Document:

FORM OF WARRANT

 Exhibit 4.1 
  

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR SAFLINK CORPORATION SHALL HAVE RECEIVED AN
OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED. 
  
 WARRANT TO PURCHASE 
  
 SHARES OF COMMON STOCK 
  
 OF 
  
 SAFLINK CORPORATION 
  
 Expires February 26, 2009

  

			
	 No.: W-04-     
	  	 Number of Shares:
            

	 Date of Issuance: February 26, 2004
	  	 

  
 FOR VALUE RECEIVED,
subject to the provisions hereinafter set forth, the undersigned, Saflink Corporation, a Delaware corporation (together with its successors and assigns, the “Issuer”), hereby certifies that
                             or its registered assigns is entitled to subscribe for and purchase,
during the Term (as hereinafter defined), up to                             
(            ) shares (subject to adjustment as hereinafter provided) of the duly authorized, validly issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject, however, to the provisions and upon the terms and conditions hereinafter set forth. Capitalized terms used in this Warrant and not otherwise defined herein shall have the respective
meanings specified in Section 9 hereof. 
  
 1. Term. The
term of this Warrant shall commence on February 26, 2004 and shall expire at 5:00 p.m., eastern time, on February 26, 2009 (such period being the “Term”). 
  
 2. Method of Exercise; Payment; Issuance of New Warrant; Transfer and Exchange. 
  
 (a) Time of Exercise. The purchase rights represented by this Warrant
may be exercised in whole or in part at any time during the Term. 
  
 (b) Method of Exercise. The Holder hereof may exercise this Warrant, in whole or in part, by the surrender of this Warrant (with the exercise form attached hereto duly executed) at 

 the principal office of the Issuer, and by the payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of shares of Warrant Stock with respect to which this Warrant is then being exercised, payable at such Holder’s election (i) by certified or official bank check or by
wire transfer to an account designated by the Issuer, (ii) by “cashless exercise” in accordance with the provisions of subsection (c) of this Section 2, but only when a registration statement under the Securities Act providing for the
resale of the Warrant Stock is not then in effect, or (iii) by a combination of the foregoing methods of payment selected by the Holder of this Warrant. 
  
 (c) Cashless Exercise. Notwithstanding any provisions herein to the contrary and commencing one (1) year following the Original Issue Date, if (i)
the Per Share Market Value of one share of Common Stock is greater than the Warrant Price (at the date of calculation as set forth below) and (ii) a registration statement under the Securities Act providing for the resale of the Warrant Stock is not
then in effect, in lieu of exercising this Warrant by payment of cash, the Holder may exercise this Warrant by a cashless exercise and shall receive the number of shares of Common Stock equal to an amount (as determined below) by surrender of this
Warrant at the principal office of the Issuer together with the properly endorsed Notice of Exercise in which event the Issuer shall issue to the Holder a number of shares of Common Stock computed using the following formula: 
  

					
	 	  	X =	  	 Y - (A)(Y)
 B

			
	 Where
	  	 X =
	  	the number of shares of Common Stock to be issued to the Holder.
			
	 	  	 Y =
	  	the number of shares of Common Stock purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being
exercised.
			
	 	  	 A =
	  	the Warrant Price.
			
	 	  	 B =
	  	the Per Share Market Value of one share of Common Stock.

  
 (d) Issuance of
Stock Certificates. In the event of any exercise of the rights represented by this Warrant in accordance with and subject to the terms and conditions hereof, (i) certificates for the shares of Warrant Stock so purchased shall be dated the date
of such exercise and delivered to the Holder hereof within a reasonable time, not exceeding three (3) Trading Days after such exercise or, at the request of the Holder (provided that a registration statement under the Securities Act providing for
the resale of the Warrant Stock is then in effect), issued and delivered to the Depository Trust Company (“DTC”) account on the Holder’s behalf via the Deposit Withdrawal Agent Commission System (“DWAC”) within
a reasonable time, not exceeding three (3) Trading Days after such exercise, and the Holder hereof shall be deemed for all purposes to be the holder of the shares of Warrant Stock so purchased as of the date of such exercise and (ii) unless this
Warrant has expired, a new Warrant representing the number of shares of Warrant Stock, if any, with respect to which this Warrant shall not then have been exercised (less any amount thereof which shall have been canceled in payment or partial
payment of the Warrant Price as hereinabove provided) shall also be issued to the Holder hereof at the Issuer’s expense within such time. 
  

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 (e) Transferability of Warrant. Subject to Section 2(g), this Warrant may be transferred by a
Holder without the consent of the Issuer. If transferred pursuant to this paragraph and subject to the provisions of subsection (g) of this Section 2, this Warrant may be transferred on the books of the Issuer by the Holder hereof in person or by
duly authorized attorney, upon surrender of this Warrant at the principal office of the Issuer, properly endorsed (by the Holder executing an assignment in the form attached hereto) and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. This Warrant is exchangeable at the principal office of the Issuer for Warrants for the purchase of the same aggregate number of shares of Warrant Stock, each new Warrant to represent the right to
purchase such number of shares of Warrant Stock as the Holder hereof shall designate at the time of such exchange. All Warrants issued on transfers or exchanges shall be dated the Original Issue Date and shall be identical with this Warrant except
as to the number of shares of Warrant Stock issuable pursuant hereto. 
  
 (f) Continuing Rights of Holder. The Issuer will, at the time of or at any time after each exercise of this Warrant, upon the request of the Holder hereof, acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be entitled after such exercise in accordance with the terms of this Warrant, provided that if any such Holder shall fail to make any such request, the failure shall not
affect the continuing obligation of the Issuer to afford such rights to such Holder. 
  
 (g) Compliance with Securities Laws. 
  
 (i) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant or the shares of Warrant Stock to be issued upon exercise hereof are being acquired solely for the Holder’s own account and not
as a nominee for any other party, and for investment, and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Warrant Stock to be issued upon exercise hereof except pursuant to an effective registration
statement, or an exemption from registration, under the Securities Act and any applicable state securities laws. 
  
 (ii) Except as provided in paragraph (iii) below, this Warrant and all certificates representing shares of Warrant Stock issued upon
exercise hereof shall be stamped or imprinted with a legend in substantially the following form: 
  
 THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR SAFLINK 
  

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 CORPORATION SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED. 
  
 (iii) The Issuer agrees to reissue this Warrant or certificates representing any of the Warrant Stock, without the legend set forth above
if at such time, prior to making any transfer of any such securities, the Holder shall give written notice to the Issuer describing the manner and terms of such transfer and removal as the Issuer may reasonably request. Such proposed transfer and
removal will not be effected until: (a) either (i) the Issuer has received an opinion of counsel reasonably satisfactory to the Issuer, to the effect that the registration of such securities under the Securities Act is not required in connection
with such proposed transfer, (ii) a registration statement under the Securities Act covering such proposed disposition has been filed by the Issuer with the Securities and Exchange Commission and has become effective under the Securities Act, (iii)
the Issuer has received other evidence reasonably satisfactory to the Issuer that such registration and qualification under the Securities Act and state securities laws are not required, or (iv) the Holder provides the Issuer with reasonable
assurances that such security can be sold pursuant to Rule 144 under the Securities Act; and (b) either (i) the Issuer has received an opinion of counsel reasonably satisfactory to the Issuer, to the effect that registration or qualification under
the securities or “blue sky” laws of any state is not required in connection with such proposed disposition, or (ii) compliance with applicable state securities or “blue sky” laws has been effected or a valid exemption exists
with respect thereto. The Issuer will respond to any such notice from a holder within five (5) business days. In the case of any proposed transfer under this Section 2(f), the Issuer will use reasonable efforts to comply with any such applicable
state securities or “blue sky” laws, but shall in no event be required, (x) to qualify to do business in any state where it is not then qualified, (y) to take any action that would subject it to tax or to the general service of process in
any state where it is not then subject, or (z) to comply with state securities or “blue sky” laws of any state for which registration by coordination is unavailable to the Issuer. The restrictions on transfer contained in this Section 2(f)
shall be in addition to, and not by way of limitation of, any other restrictions on transfer contained in any other section of this Warrant. 
  
 3. Stock Fully Paid; Reservation and Listing of Shares; Covenants. 
  
 (a) Stock Fully Paid. The Issuer represents, warrants, covenants and agrees that all shares of Warrant Stock which
may be issued upon the exercise of this Warrant or otherwise hereunder will, upon issuance, be duly authorized, validly issued, fully paid and non-assessable and free from all taxes, liens and charges created by or through Issuer. The Issuer further
covenants and agrees that during the period within which this Warrant may be exercised, the Issuer will at all times have authorized and reserved for the purpose of the issue upon exercise of this Warrant a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant. 
  

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 (b) Reservation. If any shares of Common Stock required to be reserved for issuance upon exercise
of this Warrant or as otherwise provided hereunder require registration or qualification with any governmental authority under any federal or state law before such shares may be so issued, the Issuer will in good faith use its reasonable best
efforts as expeditiously as possible at its expense to cause such shares to be duly registered or qualified. If the Issuer shall list any shares of Common Stock on any securities exchange or market it will, at its expense, list thereon, maintain and
increase when necessary such listing, of, all shares of Warrant Stock from time to time issued upon exercise of this Warrant or as otherwise provided hereunder (provided that such Warrant Stock has been registered pursuant to a registration
statement under the Securities Act then in effect), and, to the extent permissible under the applicable securities exchange rules, all unissued shares of Warrant Stock which are at any time issuable hereunder, so long as any shares of Common Stock
shall be so listed. The Issuer will also so list on each securities exchange or market, and will maintain such listing of, any other securities which the Holder of this Warrant shall be entitled to receive upon the exercise of this Warrant if at the
time any securities of the same class shall be listed on such securities exchange or market by the Issuer. 
  
 (c) Covenants. The Issuer shall not by any action including, without limitation, amending the Certificate of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder hereof against dilution (to the extent specifically provided herein) or
impairment. Without limiting the generality of the foregoing, the Issuer will (i) not permit the par value, if any, of its Common Stock to exceed the then effective Warrant Price, (ii) not amend or modify any provision of the Certificate of
Incorporation or by-laws of the Issuer in any manner that would adversely affect the rights of the Holders of the Warrants, (iii) take all such action as may be reasonably necessary in order that the Issuer may validly and legally issue fully paid
and nonassessable shares of Common Stock, free and clear of any liens, claims, encumbrances and restrictions (other than as provided herein or under applicable securities laws) upon the exercise of this Warrant, and (iv) use its reasonable best
efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be reasonably necessary to enable the Issuer to perform its obligations under this Warrant. 
  
 (d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security satisfactory to the Issuer or, in the case of
any such mutilation, upon surrender and cancellation of such Warrant, the Issuer will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same number
of shares of Common Stock. 
  

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 4. Adjustment of Warrant Price and Warrant Share Number. The number of shares of Common Stock for
which this Warrant is exercisable, and the price at which such shares may be purchased upon exercise of this Warrant, shall be subject to adjustment from time to time as set forth in this Section 4. The Issuer shall give the Holder notice of any
event described below which requires an adjustment pursuant to this Section 4 in accordance with Section 5. 
  
 (a) Recapitalization, Reorganization, Reclassification, Consolidation, Merger or Sale. 
  
 (i) In case the Issuer after the Original Issue Date shall
do any of the following (each, a “Triggering Event”): (a) consolidate with or merge into any other Person and the Issuer shall not be the continuing or surviving corporation of such consolidation or merger, or (b) permit any other
Person to consolidate with or merge into the Issuer and the Issuer shall be the continuing or surviving Person but, in connection with such consolidation or merger, any Capital Stock of the Issuer shall be changed into or exchanged for Securities of
any other Person or cash or any other property, or (c) transfer all or substantially all of its properties or assets to any other Person, or (d) effect a capital reorganization or reclassification of its Capital Stock, then, and in the case of each
such Triggering Event, proper provision shall be made so that, upon the basis and the terms and in the manner provided in this Warrant, the Holder of this Warrant shall be entitled upon the exercise hereof at any time after the consummation of such
Triggering Event, to the extent this Warrant is not exercised prior to such Triggering Event, to receive at the Warrant Price in effect at the time immediately prior to the consummation of such Triggering Event in lieu of the Common Stock issuable
upon such exercise of this Warrant prior to such Triggering Event, the Securities, cash and property to which such Holder would have been entitled upon the consummation of such Triggering Event if such Holder had exercised the rights represented by
this Warrant immediately prior thereto, subject to adjustments (subsequent to such corporate action) as nearly equivalent as possible to the adjustments provided for elsewhere in this Section 4. 
  
