Document:

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                                                                    Exhibit 10.1

                         SECURITIES PURCHASE AGREEMENT
                         -----------------------------

This SECURITIES PURCHASE AGREEMENT ("Agreement") is entered into as of June 5,
                                     ---------
2001, by and between SAFLINK Corporation, a Delaware corporation (the
"Company"), with headquarters located at 18650 N.E. 67th Court, Suite 210
 -------
Redmond, WA  98052 and each of the purchasers listed on Schedule I hereto
("Purchaser") with regard to the following:
  ---------

                                   RECITALS
                                   --------

     A.   The Company and each Purchaser are executing and delivering this
Agreement in reliance upon the exemption from registration afforded by the
provisions of Regulation D ("Regulation D"), as promulgated by the United States
                             ------------
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
                                         ---
as amended (the "Securities Act").
                 --------------

     B.   Each Purchaser desires to purchase, upon the terms and conditions
stated in this Agreement, (i) Series E Convertible Preferred Stock of the
Company having the rights set forth in the Certificate of Designations,
Preferences and Rights (the "Certificate of Designation") attached hereto as
                             --------------------------
Exhibit A (the "Preferred Stock"), which shall be convertible into shares of the
---------       ---------------
Company's Common Stock, par value $.01 per share (the "Common Stock"), (ii) a
                                                       ------------
Series A Warrant in the form of Exhibit B attached hereto (the "Series A
                                ---------                       --------
Warrant"), and (iii) for certain Purchasers purchasing at least 5000 shares of
-------
Preferred Stock, a Series B Warrant in the form of Exhibit C attached hereto
                                                   ---------
("Series B Warrant") (the term "Warrant" shall refer to either (i) the Series A
  ----------------              -------
Warrant or (ii) Series A Warrant and Series B Warrant as appropriate). The
Series A Warrant and Series B Warrant entitle the holder thereof to purchase the
number of shares (the "Warrant Shares") of Common Stock as set forth below. The
                       --------------
shares of Common Stock issuable upon conversion of or otherwise pursuant to the
Preferred Stock are referred to herein as the "Conversion Shares". The Preferred
                                               -----------------
Stock, the Warrant, the Warrant Shares and the Conversion Shares are each
referred to as a "Security" and collectively the "Securities."
                                                  ----------

     C.   Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
in the form attached hereto as Exhibit D (the "Registration Rights Agreement"),
                               ---------       -----------------------------
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act, the rules and regulations promulgated thereunder and
applicable state securities laws.

                                  AGREEMENTS
                                  ----------

     NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and each Purchaser, severally and not
jointly, hereby agree as follows:

                                       1
<PAGE>

                                   ARTICLE I
                        PURCHASE AND SALE OF SECURITIES

     1.1  Purchase of Preferred Stock and the Warrant. The purchase price (the
          -------------------------------------------
"Purchase Price") per share of Preferred Stock shall be equal to $200. On the
---------------
date of the closing of the purchase of the Preferred Stock and the Warrant
pursuant hereto (the "Closing"), subject to the satisfaction or waiver of the
                      -------
conditions set forth in Articles VI and VII hereof, the Company shall issue and
sell to the Purchasers, and Purchasers shall purchase from the Company (i) an
aggregate of 40,000 shares of Preferred Stock, and (ii) Series A Warrants
entitling the holders thereof to purchase that number of Warrant Shares as is
equal to (x) 1000 multiplied by (y) the number of shares of Preferred Stock
                  ----------
purchased; provided, however, if the Purchaser agrees to purchase at least 5000
shares of Preferred Stock the Company shall issue and sell to such Purchaser,
and Purchaser shall purchase from the Company (i) the number of shares of
Preferred Stock that such Purchaser has agreed to purchase, (ii) Series A
Warrants entitling the holders thereof to purchase that number of Warrant Shares
as is equal to (x) 1000 multiplied by (y) the number of shares of Preferred
                        ----------
Stock purchased; and (iii) Series B Warrants entitling the holder thereof to
purchase 1,000,000 Warrant Shares for each 5000 shares of Preferred Stock
purchased. The terms of the Series B Warrants shall be identical to those of the
Series A Warrants, except that the Series B Warrants shall have an exercise
price equal to $.25 per share and be exercisable for a period of the later of
(i) six (6) months from the date of issuance, or (ii) one hundred and twenty
(120) days from the effective date, as declared by the SEC, of the Registration
Statement (as defined in the Registration Rights Agreement) registering the
Warrant Shares.

     1.2  Form of Payment. At the Closing, each Purchaser shall pay the
          ---------------
aggregate Purchase Price for the Preferred Stock and the Warrant being purchased
by such Purchaser hereunder by wire transfer to the Company, in accordance with
the Company's written wiring instructions, against delivery of duly executed
stock certificates and a certificate representing the Warrant for the same, and
the Company shall deliver such Preferred Stock and certificate representing the
Warrant against delivery of such aggregate Purchase Price. Payment for each
Purchaser electing to convert debt issued by the Company shall be effected by
such Purchaser returning the original note payable for such debt, marked paid in
full, to the Company and Company shall deliver the Preferred Stock certificate
and the Warrant certificate against delivery of such note.

     1.3  Closing Date. Subject to the satisfaction or waiver of the conditions
          ------------
set forth in Articles VI and VII below, the date and time of the issuance, sale
and purchase of the Securities pursuant to this Agreement and the Investment
Agreements (as defined in Section 3.1 hereof) contemplated hereby shall be
within three (3) business days of the execution of this Agreement. The Closing
shall occur at 10:00 a.m. New York time, at the offices of Baker & McKenzie, 815
Connecticut Ave N.W., Washington D.C. 20006 - 4078.

                                  ARTICLE II
                  PURCHASER'S REPRESENTATIONS AND WARRANTIES

     Each Purchaser severally and not jointly represents and warrants to the
Company as set forth in this Article II. None of the Purchasers makes any other
representations or warranties, express or implied, to the Company in connection
with the transactions contemplated hereby or

                                       2
<PAGE>

by any other Investment Agreements and any and all prior representations and
warranties, if any, which may have been made by such Purchaser to the Company in
connection with the transactions contemplated hereby shall be deemed to have
been merged in this Agreement and any such prior representations and warranties,
if any, shall not survive the execution and delivery of this Agreement.

     2.1  Investment Purpose. Purchaser is purchasing the Preferred Stock and
          ------------------
the Warrant for Purchaser's own account for investment only and not with a view
toward or in connection with the public sale or distribution thereof, and
Purchaser has no present intention of selling, granting any participation in or
otherwise distributing the same. Purchaser is entering into this Agreement to
purchase the Preferred Stock and the Warrant on its own behalf and is not
relying on any other investor in making its investment decision. By executing
this Agreement, Purchaser further represents that Purchaser does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to the Preferred Stock and the Warrant. Purchaser will not resell the
Preferred Stock, the Warrant or any securities which may be issued upon
conversion thereof except pursuant to sales that are exempt from the
registration requirements of the Securities Act and/or sales registered under
the Securities Act. Purchaser understands that Purchaser must bear the economic
risk of this investment indefinitely, unless the Securities are registered
pursuant to the Securities Act and any applicable state securities laws or an
exemption from such registration is available, and that the Company has no
present intention of registering any such Securities other than as contemplated
by the Registration Rights Agreement. By making the representations in this
Section 2.1, Purchaser does not agree to hold the Securities for any minimum or
other specific term and reserves the right to dispose of the Securities at any
time in accordance with or pursuant to a registration statement or an exemption
from registration under the Securities Act.

     2.2  Accredited Investor Status. Purchaser is an "accredited investor" as
          --------------------------
that term is defined in Rule 501(a) of Regulation D.

     2.3  Reliance on Exemptions. Purchaser understands that the Securities are
          ----------------------
being offered and sold to Purchaser in reliance upon specific exemptions from
the registration requirements of the United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and
Purchaser's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility of Purchaser
to acquire the Securities.

     2.4  Information. Purchaser and its counsel have been furnished all
          -----------
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Preferred Stock which have been
specifically requested by Purchaser which is all the information Purchaser
considers necessary or appropriate for deciding to purchase the Securities.
Purchaser has been afforded the opportunity to ask questions of the Company and
has received what Purchaser believes to be complete and satisfactory answers to
any such inquiries. Neither such inquiries nor any other due diligence
investigation conducted by Purchaser or any of its representatives shall modify,
amend or affect Purchaser's right to rely on the Company's

                                       3
<PAGE>

representations and warranties contained in Article III hereof. Purchaser
understands that Purchaser's investment in the Securities involves a high degree
of risk.

     2.5  Governmental Review. Purchaser understands that no United States
          -------------------
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities or an
investment therein.

     2.6  Transfer or Resale. Purchaser understands that (i) except as provided
          ------------------
in the Registration Rights Agreement, the Securities have not been and will not
be registered under the Securities Act or any state securities laws, and may not
be transferred unless subsequently registered thereunder or an exemption from
such registration is available (which exemption the Company expressly agrees may
be established as contemplated in clauses (b) and (c) of Section 5.1 hereof);
(ii) any sale of such Securities made in reliance on Rule 144 under the
Securities Act (or a successor rule) ("Rule 144") may be made only in accordance
                                       --------
with the terms of said Rule and further, if said Rule is not applicable, any
resale of such Securities without registration under the Securities Act under
circumstances in which the seller may be deemed to be an underwriter (as that
term is defined in the Securities Act) may require compliance with some other
exemption under the Securities Act or the rules and regulations of the SEC
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the Securities Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder (in each case, other than pursuant to this Agreement or the
Registration Rights Agreement).

     2.7  Legends. Purchaser understands that, subject to Article V hereof, the
          -------
certificates for the Preferred Stock and the Warrant, and until such time as the
Conversion Shares and Warrant Shares have been registered under the Securities
Act as contemplated by the Registration Rights Agreement or otherwise may be
sold by Purchaser pursuant to Rule 144, the certificates for the Conversion
Shares and Warrant Shares (respectively) will bear a restrictive legend (the
"Legend") in the following form:
 ------

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
     REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
     SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES
     REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD OR OTHERWISE
     TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
     THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED,
     SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
     REGISTRATION REQUIREMENTS OF THOSE LAWS.

Except for the legends contemplated by this Section 2.7, Section 5.1 hereof and
the information required to be set forth on or stated on certificates pursuant
to Section 151(f) of the Delaware General Corporation Law, the Securities shall
bear no other legend.

     2.8  Authorization; Enforcement. This Agreement and the Registration Rights
          --------------------------
Agreement have been duly and validly authorized, executed and delivered on
behalf of Purchaser

                                       4
<PAGE>

and are valid and binding agreements of Purchaser enforceable against Purchaser
in accordance with their terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or
other similar laws affecting creditors' rights, and subject to general equity
principles and to limitations on availability of equitable relief, including
specific performance.

     2.9  Trading Limitations. Purchaser represents that prior to the Closing
          -------------------
and so long as it owns any Securities, it will conduct any sales of Common Stock
in compliance with all relevant securities laws and regulations.

