared
effective by the Commission but thereafter ceases to be effective as to all
Registrable Securities at any time prior to the expiration of the Effectiveness
Period, without being promptly succeeded by a subsequent Registration Statement
filed with and declared effective by the Commission, or (E) during the
Effectiveness Period, the Company has breached Section 3(n), or (F) during the
Effectiveness Period, trading in the Common Stock shall be suspended or if the
Common Stock is delisted from both The Nasdaq SmallCap Market and the OTC
Bulletin Board for any reason for more than five Business Days in the aggregate
(any such failure or breach being referred to as an “Event,” and for purposes of
clauses (A) and (B) the date on which such Event occurs, or for purposes of
clause (C) the date on which such five Business Day period is exceeded, or for
purposes of clause (D) after more than fifteen Business Days, or for purposes of
clause (F) the date on which such five Business Day period is exceeded, being
referred to as “Event Date”), the Company shall pay an amount as liquidated
damages to each Holder equal to 2% for the first thirty (30) day period and 1%
per thirty (30) day period thereafter or portion thereof of the Holder’s initial
investment in the Shares from the Event Date (provided that, with respect to the
Event described in clause (B), the “first calendar month” shall be deemed to
commence on the 30th day prior to the applicable Event Date) until the
applicable Event is cured; provided, that, liquidated damages for the first
calendar month upon the occurrence of an Event, and for each calendar month
thereafter shall be payable in cash only; provided, further, that the Company
shall not incur liquidated damages under this Section 7(e) if such Event occurs
after the expiration of the Effectiveness Period. Notwithstanding anything to
the contrary in this paragraph (e), if (I) any of the Events described in
clauses (A), (B), (C), (D) or (F) shall have occurred, (II) on or prior to the
applicable Event Date, the Company shall have exercised its rights under Section
3(n) hereof and (III) the postponement or suspension permitted pursuant to such
Section 3(n) shall remain effective as of such applicable Event Date, then the
applicable Event Date shall be deemed instead to occur on the second Business
Day following the termination of such postponement or suspension.

 

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Payments to be made pursuant to this Section 7(e) shall be due and payable
immediately upon demand at the option of the Holders in cash. The parties agree
that the liquidated damages represent a reasonable estimate on the part of the
parties, as of the date of this Agreement, of the amount of damages that may be
incurred by the Holders if the Registration Statement is not filed on or prior
to the Filing Date or has not been declared effective by the Commission on or
prior to the Effectiveness Date and maintained in the manner contemplated herein
during the Effectiveness Period or if any other Event as described herein has
occurred. Notwithstanding the foregoing, the Company shall not be obligated to
pay liquidated damages for a delay or suspension of effectiveness as a result of
the Blackout Period.

 

(f) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Holders of
a majority of the Registrable Securities outstanding. Any amendment or waiver
effected in accordance with this Section 8(f) shall be binding upon each Holder
(and their permitted assigns) and the Company.

 

(g) Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earlier of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice prior to 5:00 p.m., New York City time, on a
Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., New York City time, on any
date and earlier than 11:59 p.m., New York City time, on such date, (iii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be
with respect to each Holder at its address set forth under its name on Schedule
I attached hereto, or with respect to the Company, addressed to:

 

Saflink Corporation

777 108th Avenue NE, Suite 2100

Bellevue, WA 98004

Attention: President

Tel. No.: (425) 278-1100

Fax No.: (425)       -        

 

or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice.

 

(h) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns and shall
inure to the benefit of each Holder and its successors and assigns. The Company
may not assign this Agreement or any of its rights or obligations hereunder
without the prior written consent of each Holder. Each Purchaser may assign its
rights hereunder in the manner and to the Persons as permitted under the
Purchase Agreement.

 

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(i) Assignment of Registration Rights. The rights of each Holder hereunder,
including the right to have the Company register for resale Registrable
Securities in accordance with the terms of this Agreement, shall be assignable
by each Holder to any Affiliate of such Holder or any other Holder or Affiliate
of any other Holder of all or a portion of the Registrable Securities if: (i)
the Holder agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment the further disposition of such
securities by the transferee or assignees is restricted under the Securities Act
and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions of this Agreement, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement. In
addition, each Holder shall have the right to assign its rights hereunder to any
other Person with the prior written consent of the Company, which consent shall
not be unreasonably withheld. The rights to assignment shall apply to the
Holders (and to subsequent) successors and assigns.

 

(j) Counterparts. This Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original and, all of
which taken together shall constitute one and the same Agreement. In the event
that any signature is delivered by facsimile transmission, such signature shall
create a valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.

 

(k) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law thereof.

 

(l) Cumulative Remedies. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.

 

(m) Severability. If any term, provision, covenant or restriction of this
Agreement is held to be invalid, illegal, void or unenforceable in any respect,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

 

(n) Headings. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof.

 

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(o) Shares Held by the Company and its Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its Affiliates
(other than any Holder or transferees or successors or assigns thereof if such
Holder is deemed to be an Affiliate solely by reason of its holdings of such
Registrable Securities) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage.

 

(p) Independent Nature of Purchasers. The Company acknowledges that the
obligations of each Purchaser under the Transaction Documents are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under the Transaction Documents. The Company acknowledges that the
decision of each Purchaser to purchase securities pursuant to the Purchase
Agreement has been made by such Purchaser independently of any other purchase
and independently of any information, materials, statements or opinions as to
the business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company or of
its Subsidiaries which may have made or given by any other Purchaser or by any
agent or employee of any other Purchaser, and no Purchaser or any of its agents
or employees shall have any liability to any Purchaser (or any other person)
relating to or arising from any such information, materials, statements or
opinions. The Company acknowledges that nothing contained herein, or in any
Transaction Document, and no action taken by any Purchaser pursuant hereto or
thereto (including, but not limited to, the (i) inclusion of a Purchaser in the
Registration Statement and (ii) review by, and consent to, such Registration
Statement by a Purchaser) shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by the
Transaction Documents. The Company acknowledges that each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. The Company
acknowledges that for reasons of administrative convenience only, the
Transaction Documents have been prepared by counsel for one of the Purchasers
and such counsel does not represent all of the Purchasers but only such
Purchaser and the other Purchasers have retained their own individual counsel
with respect to the transactions contemplated hereby. The Company acknowledges
that it has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers. The Company acknowledges that
such procedure with respect to the Transaction Documents in no way creates a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to the Transaction Documents or the transactions contemplated
hereby or thereby.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.

 

SAFLINK CORPORATION

By:

 

 

--------------------------------------------------------------------------------

Name:

   

Title:

   

PURCHASER:

By:

 

 

--------------------------------------------------------------------------------

Name:

   

Title:

   

PURCHASER:

By:

 

 

--------------------------------------------------------------------------------

Name:

   

Title:

   

PURCHASER:

By:

 

 

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Name:

   

Title:

   

 

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Schedule I

List of Purchasers

 

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