 (ii) Notwithstanding anything contained in this Warrant to
the contrary, a Triggering Event shall not be deemed to have occurred if, prior to the consummation thereof, each Person (other than the Issuer) which may be required to deliver any Securities, cash or property upon the exercise of this Warrant as
provided herein shall assume, by written instrument delivered to, and reasonably satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer under this Warrant (and if the Issuer shall survive the consummation of such Triggering
Event, such assumption shall be in addition to, and shall not release the Issuer from, any continuing obligations of the Issuer under this Warrant) and (B) the obligation to deliver to such Holder such Securities, cash or property as, in accordance
with the foregoing provisions of this subsection (a), such Holder shall be entitled to receive, and such Person shall have similarly delivered to such Holder an opinion of counsel for such Person, which counsel shall be reasonably satisfactory to
such Holder, or in the alternative, a written acknowledgement executed by the President or Chief Financial Officer of the Issuer, stating that this Warrant shall thereafter continue in full force and effect and the terms hereof (including, without
limitation, all of the provisions of this subsection (a)) shall be applicable to the Securities, cash or property which such Person may be required to deliver upon any exercise of this Warrant or the exercise of any rights pursuant hereto.

  

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 (b) Stock Dividends, Subdivisions and Combinations. If at any time the Issuer shall: 

 
 (i) take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend payable in, or other distribution of, shares of Common Stock, 
  
 (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or 
  
 (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, 
  
 then (1) the number of shares of
Common Stock for which this Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which this
Warrant is exercisable immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event, and (2) the Warrant Price then in effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares of Common Stock for which this Warrant is exercisable immediately after such adjustment.

  
 (c) Certain Other Distributions. If at any time the
Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any dividend or other distribution of: 
  
 (i) cash (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the
laws of the jurisdiction of incorporation of the Issuer), 
  
 (ii) any evidences of its indebtedness, any shares of stock of any class or any other securities or property of any nature whatsoever (other than cash, Common Stock Equivalents or Additional Shares of Common Stock),
or 
  
 (iii) any warrants or other rights to
subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property of any nature whatsoever (other than cash, Common Stock Equivalents or Additional Shares of Common Stock), 

 
 then (1) the number of shares of Common Stock for which this Warrant is exercisable shall
be adjusted to equal the product of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such adjustment multiplied by a fraction (A) the numerator of 

  

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which shall be the Per Share Market Value of Common Stock at the date of taking such record and (B) the denominator of which shall be such Per Share Market
Value minus the amount allocable to one share of Common Stock of any such cash so distributable and of the fair value (as determined in good faith by the Board of Directors of the Issuer) of any and all such evidences of indebtedness, shares of
stock, other securities or property or warrants or other subscription or purchase rights so distributable, and (2) the Warrant Price then in effect shall be adjusted to equal (A) the Warrant Price then in effect multiplied by the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares of Common Stock for which this Warrant is exercisable immediately after such adjustment. A reclassification of the Common
Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Issuer to the holders of its
Common Stock of such shares of such other class of stock within the meaning of this Section 4(c) and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of Section 4(b). 
  
 (d) Issuance of Additional Shares of Common Stock. 
  
 (i) In the event the Issuer shall at any time issue any Additional Shares of Common Stock (otherwise than as provided in the
foregoing subsections (b) through (c) of this Section 4), at a price per share less than the Warrant Price then in effect or without consideration, then the Warrant Price upon each such issuance shall be adjusted to that price determined by
multiplying the Warrant Price then in effect by a fraction: 
  
 (A) the numerator of which shall be equal to the sum of (x) the number of shares of Outstanding Common Stock immediately prior to the issuance of such Additional Shares of Common Stock plus (y) the number of
shares of Common Stock which the aggregate consideration for the total number of such Additional Shares of Common Stock so issued would purchase at a price per share equal to the Warrant Price then in effect, and 
  
 (B) the denominator of which shall be equal to the number of
shares of Outstanding Common Stock immediately after the issuance of such Additional Shares of Common Stock. 
  
 (ii) In the event (A) the Issuer, within the first twelve (12) months following the Original Issuance Date, issues shares of its Common Stock or
securities convertible into Common Stock in excess of forty percent (40%) of the number of shares of Common Stock issued and outstanding as of the Original Issuance Date (an “Organic Change”) in a single transaction or a series of
related transactions (otherwise than as provided in the foregoing subsections (b) through (c) of this Section 4), and (B) the Per Share Market Value of the Common Stock is less than the Warrant Price in effect on any date after the occurrence of the
Organic Change, the Warrant Price shall be reduced to the average of the five lowest closing bid prices of the Common Stock for the ten (10) Trading Days immediately following the date of the public announcement of the Organic Change;
provided, that the provisions of this paragraph shall only apply to the first Organic Change effected by the Company. 
  

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 (iii) The provisions of paragraphs (i) and (ii) of Section 4(d) shall not apply to any issuance of
Additional Shares of Common Stock for which an adjustment is provided under Section 4(b) or 4(c). No adjustment of the number of shares of Common Stock for which this Warrant shall be exercisable shall be made under paragraphs (i) or (ii) of Section
4(d) upon the issuance of any Additional Shares of Common Stock which are issued pursuant to the exercise of any Common Stock Equivalents, if any such adjustment shall previously have been made upon the issuance of such Common Stock Equivalents (or
upon the issuance of any warrant or other rights therefor) pursuant to Section 4(f). 
  
 (e) Intentionally Omitted. 
  
 (f) Issuance of Common Stock Equivalents. If at any time the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a distribution of, or shall in any manner (whether directly or by
assumption in a merger in which the Issuer is the surviving corporation) issue or sell, any Common Stock Equivalents, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon such conversion or exchange shall be less than the Warrant Price in effect immediately prior to the time of such issue or sale, then the number of shares of Common Stock for which this Warrant is exercisable and the Warrant
Price then in effect shall be adjusted as provided in Section 4(d) on the basis that the maximum number of Additional Shares of Common Stock necessary to effect the conversion or exchange of all such Common Stock Equivalents shall be deemed to have
been issued and outstanding and the Issuer shall have received all of the consideration payable therefor, if any, as of the date of actual issuance of such Common Stock Equivalents. No further adjustments of the number of shares of Common Stock for
which this Warrant is exercisable and the Warrant Price then in effect shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Common Stock Equivalents. 
  
 (g) Superseding Adjustment. If, at any time after any adjustment of
the number of shares of Common Stock for which this Warrant is exercisable and the Warrant Price then in effect shall have been made pursuant to Section 4(f) as the result of any issuance of warrants, other rights or Common Stock Equivalents, and
(i) such warrants or other rights, or the right of conversion or exchange in such other Common Stock Equivalents, shall expire, and all or a portion of such warrants or other rights, or the right of conversion or exchange with respect to all or a
portion of such other Common Stock Equivalents, as the case may be shall not have been exercised, or (ii) the consideration per share for which shares of Common Stock are issuable pursuant to such Common Stock Equivalents, shall be increased solely
by virtue of provisions therein contained for an automatic increase in such consideration per share upon the occurrence of a specified date or event, then for each outstanding Warrant such previous adjustment shall be rescinded and annulled and the
Additional Shares of Common Stock which were deemed to have been issued by virtue of the computation made in connection with the adjustment so rescinded and annulled shall no longer be deemed to have been issued by virtue of such computation. Upon
the occurrence of an event set forth in this Section 4(g) above, there shall be a recomputation made of the effect of such Common Stock Equivalents on the basis of: (i) treating 

  

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the number of Additional Shares of Common Stock or other property, if any, theretofore actually issued or issuable pursuant to the previous exercise of any
such warrants or other rights or any such right of conversion or exchange, as having been issued on the date or dates of any such exercise and for the consideration actually received and receivable therefor, and (ii) treating any such Common Stock
Equivalents which then remain outstanding as having been granted or issued immediately after the time of such increase of the consideration per share for which shares of Common Stock or other property are issuable under such Common Stock
Equivalents; whereupon a new adjustment of the number of shares of Common Stock for which this Warrant is exercisable and the Warrant Price then in effect shall be made, which new adjustment shall supersede the previous adjustment so rescinded and
annulled. 
  
 (h) Purchase of Common Stock by the Issuer.
If the Issuer at any time while this Warrant is outstanding shall, directly or indirectly through a Subsidiary or otherwise, purchase, redeem or otherwise acquire any shares of Common Stock at a price per share greater than the Per Share Market
Value which price per share is less than the Warrant Price then in effect, then the Warrant Price upon each such purchase, redemption or acquisition shall be adjusted to that price determined by multiplying such Warrant Price by a fraction (i) the
numerator of which shall be the number of shares of Outstanding Common Stock immediately prior to such purchase, redemption or acquisition minus the number of shares of Common Stock which the aggregate consideration for the total number of such
shares of Common Stock so purchased, redeemed or acquired would purchase at the Per Share Market Value; and (ii) the denominator of which shall be the number of shares of Outstanding Common Stock immediately after such purchase, redemption or
acquisition. For the purposes of this subsection (h), the date as of which the Per Share Market Price shall be computed shall be the earlier of (x) the date on which the Issuer shall enter into a firm contract for the purchase, redemption or
acquisition of such Common Stock, or (y) the date of actual purchase, redemption or acquisition of such Common Stock. For the purposes of this subsection (h), a purchase, redemption or acquisition of a Common Stock Equivalent shall be deemed to be a
purchase of the underlying Common Stock, and the computation herein required shall be made on the basis of the full exercise, conversion or exchange of such Common Stock Equivalent on the date as of which such computation is required hereby to be
made, whether or not such Common Stock Equivalent is actually exercisable, convertible or exchangeable on such date. 
  
 (i) Reduction of Warrant Exercise Price by Issuer. If the Issuer at any time while this Warrant is outstanding shall reduce the exercise price of
any warrants that are outstanding on the Original Issue Date (“Existing Warrants”) (or shall reduce the exercise price of any new warrants that were issued after the Original Issue Date (“New Warrants”) in exchange
for the cancellation of any Existing Warrants) pursuant to a special warrant offer or similar proposal (a “Special Warrant Offer”), such that the price per share for which Common Stock is issuable upon exercise of warrants covered
by such Special Warrant Offer is less than the Warrant Price in effect immediately prior to such Special Warrant Offer (a “Price Reduction”), then the Warrant Price then in effect shall be reduced to the exercise price offered
pursuant to the Special Warrant Offer (a “Warrant Reset”). For purposes of this Section 4(i), if the Issuer at any time while this Warrant is outstanding exchanges Existing Warrants for New Warrants and (i) such New Warrants have an
exercise price lower than the both the exercise price of the Existing Warrants and the Warrant Price and (ii) no additional consideration is delivered in exchange for such New 

  

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Warrants, such transaction will be deemed a Special Warrant Offer with a Price Reduction and a Warrant Reset will occur. Notwithstanding anything to the
contrary contained in this Warrant, any adjustment of the Warrant Price made pursuant to this paragraph shall survive the expiration of a Special Warrant Offer, irrespective of whether the Holder participates in such Special Warrant Offer.