                                  ARTICLE III
                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company represents and warrants to each Purchaser that as of the date
hereof, as of the Closing, and except as specifically set forth in the Schedule
of Exceptions attached hereto (the "Schedule of Exceptions"):
                                    ----------------------

     3.1  Organization and Qualification. The Company and each of its
          ------------------------------
subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized, and has the requisite
corporate power and authority to own its properties and to carry on its business
as now being conducted. The Company and each of its subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction where the failure to so qualify would have a Material Adverse
Effect. "Material Adverse Effect" means any material adverse effect on either
         -----------------------
(i) the business, operations, properties, financial condition or operating
results of the Company and its subsidiaries, taken as a whole on a consolidated
basis, (ii) the Securities, (iii) the transactions contemplated hereby or by the
agreements or instruments to be entered into in connection herewith or (iv) the
authority or ability of the Company to perform its obligations under this
Agreement, the Certificate of Designation, the Warrant, and the Registration
Rights Agreements or other agreements or instruments to be entered into in
connection herewith and therewith (collectively, the "Investment Agreements").
                                                      ---------------------

     3.2  Authorization; Enforcement. (a) The Company has the requisite
          --------------------------
corporate power and authority to enter into and perform this Agreement, the
Warrant, the Certificate of Designation and the Registration Rights Agreement,
and to issue and sell, perform its obligations with respect to the Preferred
Stock and the Warrant in accordance with the terms hereof and to issue the
Conversion Shares in accordance with the terms and conditions of the Certificate
of Designation and the Warrant Shares in accordance with the terms and
conditions of the Warrant; (b) the execution, delivery and performance of this
Agreement, the Certificate of Designation, the Registration Rights Agreement and
the other Investment Agreements by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without limitation the
issuance of the Preferred Stock and the Warrant and the reservation for issuance
and issuance of the Conversion Shares and the Warrant Shares) have been duly
authorized by all necessary corporate action and, except as set forth on
Schedule 3.2 hereof, no further consent or authorization of the Company, its
------------
board of directors, or its stockholders or any other person, body or agency is
required with respect to any of the transactions contemplated hereby or thereby
(whether under rules of the Nasdaq SmallCap Market or the Nasdaq National Market

                                       5
<PAGE>

("Nasdaq"), the National Association of Securities Dealers or otherwise), other
  ------
than the Nasdaq Authorization (as herein defined) and the declaration or
ordering of effectiveness by the SEC of the Registration Statement as
contemplated by the Registration Rights Agreement (collectively, the
"Consents"); (c) this Agreement, the Registration Rights Agreement, the
Certificate of Designation, the Preferred Stock and the Warrant have been duly
executed and delivered by the Company; and (d) each Investment Agreement
constitutes legal, valid and binding obligations of the Company enforceable
against the Company in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws affecting creditors' rights, and subject to
general equity principles and to limitations on availability of equitable
relief, including specific performance.

     3.3  Capitalization. The capitalization of the Company as of the date
          --------------
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares reserved for issuance pursuant to the
Company's stock option plans, the number of shares reserved for issuance
pursuant to securities (other than the Preferred Stock and the Warrant)
exercisable for, or convertible into or exchangeable for any shares of Common
Stock and the number of shares to be initially reserved for issuance upon
conversion of the Preferred Stock and the exercise of the Warrant is set forth
on Schedule 3.3. All of such outstanding shares of capital stock have been, or
   ------------
upon issuance will be, validly issued, fully paid and non-assessable. Except as
set forth in Schedule 3.3, no shares of capital stock of the Company (including
the Preferred Stock, the Warrant, the Conversion Shares and the Warrant Shares)
are subject to preemptive rights or any other similar rights of the stockholders
of the Company or any liens or encumbrances. Except as disclosed in Schedule
                                                                    --------
3.3, as of the date of this Agreement, (i) there are no outstanding options,
---
warrants, scrip, rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exercisable
or exchangeable for, any shares of capital stock of the Company or any of its
subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries,
(ii) there are no agreements or arrangements under which the Company or any of
its subsidiaries is obligated to register the sale of any of its or their
securities under the Securities Act (except the Registration Rights Agreement)
and (iii) there are no anti-dilution or price adjustment provisions contained in
any security issued by the Company (or in any agreement providing rights to
holders of such securities). The Company has furnished to Purchaser true and
correct copies of the Company's Certificate of Incorporation as currently in
effect ("Certificate of Incorporation"), and the Company's Bylaws as currently
         ----------------------------
in effect (the "Bylaws"). The Company has set forth on Schedule 3.3 all
                ------                                 ------------
instruments and agreements (other than the Certificate of Incorporation and
Bylaws) governing securities convertible into or exercisable or exchangeable for
Common Stock of the Company (and the Company shall provide to Purchaser copies
thereof upon the request of Purchaser). Except as set forth on Schedule 3.3, the
                                                               ------------
Company has no indebtedness for borrowed money and no agreement providing for
indebtedness for borrowed money. Except as set forth on Schedule 3.3, the
                                                        ------------
Company has no subsidiaries and has no investments, either debt or equity, in
any other entity. The Company shall provide Purchaser with a written update of
this representation signed by the Company's Chief Executive Officer or Chief
Financial Officer on behalf of the Company as of the date of the Closing

                                       6
<PAGE>

     3.4  Issuance of Shares. The Conversion Shares and Warrant Shares are duly
authorized and reserved for issuance, and, upon conversion of the Preferred
Stock and the exercise of the Warrant in accordance with their respective terms,
will be validly issued, fully paid and non-assessable, and free from all taxes,
liens, claims and encumbrances and will not be subject to preemptive rights or
other similar rights of stockholders of the Company, other than (i) restrictions
on transferability as may be applicable under federal and state securities laws;
(ii) restrictive stock legends contemplated by the Investment Agreements; or
(iii) those created by Purchaser. The Preferred Stock and the Warrant are duly
authorized and are validly issued, fully paid and non-assessable, and free from
all taxes, liens claims and encumbrances and are not and will not be subject to
preemptive rights or other similar rights of stockholders of the Company, other
than (i) restrictions on transferability as may be applicable under federal and
state securities laws; (ii) restrictive stock legends contemplated by the
Investment Agreements; or (iii) those created by Purchaser. The board of
directors of the Company has unanimously approved the issuance of the Preferred
Stock and the Warrant pursuant to the terms hereof and of the Conversion Shares
and Warrant Shares issuable upon conversion of the Preferred Stock and the
exercise of the Warrant pursuant to the terms thereof (without giving effect to
any limitations on conversion or exercise contained therein, including for
purposes of Nasdaq Rule 4350 (the "Nasdaq Authorization")), has unanimously
                                   --------------------
recommended to the stockholders of the Company the approval of the Nasdaq
Authorization and will seek Stockholder Approval (as defined in Section 4.12) at
the Company's next stockholder meeting, which shall be no later than July 31,
2001. No further authorization or approval (other than the Stockholder Approval)
is required under the rules of Nasdaq with respect to the transactions
contemplated by this Agreement, including, without limitation, the issuance of
the Conversion Shares and the Warrant Shares and the inclusion thereof on
Nasdaq.

     3.5  No Conflicts. The execution, delivery and performance of each of the
Investment Agreements by the Company, and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance and reservation for issuance, as applicable, of the Preferred Stock,
the Conversion Shares, the Warrant and the Warrant Shares) will not (a) result
in a violation of the Certificate of Incorporation or Bylaws, (b) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party (except
for such conflicts, defaults, terminations, amendments, accelerations, and
cancellations as would not, individually or in the aggregate, have a Material
Adverse Effect), or (c) result in a violation of any law, rule, regulation,
order, judgment or decree (including, without limitation, U.S. federal and state
securities laws and regulations) applicable to the Company or any of its
subsidiaries, or by which any property or asset of the Company or any of its
subsidiaries, is bound or affected. Neither the Company nor any of its
subsidiaries is in violation of its Certificate of Incorporation, Bylaws or
other organizational documents, and neither the Company nor any of its
subsidiaries is in default (and no event has occurred which, with notice or
lapse of time or both, would put the Company or any of its subsidiaries in
default) under, nor has there occurred any event giving others (with notice or
lapse of time or both) any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, except for possible defaults or rights as
would not, individually or in the aggregate, have a Material Adverse Effect. To
the Company's knowledge, the business of the Company and its subsidiaries is not
being

                                       7
<PAGE>

conducted, and shall not be conducted so long as Purchaser owns any of the
Securities, in violation of any law, ordinance, rule, regulation, order,
judgment or decree of any governmental entity, court or arbitration tribunal
except for possible violations the sanctions for which either singly or in the
aggregate would not have a Material Adverse Effect.  Except as set forth on
Schedule 3.5, the Company is not required to obtain any consent, authorization
------------
or order of, or make any filing or registration with, any court or governmental
agency or any regulatory or self-regulatory agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or the
Registration Rights Agreement or to perform its obligations in accordance with
the terms hereof or thereof.

     3.6  Registration and SEC Documents.  The Common Stock is registered under
          ------------------------------
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
                                                                    --------
Act") and has been so registered since 1992.  Except as disclosed in Schedule
---                                                                     --------
3.6, since January 1, 1998, the Company has timely filed all reports, schedules,
---
forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Exchange Act (all of the foregoing
filed after December 31, 1997 and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference
therein, being referred to herein as the "SEC Documents" and all the SEC
                                          -------------
documents filed prior to the date of this Agreement, the "Filed SEC Documents").
                                                          -------------------
The Company has made available (which may include access to the SEC's website)
to Purchaser true and complete copies of the SEC Documents, except for exhibits,
schedules and incorporated documents.  As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except to the extent corrected by a subsequent
Filed SEC Document.  None of the statements made in any such SEC Documents is
currently required to be updated or amended under applicable law (except for
such statements as have been amended or updated by subsequent Filed SEC
Documents prior to the date of this Agreement).  The financial statements of the
Company included in the SEC Documents have been prepared in accordance with U.S.
generally accepted accounting principles, consistently applied, and the rules
and regulations of the SEC during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they do not include
footnotes or are condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal, immaterial year-end audit adjustments).
Except as set forth in the Filed SEC Documents, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred subsequent to the
date of such financial statements in the ordinary course of business consistent
with past practice and (ii) obligations under contracts and commitments incurred
in the ordinary course of business and not required under U.S. generally
accepted accounting principles to be reflected in such financial statements, in
each case of clause (i) and (ii) next above which, individually or in the
aggregate, are not material to the financial condition, business, operations,
properties, operating results or prospects of the Company and its subsidiaries
taken on a whole.  The Filed SEC Documents contain or incorporate by reference a

                                       8
<PAGE>

complete and accurate list of all material undischarged written or oral
contracts, agreements, leases or other instruments to which the Company or any
subsidiary is a party or by which the Company or any subsidiary is bound or to
which any of the properties or assets of the Company or any subsidiary is
subject (each a "Contract").  None of the Company, its subsidiaries or, to the
                 --------
best knowledge of the Company, any of the other parties thereto, is in breach or
violation of any Contract, which breach or violation would have a Material
Adverse Effect.  No event, occurrence or condition exists which, with the lapse
of time, the giving of notice, or both, or the happening of any further event or
condition, would become a breach or default by the Company or its subsidiaries
under any Contract which breach or default would have a Material Adverse Effect.

     3.7  Absence of Certain Changes. Since December 31, 2000, there has been no
          --------------------------
Material Adverse Effect and no material adverse development in the business,
properties, operations, financial condition or results of operations of the
Company or any of its subsidiaries, except as disclosed in Schedule 3.7.
                                                           ------------

     3.8  Absence of Litigation.  Except as disclosed in Schedule 3.8, there is
          ---------------------                          ------------
no action, suit, proceeding, or to the knowledge of the Company or any of its
subsidiaries, inquiry or investigation before or by any court, public board,
governmental agency or authority, or self-regulatory organization or body
pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company, any of its subsidiaries, or any of
their respective directors or officers in their capacities as such, wherein an
unfavorable decision, ruling or finding would have a Material Adverse Effect or
would adversely affect the transactions contemplated by this Agreement or any of
the other Investment Agreements or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of such other Investment Agreements.
The Company and each of its subsidiaries are unaware of any facts which could
give rise to a claim or proceeding which, if asserted or conducted with results
unfavorable to the Company or any of its subsidiaries, could have a Material
Adverse Effect.

     3.9  Disclosure.  No information relating to or concerning the Company set
          ----------
forth in this Agreement or provided to Purchaser in connection with the
transactions contemplated hereby contains an untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements made
herein or therein, in light of the circumstances under which they were made, not
misleading.  Except for the execution and performance of this Agreement and the
other Investment Agreements, no material fact (within the meaning of the federal
securities laws of the United States) exists with respect to the Company or any
of its subsidiaries which has not been publicly disclosed.  The Company shall in
no event be deemed to have made to Purchaser any representations or warranties
with respect to any projections, estimates or budgets of future revenues,
expenses or expenditures, or future results of operations, which the Company
shall have supplied in good faith, except that with respect to projections
contained in the investment materials provided to Purchaser in March 2001, the
Company represents that such projections were prepared in good faith and that
the Company believes there is a reasonable basis for such projections.  Except
as disclosed in Schedule 3.9, the Company has not provided any material non-
                ------------
public information to Purchaser.

     3.10 Acknowledgment Regarding Purchaser's Purchase of the Securities.  The
          ---------------------------------------------------------------
Company acknowledges and agrees that Purchaser is not acting as a financial
advisor or

                                       9
<PAGE>

fiduciary of the Company (or in any similar capacity) with respect to this
Agreement or the transactions contemplated hereby, that this Agreement and the
transactions contemplated hereby, and the relationship between Purchaser and the
Company, are "arms-length", and that any statement made by Purchaser, or any of
its representatives or agents, in connection with this Agreement or the
transactions contemplated hereby is not advice or a recommendation, is merely
incidental to Purchaser's purchase of the Securities and has not been relied
upon in any way by the Company, its officers, directors or other
representatives. The Company further represents to Purchaser that the Company's
decision to enter into this Agreement and the transactions contemplated hereby
has been based solely on an independent evaluation by the Company and its
representatives.

     3.11 Current Public Information.  Except as disclosed on Schedule 3.11, the
          --------------------------                          -------------
Company is currently eligible to register the resale of the Conversion Shares
and Warrant Shares on a registration statement on Form S-3 under the Securities
Act.

     3.12 No General Solicitation.  Neither the Company nor any person acting on
          -----------------------
behalf of the Company has conducted any "general solicitation," as described in
Rule 502(c) under Regulation D, with respect to any of the Securities being
offered hereby.

     3.13 No Integrated Offering.  Neither the Company, nor any of its
          ----------------------
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would prevent the parties hereto from
consummating the transactions contemplated hereby pursuant to an exemption from
registration under the Securities Act pursuant to the provisions of Section 4(2)
or Regulation D promulgated thereunder.  The transactions contemplated hereby
are exempt from the registration requirements of the Securities Act, assuming
the accuracy of the representations and warranties herein contained of Purchaser
to the extent relevant for such determination.

     3.14 No Brokers.  The Company has taken no action which would give rise to
          ----------
any claim by any person for brokerage commissions, finder's fees or similar
payments relating to this Agreement or the transactions contemplated hereby,
except for dealings with H.C. Wainwright & Co., Inc. and its selected dealers.

     3.15 Acknowledgment of Dilution. The Company acknowledges that its
          --------------------------
obligation to issue Conversion Shares upon conversion of the Preferred Stock is
binding upon it and enforceable regardless of the dilution that such issuance
may have on the ownership interests of other stockholders.

     3.16 Intellectual Property.  Except as disclosed in Schedule 3.16, each of
          ---------------------                          -------------
the Company and its subsidiaries owns or possesses adequate and enforceable
rights to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures) and
other similar rights and proprietary knowledge (collectively, "Intangibles")
                                                               -----------
used or necessary for the conduct of its business as now being conducted and as
previously described in the Company's Annual Report on Form 10-K for its most
recently ended fiscal year for which an Annual Report on

                                       10
<PAGE>

Form 10-K was filed. To the knowledge of the Company and its subsidiaries,
neither the Company nor any subsidiary of the Company infringes on or is in
conflict with any right of any other person with respect to any Intangibles nor
is there any claim of infringement made by a third party against or involving
the Company or any of its subsidiaries, which infringement, conflict or claim,
individually or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a Material Adverse Effect.

     3.17 Foreign Corrupt Practices.  Neither the Company, nor any of its
          -------------------------
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S.  Foreign Corrupt Practices Act of
1977, as amended; or made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment to any foreign or domestic government official or
employee.  Without limiting the generality of the foregoing, the Company and its
subsidiaries have not directly or indirectly made or agreed to make (whether or
not said payment is lawful) any payment to obtain, or with respect to, sales
other than usual and regular compensation to its or their employees and sales
representatives with respect to such sales.

     3.18 Key Employees; Company's Knowledge.  No Key Employee, to the best of
          ----------------------------------
the knowledge of the Company and its subsidiaries, is, or is now expected to be,
in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, and the continued
employment of each Key Employee does not subject the Company or any of its
subsidiaries to any liability with respect to any of the foregoing matters.
Except as disclosed in Schedule 3.18, no Key Employee has, to the best of the
                       -------------
knowledge of the Company and its subsidiaries, any intention to terminate or
limit his employment with, or services to, the Company or any of its
subsidiaries, nor is any such Key Employee subject to any constraints (e.g.,
litigation) which would cause such employee to be unable to devote his full time
and attention to such employment or services.   For purposes hereof, the term
"knowledge of the Company" shall mean the knowledge of each of the Key
Employees.

                                  ARTICLE IV
                                   COVENANTS

     4.1  Best Efforts. The Company shall use its best efforts timely to satisfy
          ------------
each of the conditions described in Articles VI and VII of this Agreement.

     4.2  Securities Laws.  The Company agrees to file a Form D with respect to
          ---------------
the Securities with the SEC as required under Regulation D.  The Company shall,
on or prior to the date of the Closing, take such action as is necessary to sell
the Securities to the Purchasers in accordance with applicable securities laws
of the states of the United States, and shall provide evidence of any such
action so taken to the Purchasers on or prior to the date of the Closing.
Without limiting any of the Company's obligations under this Agreement, the
Registration Rights Agreement, the Warrant or the Certificate of Designation,
from and after the date of the

                                       11
<PAGE>

Closing, neither the Company nor any person acting on its behalf shall take any
action which would adversely affect any exemptions from registration under the
Securities Act with respect to the transactions contemplated hereby.

     4.3  Reporting Status.  So long as a Purchaser beneficially owns any of the
          ----------------
Securities, the Company shall timely file all reports required to be filed with
the SEC pursuant to the Exchange Act, and the Company shall not terminate its
status as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would permit such
termination.

     4.4  Use of Proceeds.  The Company shall use the proceeds from the sale of
          ---------------
the Securities for working capital only, in the ordinary course of its business,
and, without limiting the generality of the foregoing, shall not use such
proceeds to make a loan to any employee, officer, director or stockholder of the
Company, to repay any loan or other obligation of the Company (except for (i)
mandatory prepayment of the RMS Note (as defined below) with 50% of the proceeds
from the exercise of the Warrants and (ii) the repayment of monies loaned to the
Company as part of the November 2000 or March 2001 bridge loans that such person
elects not to convert) to any such person or to repurchase or pay a dividend on
shares of Common Stock or other securities of the Company, other than any such
payment explicitly required or permitted by the terms of this Agreement, the
Certificate of Designation or the other Investment Agreements.

     4.5  Restriction on Issuance of Securities.  For a period beginning on the
          -------------------------------------
date of the Closing and ending on the date which is one hundred and eighty (180)
days following the effective date of the Registration Statement, the Company
shall not issue or agree to issue any privately placed discounted, variable
priced equity or equity-like securities (including debt securities with equity
features), other than (i) to the Purchasers pursuant to this Agreement, (ii)
pursuant to a bona fide business acquisition of or by the Company, whether by
merger, joint venture, consolidation, sale of assets, sale or exchange of stock
or otherwise that has been approved by the Board of Directors of the Company,
the primary purpose of which is not to raise equity capital, (iii) in private
placements of such securities pursuant to or in connection with a strategic
alliance or partnering relationship, the primary purpose of which is not to
raise equity capital, (iv) upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding as of the Closing and
disclosed in the Schedule of Exceptions, (v) pursuant to the Company's stock
option plans, employee stock purchase plan or restricted stock plans approved by
the stockholders of the Company, (vi) pursuant to written agreements existing on
the date hereof to independent contractors or consultants for professional
services provided to the Company, or (vii) in connection with lease lines bank
financings or acquisitions of intellectual property rights, the primary purpose
of which is not to raise equity capital.  Without implication that the contrary
would otherwise be true, the Company shall not indirectly accomplish any action
which the immediately preceding sentence would have otherwise prohibited from
being effected directly (e.g., by an asset drop-down to a subsidiary followed by
the offering of securities of such subsidiary).

     4.6  [Intentionally Omitted].

     4.7  [Intentionally Omitted].
          -----------------------

                                       12
<PAGE>

     4.8  Listing.  For so long as a Purchaser owns any of the Securities, the
          -------
Company shall continue the listing of its Common Stock on the Nasdaq SmallCap
Market, the Nasdaq National Market, the New York Stock Exchange or the American
Stock Exchange, secure and maintain listing and trading of the Conversion Shares
and Warrant Shares on such exchange, and comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
such exchange.

     4.9  Prospectus Delivery Requirement.  Each Purchaser understands that the
          -------------------------------
Securities Act may require delivery of a prospectus relating to the Common Stock
in connection with any sale thereof pursuant to a registration statement under
the Securities Act covering the resale by Purchaser of the Common Stock being
sold, and Purchaser shall use its reasonable efforts to comply with the
applicable prospectus delivery requirements of the Securities Act in connection
with any such sale.

     4.10 Intentional Acts or Omissions.  The Company shall not intentionally
          -----------------------------
perform any act which if performed, or intentionally omit to perform any act
which, if omitted to be performed, would prevent or excuse the performance of
this Agreement or any of the other Investment Agreements or any of the
transactions contemplated hereby or thereby or the benefits intended to be
secured thereby by Purchaser (including, without limitation, pursuant to any
agreements or documents obtained by the Company as a condition to any Closing
hereunder).

     4.11 Corporate Existence.  So long as a Purchaser beneficially owns any
          -------------------
Securities, the Company shall maintain its corporate existence, except in the
event of a merger or consolidation as long as the surviving or successor entity
in such transaction (i) assumes the Company's obligations hereunder and under
the agreements and instruments entered into in connection herewith regardless of
whether or not the Company would have had a sufficient number of shares of
Common Stock authorized and available for issuance in order to effect the
conversion of all Preferred Stock and the exercise of the Warrant outstanding as
of the date of such transaction (including, without limitation, without giving
effect to any limitations on conversion or exercise thereof) and (ii) is a
publicly traded corporation whose common stock is listed for trading on the
Nasdaq SmallCap Market, the Nasdaq National Market, the New York Stock Exchange
or the American Stock Exchange.