  
 (j) Other Provisions applicable to Adjustments under this
Section. The following provisions shall be applicable to the making of adjustments of the number of shares of Common Stock for which this Warrant is exercisable and the Warrant Price then in effect provided for in this Section 4: 
  
 (i) Computation of Consideration. To the extent that any Additional
Shares of Common Stock or any Common Stock Equivalents (or any warrants or other rights therefor) shall be issued for cash consideration, the consideration received by the Issuer therefor shall be the amount of the cash received by the Issuer
therefor, or, if such Additional Shares of Common Stock or Common Stock Equivalents are offered by the Issuer for subscription, the subscription price, or, if such Additional Shares of Common Stock or Common Stock Equivalents are sold to
underwriters or dealers for public offering without a subscription offering, the initial public offering price (in any such case subtracting any amounts paid or receivable for accrued interest or accrued dividends and without taking into account any
compensation, discounts or expenses paid or incurred by the Issuer for and in the underwriting of, or otherwise in connection with, the issuance thereof). To the extent that such issuance shall be for a consideration other than cash, then, except as
herein otherwise expressly provided, the amount of such consideration shall be deemed to be the fair value of such consideration at the time of such issuance as determined in good faith by the Board of Directors of the Issuer. In case any Additional
Shares of Common Stock or any Common Stock Equivalents (or any warrants or other rights therefor) shall be issued in connection with any merger in which the Issuer issues any securities, the amount of consideration therefor shall be deemed to be the
fair value, as determined in good faith by the Board of Directors of the Issuer, of such portion of the assets and business of the nonsurviving corporation as such Board in good faith shall determine to be attributable to such Additional Shares of
Common Stock, Common Stock Equivalents, or any warrants or other rights therefor, as the case may be. The consideration for any Additional Shares of Common Stock issuable pursuant to any warrants or other rights to subscribe for or purchase the same
shall be the consideration received by the Issuer for issuing such warrants or other rights plus the additional consideration payable to the Issuer upon exercise of such warrants or other rights. The consideration for any Additional Shares of Common
Stock issuable pursuant to the terms of any Common Stock Equivalents shall be the consideration received by the Issuer for issuing warrants or other rights to subscribe for or purchase such Common Stock Equivalents, plus the consideration paid or
payable to the Issuer in respect of the subscription for or purchase of such Common Stock Equivalents, plus the additional consideration, if any, payable to the Issuer upon the exercise of the right of conversion or exchange in such Common Stock
Equivalents. In case of the issuance at any time of any Additional Shares of Common Stock or Common Stock Equivalents in payment or satisfaction of any dividends upon any class of stock other than Common Stock, the Issuer shall be deemed to have
received for such Additional Shares of Common Stock or Common Stock Equivalents a consideration equal to the amount of such dividend so paid or satisfied. 
  

 -11- 

 (ii) When Adjustments to Be Made. The adjustments required by this Section 4 shall be made
whenever and as often as any specified event requiring an adjustment shall occur, except that any adjustment of the number of shares of Common Stock for which this Warrant is exercisable that would otherwise be required may be postponed (except in
the case of a subdivision or combination of shares of the Common Stock, as provided for in Section 4(b)) up to, but not beyond the date of exercise if such adjustment either by itself or with other adjustments not previously made adds or subtracts
less than one percent (1%) of the shares of Common Stock for which this Warrant is exercisable immediately prior to the making of such adjustment. Any adjustment representing a change of less than such minimum amount (except as aforesaid) which is
postponed shall be carried forward and made as soon as such adjustment, together with other adjustments required by this Section 4 and not previously made, would result in a minimum adjustment or on the date of exercise. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. 
  
 (iii) Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be taken into account to the
nearest one one-hundredth (1/100th) of a share. 
  
 (iv) When Adjustment Not Required. If the Issuer shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. 
  
 (k) Form of Warrant after Adjustments. The form of this Warrant need
not be changed because of any adjustments in the Warrant Price or the number and kind of Securities purchasable upon the exercise of this Warrant. 
  
 (l) Escrow of Warrant Stock. If after any property becomes distributable pursuant to this Section 4 by reason of the taking of any record of the
holders of Common Stock, but prior to the occurrence of the event for which such record is taken, and the Holder exercises this Warrant, any shares of Common Stock issuable upon exercise by reason of such adjustment shall be deemed the last shares
of Common Stock for which this Warrant is exercised (notwithstanding any other provision to the contrary herein) and such shares or other property shall be held in escrow for the Holder by the Issuer to be issued to the Holder upon and to the extent
that the event actually takes place, upon payment of the current Warrant Price. Notwithstanding any other provision to the contrary herein, if the event for which such record was taken fails to occur or is rescinded, then such escrowed shares shall
be cancelled by the Issuer and escrowed property returned. 
  
 5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant to Section 4 hereof (for purposes of this Section 5, each an 

  

 -12- 

 
“adjustment”), the Issuer shall cause its Chief Financial Officer to prepare and execute a certificate setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Board made any determination hereunder), and the Warrant Price and Warrant Share
Number after giving effect to such adjustment, and shall cause copies of such certificate to be delivered to the Holder of this Warrant promptly after each adjustment. Any dispute between the Issuer and the Holder of this Warrant with respect to the
matters set forth in such certificate may at the option of the Holder of this Warrant be submitted to one of the national accounting firms currently known as the “big four” selected by the Holder, provided that the Issuer shall have
ten (10) days after receipt of notice from such Holder of its selection of such firm to object thereto, in which case such Holder shall select another such firm and the Issuer shall have no such right of objection. The firm selected by the Holder of
this Warrant as provided in the preceding sentence shall be instructed to deliver a written opinion as to such matters to the Issuer and such Holder within thirty (30) days after submission to it of such dispute. Such opinion shall be final and
binding on the parties hereto. 
  
 6. Fractional Shares. No
fractional shares of Warrant Stock will be issued in connection with and exercise hereof, but in lieu of such fractional shares, the Issuer shall make a cash payment therefor equal in amount to the product of the applicable fraction multiplied by
the Per Share Market Value then in effect. 
  
 7. Ownership Cap
and Certain Exercise Restrictions. (a) Notwithstanding anything to the contrary set forth in this Warrant, at no time may a Holder of this Warrant exercise this Warrant if the number of shares of Common Stock to be issued pursuant to such
exercise would exceed, when aggregated with all other shares of Common Stock owned by such Holder at such time, the number of shares of Common Stock which would result in such Holder owning more than 4.999% of all of the Common Stock outstanding at
such time; provided, however, that upon a holder of this Warrant providing the Issuer with sixty-one (61) days notice (pursuant to Section 13 hereof) (the “Waiver Notice”) that such Holder would like to waive this Section
7(a) with regard to any or all shares of Common Stock issuable upon exercise of this Warrant, this Section 7(a) will be of no force or effect with regard to all or a portion of the Warrant referenced in the Waiver Notice; provided,
further, that this provision shall be of no further force or effect (i) during the sixty-one (61) days immediately preceding the expiration of the term of this Warrant or (ii) upon the Holder’s receipt of a Call Notice (as defined in
Section 8 hereof). 
  
 (b) The Holder may not exercise the Warrant
hereunder to the extent such exercise would result in the Holder beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules thereunder) in excess of 9.999% of the then issued and outstanding shares of
Common Stock, including shares issuable upon exercise of the Warrant held by the Holder after application of this Section; provided, however, that upon a holder of this Warrant providing the Issuer with a Waiver Notice that such holder
would like to waive this Section 7(b) with regard to any or all shares of Common Stock issuable upon exercise of this Warrant, this Section 7(b) shall be of no force or effect with regard to those shares of Warrant Stock referenced in the Waiver
Notice; provided, further, that this provision shall be of no further force or effect (i) during the sixty-one (61) days immediately preceding the expiration of the term of this Warrant or (ii) upon the Holder’s receipt of a Call
Notice. 
  

 -13- 

 8. Call. Notwithstanding anything herein to the contrary, commencing thirty-six (36) months and
ten (10) Trading Days following the Original Issue Date, the Issuer, at its option, may call up to one hundred percent (100%) of this Warrant by providing the Holder of this Warrant written notice pursuant to Section 13 (the “Call
Notice”) if the Per Share Market Value of the Common Stock has been equal to or greater than 200% of the Warrant Price (as may be adjusted for any stock splits or combinations of the Common Stock) for a period of ten (10) consecutive
Trading Days immediately prior to the date of delivery of the Call Notice; provided, that (i) a registration statement under the Securities Act providing for the resale of the Warrant Stock and the Common Stock issued pursuant to the
Purchase Agreement is then in effect and has been effective, without lapse or suspension of any kind, for a period of 60 consecutive calendar days, (ii) trading in the Common Stock shall not have been suspended by the Securities and Exchange
Commission or Nasdaq and (iii) the Issuer is in material compliance with the terms and conditions of this Warrant and the other Transaction Documents (as defined in the Purchase Agreement); provided, further, that a registration
statement under the Securities Act providing for the resale of the Warrant Stock and the Common Stock issued pursuant to the Purchase Agreement is in effect from the date of delivery of the Call Notice until the date which is the later of (A) the
date the Holder exercises the Warrant pursuant to the Call Notice and (B) the 10th Trading Day after the Holder
receives the Call Notice (the “Early Termination Date”). The rights and privileges granted pursuant to this Warrant with respect to the shares of Warrant Stock subject to the Call Notice (the “Called Warrant
Shares”) shall expire on the Early Termination Date if this Warrant is not exercised with respect to such Called Warrant Shares prior to such Early Termination Date. In the event this Warrant is not exercised with respect to the Called
Warrant Shares, the Issuer shall remit to the Holder of this Warrant (1) $.10 per Called Warrant Share and (2) a new Warrant representing the number of shares of Warrant Stock, if any, which shall not have been subject to the Call Notice upon the
Holder tendering to the Issuer the applicable Warrant certificate. 
  
 9. Definitions. For the purposes of this Warrant, the following terms have the following meanings: 
  
 “Additional Shares of Common Stock” means all shares of Common Stock (including Common Stock Equivalents) issued or
issuable by the Issuer after the Original Issue Date, and all shares of Other Common, if any, issued by the Issuer after the Original Issue Date, except: (1) shares of Common Stock to be issued to strategic partners and/or in connection with a
strategic merger or acquisition and/or securities to be issued in connection with strategic licensing transactions, the primary purpose of which is not to raise equity capital; (2) shares of Common Stock or the issuance of options to purchase shares
of Common Stock to employees, officers, directors, consultants and vendors in accordance with the Issuer’s equity incentive policies, as they exist on the Original Issue Date; (3) the issuance of securities pursuant to a bona fide firm
underwritten public offering of the Issuer’s securities; (4) the conversion or exercise of convertible or exercisable securities issued or outstanding on or prior to the date hereof; and (5) the issuance of any securities to the placement agent
in connection with the transactions contemplated by the Purchase Agreement. 
  

 -14- 

 “Board” shall mean the Board of Directors of the Issuer. 
  
 “Capital Stock” means and includes (i) any
and all shares, interests, participations or other equivalents of or interests in (however designated) corporate stock, including, without limitation, shares of preferred or preference stock, (ii) all partnership interests (whether general or
limited) in any Person which is a partnership, (iii) all membership interests or limited liability company interests in any limited liability company, and (iv) all equity or ownership interests in any Person of any other type. 
  
 “Certificate of Incorporation” means the
Certificate of Incorporation of the Issuer as in effect on the Original Issue Date, and as hereafter from time to time amended, modified, supplemented or restated in accordance with the terms hereof and thereof and pursuant to applicable law.

  
 “Common Stock” means the
Common Stock, par value $.01 per share, of the Issuer and any other Capital Stock into which such stock may hereafter be changed. 
  
 “Common Stock Equivalent” means any Convertible Security or warrant, option or other right to subscribe for or purchase
any Additional Shares of Common Stock or any Convertible Security. 
  
 “Convertible Securities” means evidences of Indebtedness, shares of Capital Stock or other Securities which are or may be at any time convertible into or exchangeable for Additional Shares of Common
Stock. The term “Convertible Security” means one of the Convertible Securities. 
  
 “Governmental Authority” means any governmental, regulatory or self-regulatory entity, department, body, official,
authority, commission, board, agency or instrumentality, whether federal, state or local, and whether domestic or foreign. 
  
 “Holders” mean the Persons who shall from time to time own any Warrant. The term “Holder” means one of the
Holders. 
  
 “Issuer” means
Saflink Corporation, a Delaware corporation, and its successors. 
  
 “Majority Holders” means at any time the Holders of Warrants exercisable for a majority of the shares of Warrant Stock issuable under the Warrants at the time outstanding. 
  
 “Nasdaq” means the Nasdaq SmallCap Market.