     4.12 Share Authorization.  The Company covenants and agrees that it shall
          -------------------
(i) solicit by proxy Stockholder Approval (as defined below) and (ii) use its
best efforts to obtain Stockholder Approval at its next stockholder meeting
which shall be held no later than July 31, 2001 (the "Stockholder Approval
                                                      --------------------
Date").  For purposes hereof, "Stockholder Approval" means (a) authorization by
                               --------------------
the required vote under Nasdaq Rule 4350 of the stockholders of the Company of
the issuance of shares of Common Stock upon conversion of shares of Preferred
Stock pursuant to the terms of the Certificate of Designation and the exercise
of the Warrant pursuant to the terms thereof in the aggregate in excess of
19.99% of the outstanding shares of Common Stock, (b) if necessary and to the
extent effected by stockholder vote, the elimination of any prohibitions under
the rules or regulations of any stock exchange, interdealer quotation system or
other self-regulatory organization with jurisdiction over the Company or any of
its securities on the Company's ability to issue shares of Common Stock in
excess of the Cap Amount (as defined in the Certificate of Designation) and for
all other applicable purposes, and (c) authorization by the required vote under
the Delaware General Corporation Law to approve

                                       13
<PAGE>

the Reverse Stock Split (as defined below). In addition, the Company shall,
unless otherwise consented to by Purchaser, have a definitive proxy statement
mailed to each stockholder of the Company at least ten (10) days prior to the
Stockholder Approval Date.

     4.13 Transactions with Affiliates.  Except as disclosed in Schedule 4.13,
          ----------------------------                          -------------
the Company and each of its subsidiaries will not enter into any agreement or
arrangement, written or oral, directly or indirectly, with an affiliate or
provide services or sell goods to, or for the benefit of, or pay or otherwise
distribute monies, goods or other valuable consideration to, an affiliate,
except upon fair and reasonable terms under the circumstances as determined by
the Company in good faith, taking into account all of the facts and
circumstances of such agreement or arrangement, and except for existing
intercompany debt or transactions with or between the Company and any of its
wholly-owned subsidiaries and payments and benefits to officers and directors in
their capacities as such in the ordinary course of business, consistent with
past practices.

     4.14 Limitation of Agreements.  The Company will not, and will not permit
          ------------------------
any subsidiary to, enter into any Contract, or any amendment, modification,
extension or supplement to any existing Contract, which limits the Company from
performing its obligations under any of the Investment Agreements or that would
limit the number of shares of Common Stock issuable to a Purchaser upon
conversion of the Preferred Stock or exercise of the Warrant without Stockholder
Approval, including, without limitation, by integration of other shares of
Common Stock with the Cap Amount.

     4.15 Reverse Stock Split.  The Company covenants and agrees that it will
          -------------------
use its best efforts to obtain by July 31, 2001 stockholder approval to conduct
a 1 to 5 reverse stock split of its Common Stock, or such greater ratio (e.g. 1
to 6) as necessary to comply with the Nasdaq Marketplace Rules (the "Reverse
                                                                     -------
Stock Split"), provided that the number of shares of Common Stock reduced to one
-----------
(1) share of Common Stock in the Reverse Stock Split multiplied by the closing
price of the Common Stock on the record date set for the Company's next
stockholder meeting ("Closing Price") shall equal or exceed $2.00 per share.
For example, if the Company conducts a 1 to 6 reverse stock split, the Closing
Price multiplied by 6 must be greater than or equal to $2.00 per share.

     4.16 Conversion of Jotter Note.  The Company covenants and agrees that it
          -------------------------
will use its best efforts to obtain by July 31, 2001 stockholder approval for
the conversion of the $1.7 million promissory note issued to Jotter
Technologies, Inc. ("Jotter") as partial consideration in the asset purchase
                     ------
transaction between the Company and Jotter ("Jotter Asset Purchase") into shares
                                             ---------------------
of Common Stock at $1.00 per share, provided that Nasdaq determines that such
stockholder approval is required for such conversion, and the Company shall, in
any event, provide evidence satisfactory to the Purchaser of such conversion.

                                       14
<PAGE>

                                   ARTICLE V
                  LEGEND REMOVAL, TRANSFER, AND CERTAIN SALES

     5.1  Removal of Legend.  The Legend shall be removed and the Company shall
          -----------------
issue a certificate without any legend to the holder of any Security upon which
such Legend is stamped, and a certificate for a Security shall be originally
issued without any legend, if, unless otherwise required by applicable state
securities laws, (a) the sale thereof is registered under the Securities Act
pursuant to an effective registration statement, (b) such holder provides the
Company with an opinion of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions and reasonably acceptable to the
Company (the reasonable cost of which shall be borne by the Company), to the
effect that a public sale or transfer of such Security may be made without
registration under the Securities Act or (c) Purchaser provides reasonable
assurances that such Security can be sold pursuant to Rule 144.  Each Purchaser
agrees to sell all Securities, including those represented by a certificate(s)
from which the Legend has been removed, or which were originally issued without
the Legend, pursuant to an effective registration statement and to deliver a
prospectus in connection with such sale or in compliance with an exemption from
the registration requirements of the Securities Act.  In the event the Legend is
removed from any Security or any Security is issued without the Legend and
thereafter the effectiveness of a registration statement covering the resale of
such Security is suspended or the Company determines that a supplement or
amendment thereto is required by applicable securities laws, then upon
reasonable advance notice to the Purchaser holding such Security, the Company
may require that the Legend be placed on any such Security that cannot then be
sold pursuant to an effective registration statement or Rule 144 or with respect
to which the opinion referred to in clause (b) next above has not been rendered,
which Legend shall be removed when such Security may be sold pursuant to an
effective registration statement or Rule 144 or such holder provides the opinion
with respect thereto described in clause (b) next above.

     5.2  Transfer Agent Instructions.  The Company shall instruct its transfer
          ---------------------------
agent to issue certificates, registered in the name of each Purchaser or its
nominee, for the Conversion Shares and/or Warrant Shares in such amounts as
specified from time to time by Purchaser to the Company upon, and in accordance
with, the conversion of the Preferred Stock and the exercise of the Warrant.
Such certificates shall bear a legend only in the form of the Legend and only to
the extent permitted by Section 5.1 above.  The Company warrants that no
instruction other than such instructions referred to in this Article V, and no
stop transfer instructions other than stop transfer instructions to give effect
to Section 2.6 hereof in the case of the Conversion Shares and/or Warrant Shares
prior to registration of the Conversion Shares and/or Warrant Shares under the
Securities Act, will be given by the Company to its transfer agent and that the
Securities shall otherwise be freely transferable on the books and records of
the Company.  Nothing in this Section shall affect in any way Purchaser's
obligations and agreement set forth in Section 5.1 hereof to resell the
Securities pursuant to an effective registration statement and to deliver a
prospectus in connection with such sale or in compliance with an exemption from
the registration requirements of applicable securities laws.  Without limiting
the foregoing, if (a) Purchaser provides the Company with an opinion of counsel,
which opinion of counsel shall be in form, substance and scope customary for
opinions of counsel in comparable transactions and reasonably acceptable to the
Company (the reasonable cost of which shall be borne by the Company), to the
effect that the Securities to be sold or transferred may be sold or transferred

                                       15
<PAGE>

pursuant to an exemption from registration or (b) Purchaser transfers Securities
to an affiliate or pursuant to Rule 144, the Company shall permit the transfer,
and, in the case of the Conversion Shares and/or Warrant Shares, promptly
instruct its transfer agent to issue one or more certificates in such name and
in such denomination as specified by Purchaser in order to effect such a
transfer or sale.  The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to Purchaser by vitiating the
intent and purpose of the transaction contemplated hereby.  Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Article V will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Article V, that
Purchaser shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.

                                  ARTICLE VI
                CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL

     6.1  Conditions to the Company's Obligation to Sell.  The obligation of the
          ----------------------------------------------
Company hereunder to issue and sell the Preferred Stock and the Warrant to the
Purchasers at the Closing is subject to the satisfaction, as of the date of the
Closing, of each of the following conditions thereto, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion:

          (i)    Each Purchaser shall have executed the signature page to this
     Agreement and the Registration Rights Agreement and delivered the same to
     the Company.

          (ii)   Each Purchaser shall deliver the applicable Purchase Price for
     the Preferred Stock purchased at the Closing.

          (iii)  The representations and warranties of each Purchaser shall be
     true and correct as of the date when made and as of the Closing as though
     made at that time, and each Purchaser shall have performed, satisfied and
     complied in all material respects with the covenants and agreements
     required by this Agreement to be performed or complied with by each
     Purchaser at or prior to the Closing.

          (iv)   No statute, rule, regulation, executive order, decree, ruling
     or injunction shall have been enacted, entered, promulgated or endorsed by
     any court or governmental authority of competent jurisdiction or any self-
     regulatory organization having authority over the matters contemplated
     hereby which restricts or prohibits the consummation of any of the
     transactions contemplated by this Agreement.

                                  ARTICLE VII
               CONDITIONS TO PURCHASER'S OBLIGATION TO PURCHASE

     7.1  Conditions to the Closing.  The obligation of each Purchaser hereunder
          -------------------------
to purchase the Preferred Stock and the Warrant to be purchased by it on the
date of the Closing is subject to the satisfaction of each of the following
conditions (including conditions to be performed at the Closing), provided that
these conditions are for Purchaser's sole benefit and may not be waived by a
majority of the Purchasers:

                                       16
<PAGE>

             (i)    The Company shall have executed the signature page to this
     Agreement and Registration Rights Agreement and delivered the same to the
     Purchasers' counsel.

             (ii)   The Company shall have delivered duly executed certificates
     for the Preferred Stock and duly executed the Warrant being so purchased by
     each Purchaser at the Closing (each in such denominations as each Purchaser
     shall request).

             (iii)  The Common Stock shall be listed on the Nasdaq SmallCap
     Market, the Nasdaq National Market, the New York Stock Exchange or the
     American Stock Exchange.

             (iv)   The representations and warranties of the Company shall be
     true and correct as of the date when made and as of the Closing as though
     made at that time and the Company shall have performed, satisfied and
     complied with the covenants and agreements required by this Agreement to be
     performed or complied with by the Company at or prior to the Closing.
     Purchasers shall have received a certificate, executed by the Chief
     Executive Officer or Chief Financial Officer of the Company, dated as of
     the Closing to the foregoing effect and as to such other matters as may be
     reasonably requested by the Purchasers.

             (v)    No statute, rule, regulation, executive order, decree,
     ruling or injunction shall have been enacted, entered, promulgated or
     endorsed by any court or governmental authority of competent jurisdiction
     or any self-regulatory organization having authority over the matters
     contemplated hereby which prohibits the consummation of any of the
     transactions contemplated by this Agreement.

             (vi)   Purchaser shall have received the officer's certificate
     described in Section 3.3, dated as of the Closing.

             (vii)  Purchasers shall have received an opinion of the Company's
     outside legal counsel, dated as of the Closing in the form attached hereto
     as Exhibit E.
        ---------

             (viii) The Company's transfer agent has agreed to act in accordance
     with irrevocable instructions in the form attached hereto as Exhibit F.
                                                                  ---------

             (ix)   The Certificate of Designation shall have been accepted for
     filing with the Secretary of State of the State of Delaware and a copy
     thereof certified by the Secretary of State of Delaware shall have been
     delivered to Purchaser's counsel.

             (x)    The Company shall have received (a) subscription for
     Preferred Stock and Warrants for an aggregate purchase price of not less
     than $9 million or (b) subscription for Preferred Stock and Warrants for an
     aggregate purchase price of not less than $8 million and an agreement from
     RMS Limited Partnership ("RMS") to extend by one (1) year the maturity date
                               ---
     of the $1.0 million promissory note issued to it in connection with a
     bridge financing on November 13, 2001 ("RMS Note").
                                             --------

                                       17
<PAGE>

             (xi)   In the event that RMS has agreed to convert the RMS Note
     into Series E Preferred Stock and Warrants, the Company shall have provided
     evidence satisfactory to Purchaser that a minimum of $1.5 million of the
     $2.0 million principal amount in short term debt shall be converted into
     the Series E Convertible Preferred Stock and Warrants.