  
 “Original Issue Date” means
February 26, 2004. 
  
 “OTC Bulletin
Board” means the over-the-counter electronic bulletin board. 
  

 -15- 

 “Other Common” means any other Capital Stock of the Issuer of any class
which shall be authorized at any time after the date of this Warrant (other than Common Stock) and which shall have the right to participate in the distribution of earnings and assets of the Issuer without limitation as to amount. 
  
 “Outstanding Common Stock” means, at any
given time, the aggregate amount of outstanding shares of Common Stock, assuming full exercise, conversion or exchange (as applicable) of all options, warrants and other Securities which are convertible into or exercisable or exchangeable for, and
any right to subscribe for, shares of Common Stock that are outstanding at such time. 
  
 “Person” means an individual, corporation, limited liability company, partnership, joint stock company, trust,
unincorporated organization, joint venture, Governmental Authority or other entity of whatever nature. 
  
 “Per Share Market Value” means on any particular date (a) the closing bid price per share of the Common Stock on such
date on Nasdaq or another registered national stock exchange on which the Common Stock is then listed, or if there is no such price on such date, then the closing bid price on such exchange or quotation system on the date nearest preceding such
date, or (b) if the Common Stock is not listed then on Nasdaq or any registered national stock exchange, the closing bid price for a share of Common Stock in the over-the-counter market, as reported by the OTC Bulletin Board or in the National
Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then reported by the OTC Bulletin Board or the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average of the “Pink Sheet” quotes for the relevant conversion period, as determined in good faith by the holder,
or (d) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined by the Board in good faith. 
  
 “Purchase Agreement” means the Common Stock Purchase Agreement dated as of February 26, 2004, among the Issuer and the
investors a party thereto. 
  
 “Purchasers” means the purchasers of Common Stock and Warrants issued by the Issuer pursuant to the Purchase Agreement. 
  
 “Securities” means any debt or equity securities of the Issuer, whether now or hereafter authorized, any instrument
convertible into or exchangeable for Securities or a Security, and any option, warrant or other right to purchase or acquire any Security. “Security” means one of the Securities. 
  
 “Securities Act” means the Securities Act
of 1933, as amended, or any similar federal statute then in effect. 
  

 -16- 

 “Subsidiary” means any corporation at least 50% of whose outstanding
Voting Stock shall at the time be owned directly or indirectly by the Issuer or by one or more of its Subsidiaries, or by the Issuer and one or more of its Subsidiaries. 
  
 “Term” has the meaning specified in Section 1 hereof. 
  
 “Trading Day” means (a) a day on which the
Common Stock is traded on Nasdaq, or (b) if the Common Stock is not listed on Nasdaq, a day on which the Common Stock is traded on any other registered national stock exchange, or (c) if the Common Stock is not traded on any other registered
national stock exchange, a day on which the Common Stock is traded on the OTC Bulletin Board, or (d) if the Common Stock is not traded on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the Common Stock is not listed or quoted as set forth in (a),
(b) and (c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action
to close. 
  
 “Voting Stock”
means, as applied to the Capital Stock of any corporation, Capital Stock of any class or classes (however designated) having ordinary voting power for the election of a majority of the members of the Board of Directors (or other governing body) of
such corporation, other than Capital Stock having such power only by reason of the happening of a contingency. 
  
 “Warrants” means the Warrants issued and sold pursuant to the Purchase Agreement, including, without limitation, this
Warrant, and any other warrants of like tenor issued in substitution or exchange for any thereof pursuant to the provisions of Section 2(c), 2(d) or 2(e) hereof or of any of such other Warrants. 
  
 “Warrant Price” initially means U.S. $3.97,
as such price may be adjusted from time to time as shall result from the adjustments specified in this Warrant, including Section 4 hereto. 
  
 “Warrant Share Number” means at any time the aggregate number of shares of Warrant Stock which may at such time be
purchased upon exercise of this Warrant, after giving effect to all prior adjustments and increases to such number made or required to be made under the terms hereof. 
  
 “Warrant Stock” means Common Stock issuable upon exercise of any Warrant or Warrants or
otherwise issuable pursuant to any Warrant or Warrants. 
  

 -17- 

 10. Other Notices. In case at any time: 
  

			
	 (A)
	  	the Issuer shall make any distributions to the holders of Common Stock; or
		
	 (B)
	  	the Issuer shall authorize the granting to all holders of its Common Stock of rights to subscribe for or purchase any shares of Capital Stock of any class or other rights; or
		
	 (C)
	  	there shall be any reclassification of the Capital Stock of the Issuer; or
		
	 (D)
	  	there shall be any capital reorganization by the Issuer; or
		
	 (E)
	  	there shall be any (i) consolidation or merger involving the Issuer or (ii) sale, transfer or other disposition of all or substantially all of the Issuer’s property, assets or business
(except a merger or other reorganization in which the Issuer shall be the surviving corporation and its shares of Capital Stock shall continue to be outstanding and unchanged and except a consolidation, merger, sale, transfer or other disposition
involving a wholly-owned Subsidiary); or
		
	 (F)
	  	there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Issuer or any partial liquidation of the Issuer or distribution to holders of Common
Stock;

  
 then, in each of such cases, the
Issuer shall give written notice to the Holder of the date on which (i) the books of the Issuer shall close or a record shall be taken for such dividend, distribution or subscription rights or (ii) such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding-up, as the case may be, shall take place. Such notice also shall specify the date as of which the holders of Common Stock of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their certificates for Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, disposition, dissolution,
liquidation or winding-up, as the case may be. Such notice shall be given at least twenty (20) days prior to the action in question and not less than ten (10) days prior to the record date or the date on which the Issuer’s transfer books are
closed in respect thereto. This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Issuer prior to exercise and payment of the Warrant Price in accordance with Section 2 hereof. 
  
 11. Amendment and Waiver. Any term, covenant, agreement or condition
in this Warrant may be amended, or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), by a written instrument or written instruments executed by the Issuer and the Majority
Holders; provided, however, that no such 

  

 -18- 

 
amendment or waiver shall reduce the Warrant Share Number, increase the Warrant Price, shorten the period during which this Warrant may be exercised or
modify any provision of this Section 10 without the consent of the Holder of this Warrant. 
  
 12. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. 
  
 13. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earlier of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number
specified for notice prior to 5:00 p.m., eastern time, on a Trading Day, (ii) the Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified for notice later
than 5:00 p.m., eastern time, on any date and earlier than 11:59 p.m., eastern time, on such date, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service or (iv) actual receipt by the party to
whom such notice is required to be given. The addresses for such communications shall be with respect to the Holder of this Warrant or of Warrant Stock issued pursuant hereto, addressed to such Holder at its last known address or facsimile number
appearing on the books of the Issuer maintained for such purposes, or with respect to the Issuer, addressed to: 
  

	
	 Saflink Corporation

	 777 108th
Avenue NE, Suite 2100

	 Bellevue, WA 98004

	 Attention: President

	 Tel. No.: (425) 278-1100

	 Fax No.: (425)        -         

  
 Copies of notices to the Holder shall
be sent to Jenkens & Gilchrist Parker Chapin LLP, 405 Lexington Avenue, New York, New York 10174, Attention: Christopher S. Auguste, Esq., Facsimile No.: (212) 704-6288. Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the other party hereto. 
  
 14. Warrant Agent. The Issuer may, by written notice to each Holder of this Warrant, appoint an agent having an office in New York, New York for
the purpose of issuing shares of Warrant Stock on the exercise of this Warrant pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to subsection
(d) of Section 3 hereof, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such agent. 
  
 15. Remedies. The Issuer stipulates that the remedies at law of the Holder of this Warrant in the event of any
default or threatened default by the Issuer in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and that, to the 

  

 -19- 

 
fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise. 
  
 16. Successors and Assigns. This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors and assigns of the Issuer, the Holder hereof and (to the extent provided herein) the Holders of
Warrant Stock issued pursuant hereto, and shall be enforceable by any such Holder or Holder of Warrant Stock. 
  
 17. Modification and Severability. If, in any action before any court or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be deemed modified to the extent necessary to make it enforceable by such court or agency. If any such provision is not enforceable as set forth in the preceding sentence, the
unenforceability of such provision shall not affect the other provisions of this Warrant, but this Warrant shall be construed as if such unenforceable provision had never been contained herein. 
  
 18. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. 
  

 -20- 

 IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and year first above written.

  

			
	 SAFLINK CORPORATION

		
	 By:
	 	  

	 Name:
	 	 
	 Title:
	 	 

  
  

 -21- 

 EXERCISE FORM 
  
 SAFLINK CORPORATION 
  
 The undersigned
                            , pursuant to the provisions of the within Warrant, hereby elects to
purchase              shares of Common Stock of Saflink Corporation covered by the within Warrant. 
  

					
	 Dated:
                    
	 	 Signature
	  	  

			
	 	 	 Address
	  	  

	 	 	 	  	  

	 	 	 	  	 

  
 ASSIGNMENT 

 
 FOR VALUE RECEIVED,
                             hereby sells, assigns and transfers unto
                             the within Warrant and all rights evidenced thereby and does irrevocably
constitute and appoint                 , attorney, to transfer the said Warrant on the books of the within named corporation. 
  

					
			
	 Dated:
                    
	 	 Signature
	  	  

			
	 	 	 Address
	  	  

	 	 	 	  	  

	 	 	 	  	 

  
 PARTIAL ASSIGNMENT

  
 FOR VALUE RECEIVED,
                             hereby sells, assigns and transfers unto
             the right to purchase              shares of Warrant Stock evidenced by the within Warrant together
with all rights therein, and does irrevocably constitute and appoint                             ,
attorney, to transfer that part of the said Warrant on the books of the within named corporation. 
  

					
	 Dated:
                    
	 	 Signature
	  	  

			
	 	 	 Address
	  	  

	 	 	 	  	  

	 	 	 	  	 

 FOR USE BY THE ISSUER ONLY: 
  
 This Warrant No. W-         canceled (or transferred or exchanged) this
     day of                     ,             ,
shares of Common Stock issued therefor in the name of                     , Warrant No.
W-         issued for          shares of Common Stock in the name of
                        . 
  

 -22-COMMON STOCK PURCHASE AGREEMENT

 Exhibit 10.1 
  
 COMMON STOCK PURCHASE 
  
 AGREEMENT 
  
 Dated as of February 26, 2004 
  
 by and among 
  
 SAFLINK
CORPORATION 
  
 and 
  
 THE PURCHASERS LISTED ON EXHIBIT A 

 TABLE OF CONTENTS 
  

					
	 	  	 	  	Page

	 COMMON STOCK PURCHASE AGREEMENT
	  	1
		
	 ARTICLE I
	  	 
		
	 Purchase and Sale of Common Stock and Warrants
	  	1
	 Section 1.1
	  	 Purchase and Sale of Common Stock and Warrants.
	  	1
	 Section 1.2
	  	 Purchase Price and Closing
	  	1
		
	 ARTICLE II
	  	 
		
	 Representations and Warranties
	  	2
	 Section 2.1
	  	 Representations and Warranties of the Company
	  	2
	 Section 2.2
	  	 Representations and Warranties of the Purchasers
	  	12
		
	 ARTICLE III
	  	 
		
	 Covenants
	  	15
	 Section 3.1
	  	 Securities Compliance
	  	15
	 Section 3.2
	  	 Registration and Listing
	  	15
	 Section 3.3
	  	 Inspection Rights
	  	16
	 Section 3.4
	  	 Compliance with Laws
	  	16
	 Section 3.5
	  	 Keeping of Records and Books of Account
	  	16
	 Section 3.6
	  	 Reporting Requirements
	  	16
	 Section 3.7
	  	 Other Agreements
	  	16
	 Section 3.8
	  	 Subsequent Financings; Right of First Refusal
	  	16
	 Section 3.9
	  	 Use of Proceeds
	  	17
	 Section 3.10
	  	 Reporting Status; Eligibility to Use Form S-3
	  	17
	 Section 3.11
	  	 Disclosure of Transaction
	  	18
	 Section 3.12
	  	 Disclosure of Material Information
	  	18
	 Section 3.13
	  	 Pledge of Securities
	  	18
		
	 ARTICLE IV
	  	 
		
	 Conditions
	  	19
	 Section 4.1
	  	 Conditions Precedent to the Obligation of the Company to Close and to Sell the Securities
	  	19
	 Section 4.2
	  	 Conditions Precedent to the Obligation of the Purchasers to Close and to Purchase the Securities
	  	19
		
	 ARTICLE V
	  	 
		
	 Certificate Legend
	  	21
	 Section 5.1
	  	 Legend
	  	21

 TABLE OF CONTENTS 
 (continued) 
  

					
	 	  	Page

	 ARTICLE VI
	  	 
			
	 Indemnification
	  	 	  	22
	 Section 6.1
	  	 General Indemnity
	  	22
	 Section 6.2
	  	 Indemnification Procedure
	  	22
		
	 ARTICLE VII
	  	 
		
	 Miscellaneous
	  	23
	 Section 7.1
	  	 Fees and Expenses
	  	23
	 Section 7.2
	  	 Specific Performance; Consent to Jurisdiction; Venue.
	  	24
	 Section 7.3
	  	 Entire Agreement; Amendment
	  	24
	 Section 7.4
	  	 Notices
	  	24
	 Section 7.5
	  	 Waivers
	  	25
	 Section 7.6
	  	 Headings
	  	25
	 Section 7.7
	  	 Successors and Assigns
	  	25
	 Section 7.8
	  	 No Third Party Beneficiaries
	  	26
	 Section 7.9
	  	 Governing Law
	  	26
	 Section 7.10
	  	 Survival
	  	26
	 Section 7.11
	  	 Counterparts
	  	26
	 Section 7.12
	  	 Publicity
	  	26
	 Section 7.13
	  	 Severability
	  	26
	 Section 7.14
	  	 Further Assurances
	  	26
		
	 ACCREDITED INVESTOR CERTIFICATION
	  	iv

 COMMON STOCK PURCHASE AGREEMENT 
  
 This COMMON STOCK PURCHASE AGREEMENT this (“Agreement”), dated as of February 26, 2004 by and between
Saflink Corporation, a Delaware corporation (the “Company”), and the purchasers listed on Exhibit A hereto (each a “Purchaser” and collectively, the “Purchasers”), for the purchase and sale
of shares of the Company’s common stock, par value $.01 per share (the “Common Stock”) by the Purchasers. 
  
 The parties hereto agree as follows: 
  
 ARTICLE I 
  
 Purchase and Sale of Common Stock and Warrants 
  
 Section 1.1 Purchase and Sale of Common Stock and Warrants. 
  
 (a) Upon the following terms and conditions, the Company shall issue and sell to the Purchasers, and the Purchasers shall
purchase from the Company, an aggregate of up to 3,080,000 shares of Common Stock (the “Shares”) at a price per share of $3.00 (the “Per Share Purchase Price”) for an aggregate purchase price of up to $9,240,000
(the “Purchase Price”). The Company and the Purchasers are executing and delivering this Agreement in accordance with and in reliance upon the exemption from securities registration afforded by Section 4(2) of the U.S. Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “Securities Act”), including Regulation D (“Regulation D”), and/or upon such other exemption from the registration requirements of
the Securities Act as may be available with respect to any or all of the investments to be made hereunder. 
  
 (b) Upon the following terms and conditions, the Purchasers shall be issued Warrants, in substantially the form attached hereto as Exhibit B (the
“Warrants”), to purchase the number of shares of Common Stock set forth opposite such Purchaser’s name on Exhibit A hereto. The Warrants shall have an exercise price equal to $3.97 per share and shall be exercisable
immediately upon issuance. Any shares of Common Stock issuable upon exercise of the Warrants (and such shares when issued) are herein referred to as the “Warrant Shares”. The Shares, the Warrants and the Warrant Shares are sometimes
collectively referred to herein as the “Securities”. 
  
 Section 1.2 Purchase Price and Closing. Subject to the terms and conditions hereof, the Company agrees to issue and sell to the Purchasers and, in consideration of and in express reliance upon the representations, warranties,
covenants, terms and conditions of this Agreement, the Purchasers, severally but not jointly, agree to purchase the number of Shares and Warrants, in each case, set forth opposite their respective names on Exhibit A. The closing of the
purchase and sale of the Shares and Warrants to be acquired by the Purchasers from the Company under this Agreement shall take place at the offices of Jenkens & Gilchrist Parker Chapin LLP, The Chrysler Building, 405 Lexington Avenue, New York,
New York 10174 (the “Closing”) at 10:00 a.m., New York time (i) on or before February 27, 2004, provided, that all of 

  

 1 

 
the conditions set forth in Article IV hereof and applicable to the Closing shall have been fulfilled or waived in accordance herewith, or (ii) at such other
time and place or on such date as the Purchasers and the Company may agree upon (the “Closing Date”). Subject to the terms and conditions of this Agreement, at the Closing the Company shall deliver or cause to be delivered to each
Purchaser (i) a certificate registered in the name of such Purchaser representing the number of Shares that such Purchaser is purchasing pursuant to the terms hereof and (ii) a Warrant to purchase such number of shares of Common Stock as is set
forth opposite the name of such Purchaser on Exhibit A. At the Closing, each Purchaser shall deliver its Purchase Price by wire transfer to an account designated by the Company. 
  
 ARTICLE II 
  
 Representations and Warranties 
  
 Section 2.1 Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchasers as follows, as of the date
hereof and the Closing Date, except as set forth on the Schedule of Exceptions attached hereto with each numbered Schedule corresponding to the section number herein: 
  
 (a) Organization, Good Standing and Power. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. The Company does not have any Subsidiaries (as
defined in Section 2.1(g)) or own securities of any kind in any other entity except as set forth on Schedule 2.1(g) hereto. The Company and each such Subsidiary (as defined in Section 2.1(g)) is qualified to do business as a foreign
corporation and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary except for any jurisdiction(s) (alone or in the aggregate) in which the failure to be
so qualified will not have a Material Adverse Effect. For the purposes of this Agreement, “Material Adverse Effect” means any effect on the business, operations, properties, prospects or financial condition of the Company that is
material and adverse to the Company and its Subsidiaries, taken as a whole, and any condition, circumstance or situation that would prohibit the Company from entering into and performing any of its obligations hereunder and under the other
Transaction Documents (as defined below). 
  
 (b)
Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and perform this Agreement, the Warrants and that certain Registration Rights Agreement by and among the Company and the Purchasers, dated
as of the date hereof, substantially in the form of Exhibit C attached hereto (the “Registration Rights Agreement” and, together with this Agreement and the Warrants, the “Transaction Documents”) and to issue
and sell the Securities in accordance with the terms hereof. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly and validly
authorized by all necessary corporate action, and, except as set forth on Schedule 2.1(b), no further consent or authorization of the Company, its Board of Directors or stockholders is required. When executed and delivered by the Company,
each of the Transaction Documents shall constitute a valid and 

  

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binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable
bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application.

  
 (c) Capitalization. The authorized capital stock of the
Company as of the date of this Agreement consists of 100,000,000 shares of Common Stock, of which 28,186,151 were issued and outstanding as of January 22, 2004, and 1,000,000 shares of preferred stock, of which 23,937 were issued and outstanding as
of January 22, 2004. All of the outstanding shares of Common Stock and any other outstanding security of the Company have been duly and validly authorized. Except as set forth in this Agreement and as set forth on Schedule 2.1(c) hereto, no
shares of Common Stock or any other security of the Company are entitled to preemptive rights or registration rights and there are no outstanding options, warrants, scrip, rights to subscribe to, call or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital stock of the Company. Furthermore, except as set forth in this Agreement and as set forth on Schedule 2.1(c) hereto, there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to issue additional shares of the capital stock of the Company or options, securities or rights convertible into shares of capital stock of the Company. Except as set forth
on Schedule 2.1(c), the Company is not a party to, and it has no knowledge of, any agreement or understanding restricting the voting or transfer of any shares of the capital stock of the Company. 
  
 (d) Issuance of Securities. The Shares and the Warrants to be issued
at the Closing have been duly authorized by all necessary corporate action and, when paid for and issued in accordance with the terms hereof and the Warrants, respectively, the Shares and the Warrant Shares will be validly issued, fully paid and
nonassessable and free and clear of all liens, encumbrances and rights of refusal of any kind (other than restrictions on transfer under applicable securities laws or other such restrictions imposed under the Transaction Documents) and the holders
shall be entitled to all rights accorded to a holder of Common Stock. 
  
 (e) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby do not and will not (i) violate any
provision of the Company’s Certificate of Incorporation (the “Certificate”) or Bylaws (the “Bylaws”), each as amended to date, or any Subsidiary’s comparable charter documents, (ii) 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, mortgage, deed of trust, indenture,
note, bond, license, lease agreement, instrument or obligation to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries’ respective properties or assets are bound, or (iii) result in a
violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including 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 are bound or affected, except, in all cases, other than violations pursuant to clauses (i) or (iii) (with respect to federal and state securities laws) above, except, for such conflicts, defaults,
terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a 

  

 3 

 
Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted in violation of any laws, ordinances or regulations of any
governmental entity, except for possible violations, which singularly or in the aggregate do not and will not have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is required under federal, state, foreign or local law,
rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under the Transaction Documents or
issue and sell the Securities in accordance with the terms hereof (other than any filings, consents and approvals which may be required to be made by the Company under applicable state and federal securities laws, rules or regulations, the Nasdaq
SmallCap Market prior to or subsequent to the Closing, or any registration provisions provided in the Registration Rights Agreement). 
  
 (f) Commission Documents, Financial Statements. The Common Stock of the Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and, except as disclosed on Schedule 2.1(f) hereto, during the two year period preceding the Closing Date, the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the Securities and Exchange Commission (the “Commission”) pursuant to the reporting requirements of the Exchange Act (all of the foregoing including filings incorporated
by reference therein being referred to herein as the “Commission Documents”). At the times of their respective filing, the Form 10-Q for the fiscal quarter ended September 30, 2003 (the “Form 10-Q”) and the Form
10-K for the fiscal year ended December 31, 2002 (the “Form 10-K”) complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder and other federal,
state and local laws, rules and regulations applicable to such documents, and the Form 10-Q and Form 10-K did not contain any untrue statement of a material fact or omit 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. As of their respective dates, the financial statements of the Company included in the Commission Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and regulations of the Commission or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally
accepted accounting principles (“GAAP”) applied on a consistent basis 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 may not include footnotes or may be condensed or summary statements), and fairly present in all material respects the financial position of the Company and its Subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). 
  
 (g) Subsidiaries. Schedule 2.1(g) hereto sets forth each Subsidiary of the Company, showing the jurisdiction of its incorporation or
organization and showing the percentage of each person’s ownership of the outstanding stock or other interests of such Subsidiary. For the purposes of this Agreement, “Subsidiary” shall mean any corporation or other entity of
which at least a majority of the securities or other ownership interest having ordinary voting power (absolutely or contingently) for the election of directors or other persons performing similar functions are at the time owned directly or
indirectly by the Company and/or 

  

 4 

 
any of its other Subsidiaries. All of the outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued, and are fully
paid and nonassessable. There are no outstanding preemptive, conversion or other rights, options, warrants or agreements granted or issued by or binding upon any Subsidiary for the purchase or acquisition of any shares of capital stock of any
Subsidiary or any other securities convertible into, exchangeable for or evidencing the rights to subscribe for any shares of such capital stock. Neither the Company nor any Subsidiary is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of the capital stock of any Subsidiary or any convertible securities, rights, warrants or options of the type described in the preceding sentence except as set forth on Schedule 2.1(g)
hereto. Neither the Company nor any Subsidiary is party to, nor has any knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of any Subsidiary. 
  
 (h) No Material Adverse Change. Since September 30, 2003, the Company
has not experienced or suffered any Material Adverse Effect, except as disclosed on Schedule 2.1(h) hereto. 
  
 (i) No Undisclosed Liabilities. Except as disclosed on Schedule 2.1(i) hereto, since September 30, 2003, neither the Company nor any of its
Subsidiaries has incurred any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) other than those incurred in the ordinary course of the Company’s or
its Subsidiaries respective businesses and which, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect. 
  