             (xii)  [INTENTIONALLY OMITTED]

             (xiii) Common shares issued in connection with the Jotter Asset
     Purchase shall be subject to a contractual lock-up to be in effect from the
     Closing Date until six months following the effectiveness of the
     Registration Statement ("Lock-Up Period"). Excluded from such contractual
                              --------------
     lock-up shall be that number of common shares, not to exceed 500,000
     shares, that when sold results in gross proceeds of up to $750,000. Such
     proceeds shall be used solely to satisfy the financial obligations of
     Jotter. After the Lock-Up Period, 4% of the shares shall be released each
     week.

             (xiv)  The Company shall have provided evidence satisfactory to the
     Purchaser that Jotter and RMS have agreed to vote at the Company's next
     stockholder meeting in favor of (a) approving the Series E Preferred Stock
     and Warrant financing; (b) approving the SAFLINK Corporation 2000 Stock
     Incentive Plan, and (c) approving the Reverse Stock Split.

                                 ARTICLE VIII

                             ADDITIONAL AGREEMENTS

     8.1  Election and Removal of Directors. In the election of the directors
          ---------------------------------
to be elected by the holders of the Preferred Stock (the "Series E Directors"),
each holder of the Preferred Stock shall vote at any regular or special meeting
of stockholders or execute a written consent at the request of Palo Alto
Investors of such number of shares of voting securities then held by such holder
(or as to which it then has voting power) as may be necessary to elect two (2)
directors nominated by Palo Alto Investors. Each holder of Preferred Stock
hereby irrevocably constitutes and appoints Palo Alto Investors as its true and
lawful attorney-in-fact, in its name, place, and stead, to make, execute,
acknowledge, and file written consents in connection with the election or
removal of directors of the Company. It is expressly intended by each holder of
the Preferred Stock that the power of attorney granted hereby is coupled with an
interest, shall be irrevocable unless and until the covenants of this Section
8.1 terminate pursuant to the terms hereof, and shall survive and not be
affected by the subsequent disability or incapacity of such holder of Preferred
Stock (or if such holder of Preferred Stock is a corporation, partnership,
trust, association, limited liability company or other legal entity, by the
dissolution or termination thereof). In addition, each holder of the Preferred
Stock hereby constitutes and appoints Palo Alto Investors, with full power of
substitution, as the proxy of such holder and hereby authorizes it to represent
and to vote, or to execute and deliver written consents or otherwise act with
respect to, all of the Preferred Stock now owned or hereafter acquired by such
holder on all matters in connection with the election and removal of directors
of the Company, to the same extent and with the same effect as such holder might
or could do under applicable law, rules and regulations. The proxy granted
pursuant to the immediately preceding sentence is given in consideration of the
agreements and covenants of the Company and shareholders of the

                                       18
<PAGE>

Company pursuant to this Agreement and as such is coupled with an interest and
shall be irrevocable unless and until the covenants of this Section terminate
pursuant to the terms hereof. Each holder of Preferred Stock hereby revokes any
and all previous proxies granted with respect to any of the Preferred Stock
owned by such holder and shall not hereafter, unless and until this Agreement
terminates, purport to grant any other proxy or power of attorney with respect
to any of the Preferred Stock owned by such holder, deposit any of the Preferred
Stock into a voting trust or enter into any agreement (other than this
Agreement), arrangement or understanding with any person, directly or
indirectly, to vote, grant any proxy or give instructions with respect to the
voting of any of the Preferred Stock owned by such holder. Each holder of
Preferred Stock and Conversion Shares shall: (i) vote at any regular or special
meeting of the stockholders for the removal of a Series E Director if, and only
if, Palo Alto Investors designates that such director be removed; and (ii)
execute a written consent for the removal of a Series E Director if, and only
if, Palo Alto Investors designates that such director be removed. Except as
provided in the preceding sentence, no holder of Preferred Stock or Conversion
Shares shall vote for, or execute a written consent resulting in, the removal of
a Series E Director.

     8.2  Manner of Voting. The voting of shares pursuant to this Agreement may
          ----------------
be effected in person, by proxy, by written consent, or in any other manner
permitted by applicable law.

     8.3  Palo Alto Investors' Legal Fees. After Closing, the Company shall
          -------------------------------
reimburse Palo Alto Investors for up to $20,000 in attorneys' fees, costs and
disbursements related to the Series E Preferred Stock and Warrant financing.

                                  ARTICLE IX
                         GOVERNING LAW; MISCELLANEOUS

     9.1  Governing Law; Jurisdiction. This Agreement shall be governed by and
          ---------------------------
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company further
agrees that service of process upon the Company mailed by the first class mail
(certified/return receipt) shall be deemed in every respect effective service of
process upon the Company in any suit or proceeding arising hereunder. Nothing
herein shall affect Purchaser's right to serve process in any other manner
permitted by law. The parties hereto agree that a final non-appealable judgment
in any such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner. If any
legal action or other legal proceeding relating to this Agreement or the
enforcement of any provision hereof is brought by any party, the prevailing
party shall be entitled to recover reasonable attorneys' fees, costs and
disbursements to the extent actually incurred (in addition to any other relief
to which the prevailing party may be entitled).

     9.2  Counterparts; Facsimile Signatures. This Agreement may be executed in
          ----------------------------------
two or more counterparts, including, without limitation, by facsimile
transmission, all of which counterparts shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery

                                       19
<PAGE>

shall cause additional original executed signature pages to be delivered to the
other parties via a reputable overnight courier for next business day delivery.

     9.3  Headings. The headings of this Agreement are for convenience of
          --------
reference and shall not form part of, or affect the interpretation of, this
Agreement.

     9.4  Severability. If any provision of this Agreement shall be invalid or
          ------------
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.

     9.5  Scope of Agreement; Amendments. Except as specifically set forth
          ------------------------------
herein, Purchaser makes no representation, warranty, covenant or undertaking
with respect to the transactions contemplated hereby. No provision of this
Agreement may be waived other than by an instrument in writing signed by the
party to be charged with enforcement and no provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and each
Purchaser.

     9.6  Notice. Any notice herein required or permitted to be given shall be
          ------
in writing and may be personally served or delivered by courier or by facsimile-
machine confirmed telecopy, and shall be deemed delivered at the time and date
of receipt (which shall include telephone line facsimile transmission). The
addresses for such communications shall be:

               If to the Company:

               SAFLINK Corporation
               18650 N.E. 67/th/ Court, Suite 210
               Redmond, WA 98052
               Attention: Chief Financial Officer
               Facsimile Number:  425-497-1778

               If to Purchaser:

               to the address set forth next to each Purchaser's name on
               Schedule I hereto.

Each party shall provide notice to the other parties of any change in address.

     9.7  Successors and Assigns. This Agreement shall be binding upon and
          ----------------------
inure to the benefit of the parties and their successors and assigns. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers.

     9.8  Third Party Beneficiaries. This Agreement is intended for the benefit
          -------------------------
of the parties hereto and their respective permitted successors and assigns and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.

                                       20
<PAGE>

     9.9  Survival. The representations and warranties of Purchaser and the
          --------
Company shall survive the Closing hereunder for a period of two (2) years after
the date of the Closing and the covenants of the parties shall survive the
Closing, in each case notwithstanding any due diligence investigation conducted
by or on behalf of Purchaser. The Company agrees to indemnify (which indemnity
shall include advancement of expenses as they are incurred) and hold harmless
each of the Purchasers and each of Purchaser's officers, directors, employees,
partners, agents and affiliates for loss or damage or expenses (including
reasonable attorneys fees) arising as a result of or related to (a) any breach
or alleged breach by the Company of any of its representations or covenants set
forth herein, (b) any cause of action, suit or claim brought or made against
Purchaser and arising out of or resulting from the execution, delivery,
performance or enforcement of the Investment Agreements or any other
certificate, instrument or document contemplated hereby or thereby, (c) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, or (d) the
status of Purchaser or holder of the Securities as an investor in the Company.
To the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the indemnified liabilities which is permissible
under applicable law.

     9.10 Public Filings; Publicity. Within three (3) business day following
          -------------------------
the Closing, the Company shall issue a press release with respect to the
transactions contemplated hereby. Within five (5) business days of the Closing,
the Company shall file a Form 8-K regarding the transaction contemplated by this
Agreement; such Form 8-K shall have as exhibits thereto the material documents
executed in connection with this transaction contemplated hereby

     9.11 Further Assurances. Each party shall do and perform, or cause to be
          ------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

     9.12 Remedies. No provision of this Agreement providing for any remedy to
          --------
Purchaser shall limit any remedy which would otherwise be available to Purchaser
at law or in equity. Nothing in this Agreement shall limit any rights Purchaser
may have with any applicable federal or state securities laws with respect to
the investment contemplated hereby. The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to Purchaser and that
the remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, Purchaser
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

     9.13 Termination. In the event that the Closing shall not have occurred
          -----------
within three (3) business days of the execution of this Agreement, unless the
parties agree otherwise, this Agreement shall terminate.

                                       21
<PAGE>

     9.14 Directly or Indirectly. Where any provision in this Agreement refers
          ----------------------
to action to be taken by any person, or which such person is prohibited from
taking, such provision shall be applicable whether the action in question is
taken directly or indirectly by such person.

     9.15 Failure or Indulgence Not Waiver. No failure or delay on the part of
          --------------------------------
a party in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.

                                     * * *

                        [SIGNATURES ON FOLLOWING PAGE]

                                       22
<PAGE>

     IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused
this Securities Purchase Agreement to be duly executed as of the date first
above written.

PURCHASER:

________________

By:_________________
Its:________________

COMPANY:

SAFLINK CORPORATION

By:_____________________
Its:____________________

                                       23
<PAGE>

                                  SCHEDULE 1

                            Schedule of Purchasers
                            ----------------------

                    Shares of Series E    Series A     Series B
                                          --------     --------
Name of Purchaser     Preferred Stock     Warrants     Warrants   Purchase Price
-----------------     ---------------     --------     --------   --------------

                                       24<PAGE>

                                                                    EXHIBIT 10.2

EXHIBIT D

                         REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is made as of
                                               ---------
June 5, 2001, by and among SAFLINK Corporation, a Delaware corporation (the

"Company"), with headquarters located at 18650 N.E. 67/th/ Court, Suite 210
 -------
Redmond, WA 98052 and the purchasers listed on Schedule I hereto (each an

"Initial Purchaser" and collectively, "Initial Purchasers").
 -----------------                     ------------------

                                   RECITALS
                                   --------

     A.   In connection with the Securities Purchase Agreement dated of even
date herewith by and among the Company and the Initial Purchasers (the
"Securities Purchase Agreement"), the Company has agreed, upon the terms and
 -----------------------------
subject to the conditions contained therein, to issue and sell to the Initial
Purchasers (i) shares of Series E Convertible Preferred Stock of the Company
(including such Series E Convertible Preferred Stock issued pursuant to the
Certificate of Designation (as defined below), the "Preferred Stock"), which is
                                                    ---------------
convertible into shares (the "Conversion Shares") of the Company's common stock,
                              -----------------
par value $0.01 per share (the "Common Stock") upon the terms and subject to the
                                ------------
limitations and conditions set forth in the Certificate of Designations,
Preferences and Rights with respect to such Preferred Stock (the "Certificate of
                                                                  --------------
Designation"), in the form attached as Exhibit A to the Securities Purchase
-----------
Agreement, and (ii) Warrants (each a "Warrant" and, when taken together with all
                                      -------
of the warrants issuable under the Securities Purchase Agreement, the
"Warrants") entitling the holder thereof to purchase the number of shares of
 --------
Common Stock set forth in the Securities Purchase Agreement (the "Warrant
                                                                  -------
Shares").
------

     B.   To induce the Initial Purchasers to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws.
 --------------

                                  AGREEMENTS
                                  ----------

     NOW THEREFORE, in consideration of their respective promises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Purchasers hereby agree as follows:

                                   ARTICLE I
                                  DEFINITIONS
                                  -----------

     1.1  Definitions. As used in this Agreement, the following terms shall have
          -----------
the following meanings:

          (a)  "Purchasers" means each Initial Purchaser and any transferees or
                ----------
     assignees who agree to become bound by the provisions of this Agreement in
     accordance with Article IX hereof.
<PAGE>

          (b)  "register," "registered," and "registration" refer to a
                --------    ----------        ------------
     registration effected by preparing and filing a Registration Statement or
     Statements in compliance with the Securities Act and pursuant to Rule 415
     under the Securities Act or any successor rule providing for offering
     securities on a continuous basis ("Rule 415"), and the declaration or
                                        --------
     ordering of effectiveness of such Registration Statement by the United
     States Securities and Exchange Commission (the "SEC").
                                                     ---

          (c) "Registrable Securities" means the maximum number of C Conversion
               ----------------------
     Shares issued or issuable with respect to the Preferred Stock and the
     maximum number of Warrant Shares issued or issuable with respect to the
     Warrants (each without regard to any limitations on conversion or exercise)
     and any shares of capital stock issued or issuable, from time to time (with
     any adjustments), on or in exchange for or otherwise with respect to the
     Common Stock or any other Registrable Securities; provided, however, that
     Registrable Securities shall not include shares of Common Stock that (i)
     have previously been registered, or (ii) have otherwise been sold to the
     public.

          (d) "Registration Statement" means a registration statement of the
               ----------------------
     Company under the Securities Act.

     1.2  Capitalized Terms.  Capitalized terms used herein and not otherwise
          -----------------
defined herein shall have the respective meanings set forth in the Securities
Purchase Agreement.

                                  ARTICLE II
                                 REGISTRATION
                                 ------------

     2.1  Mandatory Registration.  The Company shall prepare and file with the
          ----------------------
SEC a Registration Statement (i) on a Form S-3, in the event a Form S-3
Registration Statement is available to the Company, on or prior to the tenth
(10/th/) business day after the Closing (as defined in the Securities Purchase
Agreement); or (ii) on such form of Registration Statement as is then available
to effect a registration of all of the Registrable Securities, in the event a
Form S-3 Registration Statement is no longer available to the Company, on or
prior to the thirtieth (30th) business day after the date of the Closing (as
defined in the Securities Purchase Agreement) (in each case, the "Filing Date").
                                                                  -----------
The Registrable Securities included in the Registration Statement shall be
allocated to each Purchaser as set forth in Section 12.10 9 hereof. The
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided to (and
subject to the approval of (which approval shall not be unreasonably withheld or
denied)) the Initial Purchaser and its counsel prior to its filing or other
submission.

     2.2  Underwritten Offering.  If any offering pursuant to a Registration
          ---------------------
Statement pursuant to Section 2.1 hereof involves an underwritten offering, the
Purchasers who hold a majority in interest of the Registrable Securities subject
to such underwritten offering, shall have the right to select one legal counsel
to represent the Purchasers and the Company shall select an investment bank or
banks and manager or managers to administer the offering, which investment bank
or banks or manager or managers shall be reasonably satisfactory to the
Purchasers who hold a majority in interest of such Registrable Securities.

                                       2
<PAGE>

     2.3  Payments by the Company.  (a) The Company shall cause the Registration
          -----------------------
Statement required to be filed pursuant to Section 2.1 hereof to become
effective as soon as practicable following the date of Stockholder Approval (as
defined in the Securities Purchase Agreement), but shall cause such Registration
Statement, (i) in the event a Form S-3 Registration Statement is available to
the Company, to become effective in no event later than the sixtieth (60/th/)
day following the Closing, or (ii) in the event a Form S-3 Registration
Statement is no longer available to the Company, to become effective in no event
later than the one hundred and twentieth (120th) day following the Closing (in
each case, the "Registration Deadline"). If the Registration Statement is not
                ---------------------
effective as required by this Section 2.3, the Company shall thereafter use its
best efforts to cause such Registration Statement to become effective. If the
Registration Statement covering the Registrable Securities required to be filed
by the Company pursuant to Section 2.1 hereof is not declared effective by the
SEC on or before the Registration Deadline (a "Registration Failure"), or if
                                               --------------------
after such Registration Statement has been declared effective by the SEC, sales
of all the Registrable Securities covered thereby cannot be made pursuant to
such Registration Statement (by reason of a stop order, the Company's failure to
update the registration statement, the failure of any post-effective amendment
to the registration statement to be promptly declared effective or any other
reason outside the control of the Purchasers) (a "Registration Suspension"), or
                                                  -----------------------
if the Common Stock of the Company is not listed or included for quotation on
one of the Nasdaq National Market, the Nasdaq SmallCap Market, the New York
Stock Exchange or the American Stock Exchange after being so listed or included
for quotation thereon, (a "Listing Suspension"), then the Company will make
                           ------------------
payments to the Purchasers in such amounts and at such times as shall be
determined pursuant to this Section 2.3, as partial relief for the damages to
the Purchasers by reason of any such delay in or reduction of their ability to
sell the Registrable Securities (which remedy shall not be exclusive of any
other remedies available at law or in equity).

     (b)  In the event of a Registration Failure, the Company shall pay to each
Purchaser an amount equal to (A) the Multiplier (as defined herein) times
                                                                    -----
(B) the Funded Amount (as defined below) with respect to such Purchaser times
                                                                        -----
(C) the number of months (prorated per day for partial months) following the
Registration Deadline prior to the date the Registration Statement filed
pursuant to Section 2.1 is declared effective by the SEC. In addition, in the
event of a Registration Suspension, the Company shall pay to Purchaser an amount
equal to (D) the Multiplier times (E) the Funded Amount with respect to such
                            -----
Purchaser times (F) the number of months (prorated per day for partial months)
          -----
from (x) the date on which sales of all the Registrable Securities first cannot
be made to (y) the date on which sales of all such Registrable Securities can
again be made. In addition, in the event of a Listing Suspension, the Company
shall pay to Purchaser an amount equal to (G) the Multiplier times (H) the
                                                             -----
Funded Amount with respect to such Purchaser times (I) the number of months
                                             -----
(prorated per day for partial months) from (x) the date on which listing or
quotation of the Common Stock is suspended or trading thereon is halted to (y)
the date on which the Common Stock is again so listed, quoted and traded. Such
payments shall be made in cash within five (5) days after the end of each period
that gives rise to such obligation, provided that, if any such period extends
for more than thirty (30) days, payments shall be made for each such thirty (30)
day period within five (5) days after the end of such thirty (30) day period,
each such thirty day period being counted as a month for purposes of this
Section 2.3(b).

                                       3
<PAGE>

     (c)  For any given date, the "Multiplier" shall mean 0.015.  The "Funded
                                   ----------                          ------
Amount" means the aggregate purchase price of the Preferred Stock and the
------
Warrants relating to the Common Stock registered (or required to be registered)
on such Registration Statement.

     2.4  Piggy-Back Registrations.  If at any time prior to the expiration of
          ------------------------
the Registration Period (as hereinafter defined) the Company shall file with the
SEC a Registration Statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities
(other than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with an acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans), then the Company shall send to each Purchaser who
has a right to have Registrable Securities covered by a Registration Statement
pursuant to this Agreement written notice of such determination and, if within
fifteen (15) days after the date of such notice, such Purchaser shall so request
in writing, the Company shall include in such Registration Statement all or any
part of the Registrable Securities such Purchaser requests to be registered,
except that if, in connection with any underwritten public offering for the
account of the Company the managing underwriter(s) thereof shall impose a
limitation on the number of shares of Common Stock which may be included in the
Registration Statement because, in such underwriter(s)' judgment, marketing or
other factors dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which such Purchaser has requested inclusion hereunder as the
underwriter shall permit. Any exclusion of Registrable Securities shall be made
pro rata among the Purchasers seeking to include Registrable Securities, in
proportion to the number of Registrable Securities sought to be included by such
Purchasers; provided, however, that the Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding
securities, the holders of which are not entitled to inclusion of such
securities in such Registration Statement or are not entitled to pro rata
inclusion with the Registrable Securities; and provided, further, however, that,
after giving effect to the immediately preceding proviso, any exclusion of
Registrable Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration Statement. No
right to registration of Registrable Securities under this Section 2.4 shall be
construed to limit any registration required under Section 2.1 or 3.2 hereof. If
an offering in connection with which a Purchaser is entitled to registration
under this Section 2.4 is an underwritten offering, then each Purchaser whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.

     2.5  Eligibility for Form S-3.  The Company represents and warrants that,
          ------------------------
as of the date hereof, it may not meet, and covenants that it shall use its best
efforts to meet the requirements for the use of Form S-3 for registration of the
re-sale by the Initial Purchaser and any other Purchaser of the Registrable
Securities and the Company shall file all reports required to be filed by the
Company with the SEC in a timely manner so as to maintain such eligibility or to
become eligible for the use of Form S-3.

                                       4
<PAGE>

                                  ARTICLE III
                          OBLIGATIONS OF THE COMPANY
                          --------------------------

     In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:

     3.1  The Company shall prepare promptly and file with the SEC the
Registration Statement required by Section 2.1, and cause such Registration
Statement relating to Registrable Securities to become effective as soon as
practicable after such filing, and keep the Registration Statement effective
pursuant to Rule 415 at all times until the date on which all of the Registrable
Securities have been sold (and no further Registrable Securities may be issued
in the future) (the "Registration Period"). No Registration Statement (including
                     -------------------
any amendments or supplements thereto and prospectuses contained therein and all
documents incorporated by reference therein) shall contain any 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 not misleading.

     3.2  The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until the termination of the Registration Period. The Company shall cause such
amendment to become effective as soon as practicable following the filing
thereof. If for any reason from time to time there are Registrable Securities
which are not included or which are not allowed to be included by the SEC in a
Registration Statement filed pursuant hereto, the Company shall file additional
registration statements as soon as practicable following a request by any
Purchaser to effect a registration of all of such Registrable Securities, which
registration statement shall be subject to all terms of this Agreement and shall
use its best efforts to cause such registration statement to become effective as
soon as practicable after such filing.

     3.3  The Company shall furnish to each Purchaser whose Registrable
Securities are included in the Registration Statement and its legal counsel (a)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of a Registration Statement referred to
in Section 2.1, each written correspondence by or on behalf of the Company to
the SEC or the staff of the SEC, and each item of correspondence from the SEC or
the staff of the SEC, in each case relating to such Registration Statement
(other than any portion, if any, thereof which contains information for which
the Company has sought confidential treatment), and (b) such number of copies of
a prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Purchaser may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned (or to be owned) by such Purchaser.

     3.4  The Company shall (a) register and qualify the Registrable Securities
covered by the Registration Statement under securities laws of such
jurisdictions in the United States as each

                                       5
<PAGE>

Purchaser who holds (or has the right to hold) Registrable Securities being
offered reasonably requests, (b) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (c) take such other
actions as may be reasonably necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (d)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (i) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3.4, (ii) subject itself
to general taxation in any such jurisdiction, (iii) file a general consent to
service of process in any such jurisdiction or (iv) make any change in its
charter or bylaws which the Board of Directors of the Company determines to be
contrary to the best interests of the Company and its stockholders.