 (j) No Undisclosed Events or Circumstances. Since September 30, 2003, except as disclosed on Schedule 2.1(j) hereto, no event or
circumstance has occurred or exists with respect to the Company or its Subsidiaries or their respective businesses, properties, prospects, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure
or announcement by the Company but which has not been so publicly announced or disclosed. 
  
 (k) Indebtedness. The Commission Documents or Schedule 2.1(k) hereto sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed money or amounts owed in excess of $300,000 (other than trade accounts payable incurred in the
ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others in excess of $100,000, whether or not the same are or should be reflected in the Company’s balance sheet (or
the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $25,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness. 
  
 (l) Title to Assets. Each of the Company and the Subsidiaries has good and marketable title to all of its real and personal property reflected in
the Commission Documents, free and clear of any mortgages, pledges, charges, liens, security interests or other encumbrances, 

  

 5 

 
except for those indicated on Schedule 2.1(l) hereto or such that, individually or in the aggregate, do not cause a Material Adverse Effect. All said
leases of the Company and each of its Subsidiaries are valid and subsisting and in full force and effect. 
  
 (m) Actions Pending. There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding
pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary which questions the validity of this Agreement or any of the other Transaction Documents or any of the transactions contemplated hereby or thereby or any
action taken or to be taken pursuant hereto or thereto. Except as set forth on Schedule 2.1(m) hereto, there is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the
knowledge of the Company, threatened, against or involving the Company, any Subsidiary or any of their respective properties or assets, which individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. There are
no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company or any Subsidiary or any officers or directors of the Company or Subsidiary in their capacities as such,
which individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 
  
 (n) Compliance with Law. The business of the Company and the Subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and ordinances, except as set forth in the Commission Documents or on Schedule 2.1(n) hereto or such that, individually or in the aggregate, the noncompliance therewith
could not reasonably be expected to have a Material Adverse Effect. The Company and each of its Subsidiaries have all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct
of its business as now being conducted by it unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect. 
  
 (o) Taxes.
Except as set forth on Schedule 2.1(o) hereto, the Company and each of the Subsidiaries has accurately prepared and filed all federal, state and other tax returns required by law to be filed by it, has paid or made provisions for the payment
of all taxes shown to be due and all additional assessments, and adequate provisions have been and are reflected in the financial statements of the Company and the Subsidiaries for all current taxes and other charges to which the Company or any
Subsidiary is subject and which are not currently due and payable. Except as disclosed on Schedule 2.1(o) hereto, none of the federal income tax returns of the Company or any Subsidiary have been audited by the Internal Revenue Service. The
Company has no knowledge of any additional assessments, adjustments or contingent tax liability (whether federal or state) of any nature whatsoever, whether pending or threatened against the Company or any Subsidiary for any period, nor of any basis
for any such assessment, adjustment or contingency. 
  
 (p)
Certain Fees. Except as set forth on Schedule 2.1(p) hereto, the Company has not employed any broker or finder or incurred any liability for any brokerage or investment banking fees, commissions, finders’ structuring fees,
financial advisory fees or other similar fees in connection with the Transaction Documents. 
  

 6 

 (q) Disclosure. To the best of the Company’s knowledge, neither this Agreement or the
Schedules hereto nor any other documents, certificates or instruments furnished to the Purchasers by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by this Agreement contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading. 
  
 (r) Operation of Business. Except as set forth on Schedule
2.1(r) hereto, the Company and each of the Subsidiaries owns or possesses sufficient legal rights to use all patents, trademarks, domain names (whether or not registered) and any patentable improvements or copyrightable derivative works thereof,
websites and intellectual property rights relating thereto, service marks, trade names, copyrights, licenses and authorizations currently used in the Company’s operation of its business, without any known infringement of the rights of others.

  
 (s) Environmental Compliance. Except as disclosed on
Schedule 2.1(s) hereto, the Company and each of its Subsidiaries have obtained all material approvals, authorization, certificates, consents, licenses, orders and permits or other similar authorizations of all governmental authorities, or
from any other person, that are required under any Environmental Laws. “Environmental Laws” shall mean all applicable laws relating to the protection of the environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating emissions, discharges, releases or threatened releases of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water, groundwater or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, material or wastes, whether solid, liquid or gaseous in nature. Except as set forth on Schedule 2.1(s) hereto, the Company has all necessary governmental approvals required under all
Environmental Laws and used in its business or in the business of any of its Subsidiaries, except for such instances as would not individually or in the aggregate have a Material Adverse Effect. The Company and each of its Subsidiaries are also in
compliance with all other limitations, restrictions, conditions, standards, requirements, schedules and timetables required or imposed under all Environmental Laws. Except for such instances as would not individually or in the aggregate have a
Material Adverse Effect, there are no past or present events, conditions, circumstances, incidents, actions or omissions relating to or in any way affecting the Company or its Subsidiaries that violate or would be reasonably likely to violate any
Environmental Law after the Closing or that would be reasonably likely to give rise to any environmental liability, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing, distribution, use, treatment, storage (including, without limitation, underground storage tanks), disposal, transport or handling, or the emission, discharge, release or
threatened release of any hazardous substance. “Environmental Liabilities” means all liabilities of a person (whether such liabilities are owed by such person to governmental authorities, third parties or otherwise) whether currently in
existence or arising hereafter which arise under or relate to any Environmental Law. 
  

 7 

 (t) Books and Records; Internal Accounting Controls. The records and documents of the Company and
its Subsidiaries accurately reflect in all material respects the information relating to the business of the Company and the Subsidiaries, the location and collection of their assets, and the nature of all transactions giving rise to the obligations
or accounts receivable of the Company or any Subsidiary. The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance
that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate actions are taken with respect to any differences. 
  
 (u) Material Agreements. Except for the Transaction Documents (with respect to clause (i) only), as disclosed in the Commission Documents or as set forth on Schedule 2.1(u) hereto, or as would not be
reasonably likely to have a Material Adverse Effect, (i) the Company and each of its Subsidiaries have performed all obligations required to be performed by them to date under any written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, filed or required to be filed with the Commission (the “Material Agreements”), (ii) neither the Company nor any of its Subsidiaries has received any notice of default under any Material Agreement
and, (iii) to the best of the Company’s knowledge, neither the Company nor any of its Subsidiaries is in default under any Material Agreement now in effect. 
  
 (v) Transactions with Affiliates. Except as set forth on Schedule 2.1(v) hereto or in the Commission Documents
(or the definitive proxy statement described below), there are no loans, leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions between (a) the Company, any Subsidiary or any of their
respective customers or suppliers on the one hand, and (b) on the other hand, any officer, employee, consultant or director of the Company, or any of its Subsidiaries, or any person owning any capital stock of the Company or any Subsidiary or any
member of the immediate family of such officer, employee, consultant, director or stockholder or any corporation or other entity controlled by such officer, employee, consultant, director or stockholder, or a member of the immediate family of such
officer, employee, consultant, director or stockholder which, in each case, is required to be disclosed in the Commission Documents or in the Company’s most recently filed definitive proxy statement on Schedule 14A, that is not so disclosed in
the Commission Documents or in such proxy statement. 
  
 (w)
Securities Act of 1933. Based in material part upon the representations herein of the Purchasers, the Company has complied and will comply with all applicable federal and state securities laws in connection with the offer, issuance and sale
of the Securities hereunder. Neither the Company nor anyone acting on its behalf, directly or indirectly, has or will sell, offer to sell or solicit offers to buy any of the Securities or similar securities to, or solicit offers with respect thereto
from, or enter into any negotiations relating thereto with, any person, or has taken or will take any action so as to bring the issuance and sale of any of the Securities under the registration provisions of the Securities Act and applicable state
securities 

  

 8 

 
laws, and neither the Company nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of any of the Securities. 
  
 (x) Governmental Approvals. Except as set forth on Schedule 2.1(x) hereto, and except for the filing of any notice prior or subsequent to
the Closing that may be required under applicable state and/or federal securities laws (which if required, shall be filed on a timely basis), no authorization, consent, approval, license, exemption of, filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is or will be necessary for, or in connection with, the execution or delivery of the Securities, or for the performance by the Company of its
obligations under the Transaction Documents. 
  
 (y)
Employees. Neither the Company nor any Subsidiary has any collective bargaining arrangements or agreements covering any of its employees, except as set forth on Schedule 2.1(y) hereto. Except as set forth on Schedule 2.1(y)
hereto, neither the Company nor any Subsidiary has any employment contract, agreement regarding proprietary information, non-competition agreement, non-solicitation agreement, confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be employed or engaged by the Company or such Subsidiary required to be disclosed in the Commission Documents that is not so disclosed. Since September 30, 2003, no officer,
consultant or key employee of the Company or any Subsidiary whose termination, either individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect, has terminated or, to the knowledge of the Company, has any present
intention of terminating his or her employment or engagement with the Company or any Subsidiary. 
  
 (z) Absence of Certain Developments. Except as provided on Schedule 2.1(z) hereto or as contemplated under this Agreement, since September
30, 2003, neither the Company nor any Subsidiary has: 
  
 (i)
issued any stock, bonds or other corporate securities or any right, options or warrants with respect thereto; 
  
 (ii) borrowed any amount in excess of $300,000 or incurred or become subject to any other liabilities in excess of $100,000 (absolute or contingent)
except current liabilities incurred in the ordinary course of business which are comparable in nature and amount to the current liabilities incurred in the ordinary course of business during the comparable portion of its prior fiscal year, as
adjusted to reflect the current nature and volume of the business of the Company and its Subsidiaries; 
  
 (iii) discharged or satisfied any lien or encumbrance in excess of $250,000 or paid any obligation or liability (absolute or contingent) in excess of
$250,000, other than current liabilities paid in the ordinary course of business; 
  
 (iv) declared or made any payment or distribution of cash or other property to stockholders with respect to its stock, or purchased or redeemed, or made any agreements so to purchase or redeem, any shares of its
capital stock, in each case in excess of $50,000 individually or $100,000 in the aggregate; 
  

 9 

 (v) sold, assigned or transferred any other tangible assets, or canceled any debts or claims, in each
case in excess of $250,000, except in the ordinary course of business; 
  
 (vi) sold, assigned or transferred any patent rights, trademarks, trade names, copyrights, trade secrets or other intangible assets or intellectual property rights in excess of $250,000, or disclosed any proprietary confidential information
to any person except to customers in the ordinary course of business or to the Purchasers or their representatives; 
  
 (vii) suffered any material losses or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any
material amount of prospective business; 
  
 (viii) made any
changes in employee compensation except in the ordinary course of business and consistent with past practices; 
  
 (ix) made capital expenditures or commitments therefor that aggregate in excess of $500,000; 
  
 (x) entered into any material transaction, whether or not in the ordinary
course of business; 
  
 (xi) made charitable contributions or
pledges in excess of $25,000; 
  
 (xii) suffered any material
damage, destruction or casualty loss, whether or not covered by insurance; 
  
 (xiii) experienced any material problems with labor or management in connection with the terms and conditions of their employment; or 
  
 (xiv) entered into an agreement, written or otherwise, to take any of the foregoing actions. 
  
 (aa) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a “holding company” or a “public utility company” as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. The Company is not, and as a result of and immediately upon
the Closing will not be, an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended. 
  
 (bb) ERISA. No liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Plan by the Company or any of its Subsidiaries which is or would be materially adverse to the Company and its Subsidiaries. The execution and delivery of 

  

 10 

 
this Agreement and the issuance and sale of the Shares and the Warrants will not involve any transaction which is subject to the prohibitions of Section 406
of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended, provided that, if any of the Purchasers, or any person or entity that owns a beneficial interest in any of the
Purchasers, is an “employee pension benefit plan” (within the meaning of Section 3(2) of ERISA) with respect to which the Company is a “party in interest” (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this Section 2.1(cc), the term “Plan” shall mean an “employee pension benefit plan” (as defined in Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or any Subsidiary or by any trade or business, whether or not incorporated, which, together with the Company or any Subsidiary, is under common control, as described in
Section 414(b) or (c) of the Code. 
  
 (cc) Delisting
Notification. The Company has not received notice (written or oral) from the Nasdaq SmallCap Market to the effect that the Company is not in compliance with the listing or maintenance requirements of such market. 
  
 (dd) Independent Nature of Purchasers. The Company acknowledges that
the obligations of each Purchaser under the Transaction Documents are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser
under the Transaction Documents. The Company acknowledges that for reasons of administrative convenience only, the Transaction Documents have been prepared by counsel for one of the Purchasers. The Company acknowledges that all Purchasers have been
provided with the same terms and Transaction Documents for the purpose of closing the transaction with multiple Purchasers and not because it was required or requested to do so by the Purchasers. 
  
 (ee) No Integrated Offering. To the knowledge of the Company, 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 cause the offering
of the Securities pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the Securities Act which would prevent the Company from selling the Securities pursuant to Regulation D and Rule 506 thereof under the
Securities Act, or any applicable exchange-related stockholder approval provisions, nor will the Company or any of its affiliates or subsidiaries take any action or steps that would cause the offering of the Securities to be integrated with other
offerings. The Company does not have any registration statement pending before the Commission or currently under the Commission’s review. 
  
 (ff) Sarbanes-Oxley Act. The Company is in substantial compliance with the applicable provisions of the Sarbanes-Oxley Act of 2002 (the
“Sarbanes-Oxley Act”), and the rules and regulations promulgated thereunder, that are effective. 
  
 (gg) Eligibility to Use Form S-3. The Company meets the “registrant eligibility” requirements set forth in the general instructions to
Form S-3 applicable to “resale” registration on Form S-3. 
  

 11 

 Section 2.2 Representations and Warranties of the Purchasers. Each of the Purchasers hereby
represents and warrants to the Company with respect solely to itself and not with respect to any other Purchaser as follows as of the date hereof and as of the Closing Date: 
  
 (a) Organization and Standing of the Purchasers. If the Purchaser is an entity, such Purchaser is a corporation,
limited liability company or partnership duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization. 
  
 (b) Authorization and Power. Each Purchaser has the requisite power and authority to enter into and perform the
Transaction Documents and to purchase the Securities being sold to it hereunder. The execution, delivery and performance of the Transaction Documents by each Purchaser and the consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate or partnership action, and no further consent or authorization of such Purchaser or its Board of Directors, stockholders, or partners, as the case may be, is required. When executed and delivered by the
Purchasers, the other Transaction Documents shall constitute valid and binding obligations of each Purchaser enforceable against such Purchaser in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application.

  
 (c) No Conflict. The execution, delivery and
performance of the Transaction Documents by the Purchaser and the consummation by the Purchaser of the transactions contemplated thereby and hereby do not and will not (i) violate any provision of the Purchaser’s charter or organizational
documents, (ii) 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,
mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Purchaser is a party or by which the Purchaser’s respective properties or assets are bound, or (iii) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Purchaser or by which any property or asset of the Purchaser are bound or affected,
except, in all cases, other than violations pursuant to clauses (i) or (iii) (with respect to federal and state securities laws) above, except, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as
would not, individually or in the aggregate, materially and adversely affect the Purchaser’s ability to perform its obligations under the Transaction Documents. 
  
 (d) Acquisition for Investment. Each Purchaser is purchasing the Shares and Warrants solely for its own account for
the purpose of investment and not with a view to or for sale in connection with distribution. Each Purchaser does not have a present intention to sell any of the Shares or Warrants, nor a present arrangement (whether or not legally binding) or
intention to effect any distribution of any of the Shares or Warrants to or through any person or entity; provided, however, that by making the representations herein, such Purchaser does not agree to hold the Shares or the Warrants
for any minimum or other specific term and reserves the right to dispose of the Shares or the Warrants at any time in accordance with Federal and state 

  

 12 

 
securities laws applicable to such disposition. Each Purchaser acknowledges that it (i) has such knowledge and experience in financial and business matters
such that Purchaser is capable of evaluating the merits and risks of Purchaser’s investment in the Company, (ii) is able to bear the financial risks associated with an investment in the Securities and (iii) has been given full access to such
records of the Company and the Subsidiaries and to the officers of the Company and the Subsidiaries as it has deemed necessary or appropriate to conduct its due diligence investigation. 
  
 (e) Rule 144. Each Purchaser understands that the Securities must be held indefinitely unless such Shares are
registered under the Securities Act or an exemption from registration is available. Each Purchaser acknowledges that such person is familiar with Rule 144 of the rules and regulations of the Commission, as amended, promulgated pursuant to the
Securities Act (“Rule 144”), and that such Purchaser has been advised that Rule 144 permits resales only under certain circumstances. Each Purchaser understands that to the extent that Rule 144 is not available, such Purchaser will
be unable to sell any Securities without either registration under the Securities Act or the existence of another exemption from such registration requirement. 
  

(f) General. Each Purchaser understands that the Securities are being offered and sold in reliance on a transactional exemption from the
registration requirements of federal and state securities laws and the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to
determine the applicability of such exemptions and the suitability of such Purchaser to acquire the Securities. Each Purchaser understands that no United States federal or state agency or any government or governmental agency has passed upon or made
any recommendation or endorsement of the Securities. 
  
 (g) No
General Solicitation. Each Purchaser acknowledges that the Securities were not offered to such Purchaser by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature,
including (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media, or broadcast over television or radio, or (ii) any seminar or meeting to which such Purchaser was invited by any of the
foregoing means of communications. 
  
 (h) Accredited
Investor. Each Purchaser is an “accredited investor” (as defined in Rule 501 of Regulation D), and such Purchaser has such experience in business and financial matters that it is capable of evaluating the merits and risks of an
investment in the Securities. Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act and such Purchaser is not a broker-dealer. Each Purchaser acknowledges that an investment in the Securities is
speculative and involves a high degree of risk. Each Purchaser has completed or caused to be completed the Investor Questionnaire Certification attached hereto as Exhibit D certifying as to its status as an “accredited investor” and
understands that the Company is relying upon the truth and accuracy of the Purchaser set forth therein to determine the suitability of such Purchaser to acquire the Securities. 
  
 (i) Certain Fees. The Purchasers have not employed any broker or finder or incurred any liability for any brokerage
or investment banking fees, commissions, finders’ structuring fees, financial advisory fees or other similar fees in connection with the Transaction Documents. 
  

 13 

 (j) Independent Investment. No Purchaser has agreed to act with any other Purchaser for the
purpose of acquiring, holding, voting or disposing of the Securities purchased hereunder for purposes of Section 13(d) under the Exchange Act, and each Purchaser is acting independently with respect to its investment in the Securities. The decision
of each Purchaser to purchase Securities pursuant to this Agreement has been made by such Purchaser independently of any other purchase and independently of any information, materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company or of its Subsidiaries which may have made or given by any other Purchaser or by any agent or employee of any other Purchaser, and
no Purchaser or any of its agents or employees shall have any liability to any Purchaser (or any other person) relating to or arising from any such information, materials, statements or opinions. Each Purchaser shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Nothing contained herein, or in any Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. For reasons of administrative
convenience only, the Transaction Documents have been prepared by counsel for one of the Purchasers and such counsel does not represent all of the Purchasers but only such Purchaser and the other Purchasers have retained their own individual counsel
with respect to the transactions contemplated hereby. 
  
 (k)
Patriot Act. If the Purchaser is an individual, the Purchaser certifies that he or she is not nor to his or her knowledge has been designated, a “suspected terrorist” as defined in Executive Order 13224. If the Purchaser is a
corporation, trust, partnership, limited liability company or other organization, the Purchaser certifies that, to the best of Purchaser’s knowledge, the Purchaser has not been designated, and is not owned or controlled, by a “suspected
terrorist” as defined in Executive Order 13224. The Purchaser hereby acknowledges that the Company seeks to comply with all applicable laws concerning money laundering and related activities. In furtherance of those efforts, the Purchaser
hereby represents, warrants and agrees that to its knowledge: (i) none of the cash or property that the Purchaser will pay or will contribute to the Company has been or shall be derived from, or related to, any activity that is deemed criminal under
United States law; and (ii) no contribution or payment by the Purchaser to the Company, to the extent that they are within the Purchaser’s control shall cause the Company to be in violation of the United States Bank Secrecy Act, the United
States International Money Laundering Control Act of 1986 or the United States International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001. The Purchaser shall promptly notify the Company if any of these representations ceases
to be true and accurate regarding the Purchaser. The Purchaser agrees to provide the Company any additional information regarding the Purchaser that the Company deems necessary or convenient to ensure compliance with all applicable laws concerning
money laundering and similar activities. The Purchaser understands and agrees that if at any time it is discovered that any of the foregoing representations are 
  

 14 

 
incorrect, or if otherwise required by applicable law or regulation related to money laundering similar activities, the Company may undertake appropriate
actions to ensure compliance with applicable law or regulation, including but not limited to segregation and/or redemption of the Purchaser’s investment in the Company. In the event that the Company is requested or required (by deposition,
interrogatory, request for documents, subpoena, civil investigative demand or similar legal, judiciary or regulatory process or as otherwise required by applicable law or regulation) to disclose any confidential information about a Purchaser, the
Company shall (A) provide the Purchaser with prompt prior written notice of such request or requirement and (B) cooperate with the Purchaser so that the Purchaser may seek a protective order or other appropriate remedy. In the event that such
protective order or other remedy is not obtained, the Company and their respective representatives shall disclose only that portion of the confidential information that such person is advised by legal counsel in writing is legally required to be
disclosed, and provided that the Company uses reasonable efforts to obtain reliable assurance that confidential treatment will be accorded any confidential information so disclosed. 
  
 ARTICLE III 
  
 Covenants 
  
 The Company covenants with each Purchaser as follows, which covenants are for
the benefit of each Purchaser and their respective permitted assignees. 
  
 Section 3.1 Securities Compliance. The Company shall notify the Commission in accordance with its rules and regulations, of the transactions contemplated by any of the Transaction Documents and shall take all other necessary action
and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Securities to the Purchasers, or their respective subsequent holders. 
  
 Section 3.2 Registration and Listing. The Company shall use its
reasonable best efforts to cause its Common Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange Act, to comply in all respects with its reporting and filing obligations under the Exchange Act, to comply with all
requirements related to any registration statement filed pursuant to this Agreement, and to not take any action or file any document (whether or not permitted by the Securities Act or the rules promulgated thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations under the Exchange Act or Securities Act, except as permitted herein or as contemplated under the Registration Rights Agreement. The Company shall use its reasonable best
efforts to continue the listing or trading of its Common Stock on the Nasdaq SmallCap Market or any successor market. If required, the Company will promptly file the “Listing Application” for, or in connection with, the issuance and
delivery of the Shares and the Warrant Shares. 
  
 Section 3.3
Inspection Rights. Subject to such Purchaser having executed a Non-Disclosure Agreement in form and substance satisfactory to the Company, the Company shall permit, during normal business hours and upon reasonable request and reasonable
notice, each Purchaser or any employees, agents or representatives thereof, so long as such Purchaser shall be obligated hereunder to purchase the Shares or shall beneficially own any Shares or 

  

 15 

 
Warrant Shares, for purposes reasonably related to such Purchaser’s interests as a stockholder to examine and make reasonable copies of and extracts
from the records and books of account of, and visit and inspect the properties, assets, operations and business of the Company and any Subsidiary, and to discuss the affairs, finances and accounts of the Company and any Subsidiary with any of its
officers, consultants, directors, and key employees. 
  
 Section
3.4 Compliance with Laws. The Company shall comply, and cause each Subsidiary to comply, with all applicable laws, rules, regulations and orders, noncompliance with which would be reasonably likely to have a Material Adverse Effect.

  
 Section 3.5 Keeping of Records and Books of Account.
The Company shall keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied, reflecting all financial transactions of the Company and its Subsidiaries on a consolidated basis, and
in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made. 
  