     3.5  In the event the Purchasers who hold a majority in interest of the
Registrable Securities being offered in an offering pursuant to a Registration
Statement or any amendment or supplement thereto under Section 2.1 or 3.2 hereof
select underwriters for the offering, the Company shall enter into and perform
its obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the underwriters of such offering.

     3.6  As soon as practicable after becoming aware of such event, the Company
shall notify (by telephone and also by facsimile and reputable overnight
courier) each Purchaser of the happening of any event, of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and use its best efforts promptly to
(but in any event it shall within five (5) days) prepare a supplement or
amendment to the Registration Statement to correct such untrue statement or
omission, and deliver such number of copies of such supplement or amendment to
each Purchaser as such Purchaser may reasonably request; provided that for not
more than ten (10) consecutive calendar days (or a total of not more than thirty
(30) calendar days in any twelve (12) month period, the Company may delay the
disclosure of material non-public information concerning the Company (as well as
delay the updating of any prospectus or Registration Statement), the disclosure
of which at the time is not, in the good faith opinion of the Company, in the
best interests of the Company (an "Allowed Delay"); provided, further, that the
                                   -------------
Company shall promptly (i) notify the Purchasers in writing of the existence of
(but in no event, without the prior written consent of such Purchaser, shall the
Company disclose to any Purchaser any of the facts or circumstances regarding)
material non-public information giving rise to an Allowed Delay, and (ii) advise
the Purchasers in writing to cease all sales under such Registration Statement
until the end of the Allowed Delay. Without implication that the contrary would
otherwise be true, the period of any Allowed Delay shall constitute a
Registration Suspension for all purposes hereunder.

     3.7  The Company shall use its best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest practicable time and to notify (by telephone and also by facsimile and
reputable overnight carrier) each Purchaser who holds Registrable

                                       6
<PAGE>

Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.
Notwithstanding anything to the contrary, the Company shall cause the Transfer
Agent to deliver unlegended shares of Common Stock to a transferee of Purchaser
in connection with any sale of Registrable Securities with respect to which such
Purchaser has entered into a contract for sale prior to receipt of notice of
such suspension and for which such Purchaser has not yet settled.

     3.8   The Company shall permit a single counsel designated by the majority
in interest of the holders of Registrable Securities to review the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing with the SEC, and not file any document in a form to which
such counsel reasonably objects.

     3.9   The Company shall make available for inspection by (i) any Purchaser,
(ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
retained by the Purchasers, and (iv) one firm of attorneys retained by all such
underwriters (collectively, the "Inspectors") all pertinent financial and other
                                 ----------
records, and pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably deemed necessary by each
                    -------
Inspector in connection with such Registration Statement and cause the Company's
officers, directors and employees to supply all information which any Inspector
may reasonably request in connection therewith; provided, however, that each
Inspector shall hold in confidence and shall not make any disclosure (except to
a Purchaser) of any Record or other information which the Company determines in
good faith to be confidential, and of which determination the Inspectors are so
notified in writing, unless (a) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in any Registration Statement or to
otherwise comply with federal or state securities laws, (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or is otherwise required by
applicable law or legal process or (c) the information in such Records has been
made generally available to the public other than by disclosure in violation of
this or any other agreement (to the knowledge of the relevant Purchaser). The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and reasonable substance satisfactory to the
Company) with the Company with respect thereto, substantially in the form of
this Section 3.9. Each Purchaser agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein shall be deemed to limit a Purchaser's ability to
sell Registrable Securities in a manner which is consistent with applicable laws
and regulations.

     3.10  The Company shall hold in confidence and not make any disclosure
of information concerning a Purchaser provided to the Company unless (a)
disclosure of such information is necessary to comply with federal or state
securities laws, (b) the disclosure of such information is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (c) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction or is otherwise
required by applicable law or legal process, (d) such information has been made
generally available to the

                                       7
<PAGE>

public other than by disclosure in violation of this or any other agreement (to
the knowledge of the Company), or (e) such Purchaser consents to the form and
content of any such disclosure. The Company agrees that it shall, upon learning
that disclosure of such information concerning a Purchaser is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to such Purchaser prior to making such disclosure, and allow
the Purchaser, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.

     3.11  The Company shall cause the listing and the continuation of listing
of the Common Stock and of all the Registrable Securities covered by the
Registration Statement on the Nasdaq National Market System, the Nasdaq SmallCap
Market, the New York Stock Exchange or the American Stock Exchange, and cause
the Registrable Securities to be quoted or listed on each additional national
securities exchange or quotation system upon which the Common Stock is then
listed or quoted.

     3.12  The Company shall provide a transfer agent and registrar, which may
be a single entity, for the Registrable Securities not later than the effective
date of the Registration Statement.

     3.13  The Company shall cooperate with each Purchaser who hold Registrable
Securities being offered and the managing underwriter or underwriters, if any,
to facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Registrable Securities to be offered
pursuant to the Registration Statement and enable such certificates to be in
such denominations or amounts, as the case may be, as the managing underwriter
or underwriters, if any, or a Purchaser may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or a Purchaser
may request, and, within one (1) business day after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall cause legal counsel selected by the Company to deliver, to the
transfer agent for the Registrable Securities (with copies to the Purchasers
whose Registrable Securities are included in such Registration Statement) an
opinion of such counsel in the form attached hereto as Exhibit 1.
                                                       ---------

     3.14  At the request of a majority in interest of the holders of
Registrable Securities, the Company shall promptly prepare and file with the SEC
such amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary in order to change the plan of
distribution set forth in such Registration Statement.

     3.15  The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including, without limitation, the Securities Act and the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated by the
Commission).

     3.16  The Company shall take all such other actions as any Purchaser or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities.

                                       8
<PAGE>

     3.17  Except for the holders listed in Schedule 3.17 hereto (to the extent
such holders fail or refuse to waive their registration rights), from and after
the date of this Agreement, the Company shall not, and shall not agree to, allow
the holders of any securities of the Company to include any of their securities
in any Registration Statement or any amendment or supplement thereto under
Section 2.1 or 3.2 hereof without the consent of the holders of a majority of
the Registrable Securities hereunder.

     3.18  The Registration Statement shall state that it covers such
indeterminate number of additional shares as may be issuable upon conversion of
the Preferred Stock or exercise of the Warrants to prevent dilution resulting
from stock splits, stock dividends and other similar transactions.

                                  ARTICLE IV
                         OBLIGATIONS OF THE PURCHASERS
                         -----------------------------

     In connection with the registration of the Registrable Securities, each
Purchaser shall have the following obligations:

     4.1   It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Purchaser that such Purchaser shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least three (3)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Purchaser of the information the
Company requires from each such Purchaser.

     4.2   Purchaser, by such Purchaser's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Purchaser has notified the Company in writing
of such Purchaser's election to exclude all of such Purchaser's Registrable
Securities from the Registration Statement.

     4.3   Purchaser whose Registrable Securities are included in a Registration
Statement understands that the Securities Act may require delivery of a
prospectus relating thereto in connection with any sale thereof pursuant to such
Registration Statement, and each such Purchaser shall use its reasonable efforts
to comply with the applicable prospectus delivery requirements of the Securities
Act in connection with any such sale.

     4.4   Purchaser agrees that, upon receipt of written notice from the
Company of the happening of any event of the kind described in Section 3.6, such
Purchaser will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Purchaser's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3.6 and, if so directed by the Company, such
Purchaser shall deliver to the Company (at the expense of the Company) or
destroy (and deliver to the Company a certificate of destruction) all copies in
such Purchaser's possession (other than

                                       9
<PAGE>

a limited number of permanent file copies), of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
Notwithstanding anything to the contrary, the Company shall cause its transfer
agent to deliver unlegended shares of Common Stock to a transferee of a
Purchaser in connection with any sale of Registrable Securities with respect to
which such Purchaser has entered into a contract for sale prior to receipt of
such notice and for which such Purchaser has not yet settled.

     4.5  Without limiting Purchaser's rights under Section 2.1 or 3.2 hereof,
no Purchaser may participate in any underwritten distribution hereunder unless
such Purchaser (a) agrees to sell such Purchaser's Registrable Securities on the
basis provided in any underwriting arrangements in usual and customary form
entered into by the Company, (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements, and (c)
agrees to pay its pro rata share of all underwriting discounts and commissions
and any expenses in excess of those payable by the Company pursuant to Article
V.

                                   ARTICLE V
                           EXPENSES OF REGISTRATION
                           ------------------------

     All expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to Articles
II and III, including, without limitation, all registration, listing and
qualification fees, printers and accounting fees, the fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one
counsel selected by the Purchasers pursuant to Section 2.2, hereof shall be
borne by the Company.

                                  ARTICLE VI
                                INDEMNIFICATION
                                ---------------

     In the event any Registrable Securities are included in a Registration
Statement under this Agreement:

     6.1  To the extent permitted by law, the Company will indemnify, hold
harmless and defend (a) each Purchaser who holds such Registrable Securities,
(b) each underwriter of Registrable Securities and (c) the directors, officers,
partners, members, employees, agents and persons who control any Purchaser
within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), if any, (each,
                                                  ------------
an "Indemnified Person"), against any joint or several losses, claims, damages,
    ------------------
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "Claims") to which any of them may become
                                    ------
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (in any
amendment or supplement, if the Company files any amendment thereof or
supplement thereto with the SEC) or

                                       10
<PAGE>

the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). Subject to the restrictions set forth in Section
               ----------
6.3 with respect to the number of legal counsel, the Company shall reimburse the
Purchasers, each such underwriter and controlling person, and each such other
Indemnified Person, promptly as such expenses are incurred and are due and
payable, for any reasonable legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6.1: (x) shall not apply to an Indemnified
Person with respect to a Claim arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information furnished in writing
to the Company, by such Indemnified Person expressly for use in the Registration
Statement or any such amendment thereof or supplement thereto; (y) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld: and (z) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Person if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented, if such
corrected prospectus was timely made available by the Company pursuant to
Section 3.3 hereof, and the Indemnified person was promptly advised in writing
not to use the incorrect prospectus prior to the use giving rise to a Violation
and such Indemnified Person, notwithstanding such advice, used it. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Purchasers pursuant to Article IX.

     6.2   In connection with any Registration Statement in which a Purchaser is
participating, each such Purchaser, severally and not jointly, agrees to
indemnify, hold harmless and defend, to the same extent and in the same manner
set forth in Section 6.1, the Company, each of its directors, each of its
officers who signs the Registration Statement, its employees, agents and
persons, if any, who control the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, and any other stockholder
selling securities pursuant to the Registration Statement, together with its
directors, officers and members, and any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act (each
an "Indemnified Party"), against any Claim to which any of them may become
    -----------------
subject, under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim arises out of or is based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by such
Purchaser expressly for use in connection with such Registration Statement; and
subject to Section 6.3 such Purchaser will reimburse any legal or other expenses
(promptly as such expenses are incurred and are due and payable) reasonably
incurred by them in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6.2
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Purchaser, which consent
shall not be unreasonably withheld; provided, further, however, that a Purchaser

                                       11
<PAGE>

shall be liable under this Agreement (including this Section 6.2 and Article
VII) for only that amount as does not exceed the net proceeds actually received
by such Purchaser as a result of the sale of Registrable Securities pursuant to
such Registration Statement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Registrable Securities by the
Purchasers pursuant to Article IX. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6.2
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented, and the Indemnified Party failed to utilize
such corrected prospectus.

     6.3   Promptly after receipt by an Indemnified Person or Indemnified Party
under this Article VI of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to made against any indemnifying party under this
Article VI, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that such indemnifying party shall diligently pursue such defense and
that such indemnifying party shall not be entitled to assume such defense and an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
conflicts of interest between such Indemnified Person or Indemnified Party and
any other party represented by such counsel in such proceeding or the actual or
potential defendants in, or targets of, any such action include both the
Indemnified Person or the Indemnified Party and any such Indemnified Person or
Indemnified Party reasonably determines that there may be legal defenses
available to such Indemnified Person or Indemnified Party which are different
from or in addition to those available to such indemnifying party. The
indemnifying party shall pay for only one separate legal counsel for the
Indemnified Persons or the Indemnified Parties, as applicable, and such legal
counsel shall be selected by Purchasers holding a majority-in-interest of the
Registrable Securities included in the Registration Statement to which the Claim
relates (with the approval of the Initial Purchaser if they hold Registrable
Securities included in such Registration Statement), if the Purchasers are
entitled to indemnification hereunder, or by the Company, if the Company is
entitled to indemnification hereunder, as applicable. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Article VI,
except to the extent that the indemnifying party is actually prejudiced in its
ability to defend such action.

                                       12
<PAGE>

                                  ARTICLE VII
                                 CONTRIBUTION
                                 ------------

     To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Article
VI to the fullest extent permitted by law; provided, however, that (i) 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, and (ii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.

                                 ARTICLE VIII
                        REPORTS UNDER THE EXCHANGE ACT
                        ------------------------------

     With a view to making available to the Purchasers the benefits of Rule 144
promulgated under the Securities Act or any other similar rule or regulation of
the SEC that may at any time permit the Purchasers to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to,
                                             --------
so long as such Purchaser beneficially owns (without giving effect to any
limitations on the conversion or exercise thereof) Registrable Securities:

     8.1   File with the SEC in a timely manner and make and keep available all
reports and other documents required of the Company under the Securities Act and
the Exchange Act so long as the Company remains subject to such requirements (it
being understood that nothing herein shall limit the Company's obligations under
Section 4.3 of the Securities Purchase Agreement) and the filing and
availability of such reports and other documents is required for the applicable
provisions of Rule 144; and

     8.2   Furnish to each Purchaser promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested to permit the Purchasers to sell such securities pursuant
to Rule 144 without registration.

                                  ARTICLE IX
                       ASSIGNMENT OF REGISTRATION RIGHTS
                       ---------------------------------

     The rights of the Purchasers hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assigned by each Purchaser to any transferee (i) that is an
affiliate of a Purchaser, or (ii) is a recipient of not less than 50,000 shares
of Registrable Securities (subject to subsequent adjustments for stock splits,
stock dividends, reverse stock splits and the like) if: (a) the Purchaser 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, (b) the Company is, within ten (10) business days after such
transfer or assignment, furnished with written notice of (i) the name and

                                       13
<PAGE>

address of such transferee or assignee, and (ii) the securities with respect to
which such registration rights are being transferred or assigned, (c) following
such transfer or assignment, the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act or applicable
state securities laws, (d) at or before the time the Company receives the
written notice contemplated by clause (b) of this sentence, the transferee or
assignee agrees in writing for the benefit of the Company to be bound by all of
the provisions contained herein, (e) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase Agreement
and (f) such transferee shall be an "accredited investor" as such term is
defined in Rule 501 of the Securities Act.

     In lieu of the foregoing and in connection with a particular transfer,
Purchaser may require the Company to enter into a separate registration
agreement with such transferee providing for rights and obligations of the
Company and such transferee and such transferee shall not be deemed Purchaser
hereunder with respect to such transferred Registrable Securities in such event.

                                   ARTICLE X
                       AMENDMENT OF REGISTRATION RIGHTS
                       --------------------------------

     Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with written consent of the Company and the Initial
Purchasers or Purchasers who hold a two-thirds interest of the outstanding
Registrable Securities. Any amendment or waiver effected in accordance with this
Article X shall be binding upon each Purchaser and the Company. Notwithstanding
the foregoing, no amendment or waiver shall retroactively affect any Purchaser
without its consent or prospectively adversely affect any Purchaser who no
longer owns any Preferred Stock, Warrants or Registrable Securities without its
consent. Neither Article VI nor Article VII hereof may be amended or waived in a
manner adverse to a Purchaser without its consent.

                                  ARTICLE XI

                                  TERMINATION
                                  -----------

     This Agreement shall terminate on such date as Initial Purchasers cease to
own, beneficially of record, any Registrable Securities.

                                  ARTICLE XII
                                 MISCELLANEOUS
                                 -------------

     12.1  A person or entity is deemed to be a holder (or a holder in interest)
of Registrable Securities whenever such person or entity owns of record such
Registrable Securities (or the Preferred Stock or the Warrant which may be
converted into or exercised for Registrable Securities). If the Company receives
conflicting instructions, notices or elections from two or more persons or
entities with respect to the same Registrable Securities, the Company shall act

                                       14
<PAGE>

upon the basis of instructions, notice or election received from the registered
owner of such Registrable Securities (or Preferred Stock or the Warrant, as the
case may be).

     12.2  Any notices herein required or permitted to be given shall be in
writing and may be personally served or delivered by courier or by confirmed
telecopy, and shall be deemed delivered at the time and date of receipt (which
shall include telephone line facsimile transmission). The addresses for such
communications shall be:

           If to the Company:

           SAFLINK CORPORATION
           18650 N.E. 67th Court, Suite 210
           Redmond, WA 98052
           Telecopy: (425) 497-1778
           Attn: Chief Financial Officer

           And if to the Initial Purchaser, at such address set forth for each
           such Initial Purchaser on Schedule I hereto.

           And if to any other Purchaser, at such address as such Purchaser
           shall have provided in writing to the Company,

or at such other address as each such party furnishes by notice given in
accordance with this Section 12.2.

     12.3  Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

     12.4  This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware applicable to contracts made and to be
performed in the State of Delaware. The parties hereto further agree that
service of process upon the parties hereto mailed by first class mail shall be
deemed in every respect effective service of process upon each such party in any
such suit or proceeding. Nothing herein shall affect either party's right to
serve process in any other manner permitted by law. The parties hereto agree
that a final non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such judgment
or in any other lawful manner. If any legal action or other legal proceeding
relating to this Agreement or the enforcement of any provision hereof is brought
by either party, the prevailing party shall be entitled to recover reasonable
attorneys' fees, costs and disbursements to the extent actually incurred (in
addition to any other relief to which the prevailing party may be entitled).

     12.5  Subject to the requirements of Article IX hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto. Notwithstanding anything to the contrary contained
herein, including, without limitation, Article IX, the rights of a Holder
hereunder shall be assignable to and exercisable by a bona fide pledgee of the
Registrable Securities in connection with a Holder's margin or brokerage
accounts.

                                       15
<PAGE>

     12.6   The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.

     12.7   This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto, by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

     12.8   Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

     12.9   The initial number of Registrable Securities included on any
Registration Statement and each increase to the number of Registrable Securities
included thereon shall be allocated pro rata to a Purchaser based on the number
of Registrable Securities held by such Purchaser in relation to all Registrable
Securities at the time of such establishment or increase, as the case may be. In
the event a Purchaser shall sell or otherwise transfer any of such holder's
Registrable Securities and such transferee becomes a Purchaser hereunder, each
transferee shall be allocated a pro rata portion of the number of Registrable
Securities included on a Registration Statement for such transferor. In
addition, a Purchaser who continues to own Registrable Securities shall be
allocated a portion of any shares of Common Stock included on a Registration
Statement and which remain allocated to any person or entity which does not hold
any Registrable Securities, pro rata based on the number of shares of
Registrable Securities then held by such Purchaser in relation to all
outstanding Registrable Securities. Without implication that the contrary would
otherwise be true, for purposes of this paragraph, all Preferred Stock and
Warrants then outstanding shall be assumed converted into Registrable
Securities.

     12.10  If any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement.

                                     * * *

                                       16
<PAGE>

     IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first above written.

THE COMPANY

SAFLINK CORPORATION

By:________________________

   Name:
   Title:

INITIAL PURCHASER:

     _______________________________

     By:____________________________
     Its:___________________________

                                       17
<PAGE>

                                  SCHEDULE 1

                        Schedule of Initial Purchasers
                        ------------------------------

     Name of Initial Purchaser                      Address for Notices
     -------------------------                      -------------------

                                       18
<PAGE>

                                   EXHIBIT 1
                                                                 to Registration
                                                                Rights Agreement
                                    [Date]
[Name and address
of transfer agent]

                     RE:  SAFLINK CORPORATION

Ladies and Gentlemen:

     We are counsel to SAFLINK CORPORATION, a Delaware corporation (the
"Company"), and we understand that [Name of Purchaser] (the "Holder") has
 -------                                                     ------
purchased from the Company Series E Convertible Preferred Stock of the Company
(the "Preferred Stock"), convertible into shares of the Company's common stock,
      ---------------
par value $0.01 per share (the "Common Stock"), and a warrant entitling the
                                ------------
Holder to purchase a certain number of shares of the Company's Common Stock (the
"Warrant"). The Preferred Stock and the Warrant were purchased by the Holder
 -------
pursuant to a Securities Purchase Agreement, dated as of June ___, 2001, by and
between the Company and the Holder (the "Agreement"). Pursuant to a
                                         ---------
Registration Rights Agreement, dated as of June __, 2001, by and between the
Company and the Holder (the "Registration Rights Agreement"), the Company agreed
                             -----------------------------
with the Holder, among other things, to register the Registrable Securities (as
that term is defined in the Registration Rights Agreement) under the Securities
Act of 1933, as amended (the "Securities Act"), upon the terms provided in the
                              --------------
Registration Rights Agreement. In connection with the Company's obligations
under the Registration Rights Agreement, on _____ __, 2001, the Company filed a
Registration Statement on Form S-_____ (File No.  333- __________) (the
"Registration Statement") with the Securities and Exchange Commission (the
 ----------------------
"SEC") relating to the Registrable Securities, which names the Holder as a
 ---
selling stockholder thereunder.

     We have also examined copies of such other documents as we have deemed
necessary or appropriate in connection with the opinions hereinafter set forth.
In our examination, we have assumed the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies and the authenticity of the
originals of such latter documents. Insofar as our opinion relates to, or
depends upon, any matter of fact, we have relied upon statements and
certificates of officers of the Company and of public officials and have not
undertaken to determine the accuracy of such statements or certificates.

     We understand that the Registration Statement was declared effective on
______________ and is currently in effect. To our knowledge, no stop order has
been issued with respect to the Registration Statement and no proceedings for
that purpose have been instituted or are pending before or contemplated by the
SEC. Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.

     As transfer agent, U.S. Stock Transfer Corporation may effect the transfer
of the shares of the Holder sold pursuant to and in the manner described in the
prospectus ("Prospectus") of the Registration Statement. The stock certificates
             ----------
for the Registrable Securities, when reissued

                                      19
<PAGE>

after such sale, need not be legended. We express no opinion as to whether any
requirements for the delivery of any prospectus have been satisfied or whether
the qualification or registration under any state securities laws is necessary.
Further, we express no opinion with respect to the accuracy or completeness of
any information set forth in the Prospectus or any amendment or supplement
thereto.

     We are the members of the Bar of the District of Columbia. We have made
such examination of the federal securities laws as we have deemed relevant for
purposes of this opinion. We express no opinion as to laws of any other
jurisdiction.

     This opinion is furnished to U. S. Stock Transfer Corporation in its
capacity as transfer agent for the Company and may be relied upon by Holder only
for purpose of transferring the Registrable Securities sold pursuant to the
Prospectus. This letter is not to be furnished to, or relied upon by, any other
person or entity whatsoever without our prior written consent.

                                    Very truly yours,

cc: [Name of Purchaser]

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