 Section 3.6 Reporting Requirements. If the Commission shall cease
making the Company’s periodic reports available via the Internet without charge, then the Company shall furnish the following to each Purchaser so long as such Purchaser shall be obligated hereunder to purchase the Securities or shall
beneficially own Shares or Warrant Shares: 
  
 (a) Quarterly
Reports filed with the Commission on Form 10-Q as soon as available, and in any event within forty-five (45) days after the end of each of the first three fiscal quarters of the Company; 
  
 (b) Annual Reports filed with the Commission on Form 10-K as soon as available, and in any event within ninety (90) days
after the end of each fiscal year of the Company; and 
  
 (c)
Copies of all notices, information and proxy statements in connection with any meetings, that are, in each case, provided to holders of shares of Common Stock, contemporaneously with the delivery of such notices or information to such holders of
Common Stock. 
  
 Section 3.7 Other Agreements. The Company
shall not enter into any agreement in which the terms of such agreement would restrict or impair the right or ability to perform of the Company or any Subsidiary under any Transaction Document. 
  
 Section 3.8 Subsequent Financings; Right of First Refusal. (a) For a
period of one (1) year following the Closing Date, the Company covenants and agrees to promptly notify (in no event later than five (5) days after making or receiving an applicable offer) in writing (a “Rights Notice”) the
Purchasers of the terms and conditions of any proposed offer or sale to, or exchange with (or other type of distribution to) any third party (a “Subsequent Financing”), of Common Stock or any securities convertible, exercisable or
exchangeable into Common Stock, including convertible debt securities (collectively, the “Financing Securities”). The Rights Notice shall describe, in reasonable detail, the proposed Subsequent Financing, the proposed closing date
of the Subsequent Financing, which shall not be within twenty (20) calendar days 

  

 16 

 
from the date the Rights Notice is given nor later than forty five (45) calendar days from the date the Rights Notice is given, including, without
limitation, all of the material terms and conditions thereof and proposed definitive documentation to be entered into in connection therewith. The Rights Notice shall provide each Purchaser an option (the “Rights Option”) during the
five (5) trading days following delivery of the Rights Notice (the “Option Period”) to purchase up to the amount of the securities being offered in such Subsequent Financing necessary for such Purchaser to maintain its Percentage
Ownership in the Company on a fully-diluted basis, on the same, absolute terms and conditions as contemplated by such Subsequent Financing (the “First Refusal Rights”). For purposes of this Section 3.8, “Percentage
Ownership” means an amount equal to (x) the number of Shares purchased by a Purchaser as of the Closing Date, divided by (y) the number of shares of Common Stock of the Company issued and outstanding as of the date of the Rights Notice on a
fully-diluted basis. Delivery of any Rights Notice constitutes a representation and warranty by the Company that there are no other material terms and conditions, arrangements, agreements or otherwise except for those disclosed in the Rights Notice,
to provide additional compensation to any party participating in any proposed Subsequent Financing, including, but not limited to, additional compensation based on changes in the Purchase Price or any type of reset or adjustment of a purchase or
conversion price or to issue additional securities at any time after the closing date of a Subsequent Financing. If the Company does not receive notice of exercise of the Rights Option from any of the Purchasers within the Option Period, the Company
shall have the right to close the Subsequent Financing on the scheduled closing date with a third party (and, if applicable, with such Purchasers as shall have exercised their Rights Option); provided that all of the material terms and conditions of
the closing are the same as those provided to the Purchasers in the Rights Notice. If the closing of the proposed Subsequent Financing does not occur within 60 days from the date the Rights Notice is given, any closing of the contemplated Subsequent
Financing or any other Subsequent Financing shall be subject to all of the provisions of this Section, including, without limitation, the delivery of a new Rights Notice. 
  
 (b) For purposes of this Agreement, a Permitted Financing (as defined hereinafter) shall not be considered a Subsequent
Financing. A “Permitted Financing” shall mean (1) shares of Common Stock to be issued to strategic partners and/or in connection with a strategic merger or acquisition and/or issuances of securities in connection with strategic
licensing transactions, the primary purpose of which is not to raise equity capital; (2) shares of Common Stock or the issuance of options to purchase shares of Common Stock to employees, officers, directors, consultants and vendors in accordance
with the Company’s equity incentive policies; (3) the issuance of securities pursuant to a bona fide firm underwritten public offering of the Company’s securities; (4) the conversion or exercise of convertible or exercisable securities
issued or outstanding prior to the date hereof; and (5) the issuance of any securities to the placement agent in connection with the transactions contemplated under this Agreement. 
  
 Section 3.9 Use of Proceeds. The proceeds from the sale of the Shares will be used by the Company for working capital
and general corporate purposes. 
  
 Section 3.10 Reporting
Status; Eligibility to Use Form S-3. So long as a Purchaser beneficially owns any of the Securities, the Company shall timely file all reports required to be filed with the Commission 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 

  

 17 

 
Exchange Act or the rules and regulations thereunder would permit such termination. The Company will take commercially reasonable action to continue to meet
the “registrant eligibility” requirements set forth in the general instructions to Form S-3 applicable to “resale” registrations on Form S-3 during the Effectiveness Period (as defined in the Registration Rights Agreement).

  
 Section 3.11 Disclosure of Transaction. The Company
shall issue a press release describing the material terms of the transactions contemplated hereby (the “Press Release”) as soon as practicable after the Closing; provided, however, that if Closing occurs after 4:00 P.M. Eastern Time
on any Trading Day but in no event later than one hour after the Closing, the Company shall issue the Press Release no later than 9:00 A.M. Eastern Time on the first Trading Day following the Closing Date. The Company shall also file with the
Commission a Current Report on Form 8-K (the “Form 8-K”) describing the material terms of the transactions contemplated hereby (and attaching as exhibits thereto this Agreement, the Registration Rights Agreement and the form of
Warrant) as soon as practicable following the date of execution of this Agreement but in no event more than two (2) Trading Days following the date of execution of this Agreement, which Press Release and Form 8-K shall be subject to prior review and
comment by the Purchasers. “Trading Day” means any day during which the Nasdaq SmallCap Market (or other principal exchange on which the Common Stock is traded) shall be open for trading. 
  
 Section 3.12 Disclosure of Material Information. The Company covenants
and agrees that neither it nor any other person acting on its behalf has provided or will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto
such Purchaser shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that each Purchaser shall be relying on the foregoing representations in effecting transactions in
securities of the Company. 
  
 Section 3.13 Pledge of
Securities. To the Company’s knowledge, the Securities may be pledged by a Purchaser in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Common Stock. To the
Company’s knowledge, the pledge of Common Stock shall not be deemed to be a transfer, sale or assignment of the Common Stock hereunder, and no Purchaser effecting a pledge of Common Stock shall be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document; provided that a Purchaser and its pledgee shall be required to comply with the provisions of Article V hereof in order to effect a
sale, transfer or assignment of Common Stock to such pledgee. At the Purchasers’ expense, the Company hereby agrees to execute and deliver such documentation as a pledgee of the Common Stock may reasonably request in connection with a pledge of
the Common Stock to such pledgee by a Purchaser, subject to applicable federal securities laws. 
  

 18 

 ARTICLE IV 
  
 Conditions 
  
 Section 4.1 Conditions Precedent to the Obligation of the Company to Close and to Sell the Securities. The obligation hereunder of the Company to
close and issue and sell the Securities to the Purchasers at the Closing Date is subject to the satisfaction or waiver, at or before the Closing of the conditions set forth below. These conditions are for the Company’s sole benefit and may be
waived by the Company at any time in its sole discretion. 
  
 (a)
Accuracy of the Purchasers’ Representations and Warranties. The representations and warranties of each Purchaser shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at
that time, except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects as of such date. 
  
 (b) Performance by the Purchasers. Each Purchaser shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Purchasers at or prior to the Closing Date. 
  
 (c) No Injunction. 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 which prohibits the consummation of any of the transactions contemplated by this Agreement. 
  
 (d) Delivery of Purchase Price. The Purchase Price for the Shares
shall have been delivered to the Company on the Closing Date. 
  
 (e) Delivery of Transaction Documents. The Transaction Documents shall have been duly executed and delivered by the Purchasers to the Company. 
  

Section 4.2 Conditions Precedent to the Obligation of the Purchasers to Close and to Purchase the Securities. The obligation hereunder of the
Purchasers to purchase the Securities and consummate the transactions contemplated by this Agreement is subject to the satisfaction or waiver, at or before the Closing Date, of each of the conditions set forth below. These conditions are for the
Purchasers’ sole benefit and may be waived by the Purchasers at any time in their sole discretion. 
  
 (a) Accuracy of the Company’s Representations and Warranties. Each of the representations and warranties of the Company in this Agreement and
the Registration Rights Agreement shall be true and correct in all material respects as of the Closing Date, except for representations and warranties that speak as of a particular date, which shall be true and correct in all material respects as of
such date. 
  
 (b) Performance by the Company. The Company
shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. 
  

 19 

 (c) No Suspension, Etc. Trading in the Common Stock shall not have been suspended by the
Commission or the Nasdaq SmallCap Market (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the Closing), and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg Financial Markets (“Bloomberg”) shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by Bloomberg, or on
the New York Stock Exchange, nor shall a banking moratorium have been declared either by the United States or New York State authorities. 
  
 (d) No Injunction. 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 which prohibits the consummation of any of the transactions contemplated by this Agreement. 
  
 (e) No Proceedings or Litigation. No action, suit or proceeding before any arbitrator or any governmental authority
shall have been commenced, and no investigation by any governmental authority shall have been threatened, by any third party other than a Purchaser, against the Company or any Subsidiary, or any of the officers, directors or affiliates of the
Company or any Subsidiary seeking to restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages in connection with such transactions. 
  
 (f) Opinion of Counsel. The Purchasers shall have received an opinion of counsel to the Company, dated the date of
such Closing, substantially in the form of Exhibit E hereto, with such exceptions and limitations as shall be reasonably acceptable to counsel to the Purchasers. 
  
 (g) Shares and Warrants. At or prior to the Closing, the Company shall have delivered to the Purchasers certificates
representing the Shares (in such denominations as each Purchaser may request) and certificates representing the Warrants, in each case, being acquired by the Purchasers at the Closing. 
  
 (h) Secretary’s Certificate. The Company shall have delivered to the Purchasers a secretary’s certificate,
dated as of the Closing Date, as to (i) the resolutions adopted by the Board of Directors approving the transactions contemplated hereby, (ii) the Certificate, (iii) the Bylaws, each as in effect at the Closing, and (iv) the authority and incumbency
of the officers of the Company executing the Transaction Documents and any other documents required to be executed or delivered in connection therewith. 
  
 (i) Officer’s Certificate. On the Closing Date, the Company shall have delivered to the Purchasers a certificate signed by an executive
officer on behalf of the Company, dated as of the Closing Date, confirming the accuracy of the Company’s representations, warranties and covenants as of the Closing Date and confirming the compliance by the Company with the conditions precedent
set forth in paragraphs (a)-(e) of this Section 4.2 as of the Closing Date (provided that, with respect to the matters in paragraphs (d) and (e) of this Section 4.2, such confirmation shall be based on the knowledge of the executive officer after
due inquiry). 
  

 20 

 (j) Registration Rights Agreement. As of the Closing Date, the Company shall have duly executed
and delivered the Registration Rights Agreement in the form of Exhibit C attached hereto. 
  
 (k) Material Adverse Effect. No Material Adverse Effect shall have occurred at or before the Closing Date. 
  
 (l) Minimum Purchase. The Purchasers shall have purchased at least
$7,000,000 of the aggregate Purchase Price. 
  
 ARTICLE V

  
 Certificate Legend 
  
 Section 5.1 Legend. Each certificate representing the Securities shall
be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required by applicable state securities or “blue sky” laws): 
  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR SAFLINK
CORPORATION SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED. 
  
 The Company agrees to reissue certificates representing any of the Shares and
the Warrant Shares, without the legend set forth above if at such time, prior to making any transfer of any such Shares or Warrant Shares, such holder thereof shall give written notice to the Company describing the manner and terms of such transfer
and removal as the Company may reasonably request. Such proposed transfer and removal will not be effected until: (a) either (i) the Company has received an opinion of counsel reasonably satisfactory to the Company, to the effect that the
registration of the Shares or Warrant Shares under the Securities Act is not required in connection with such proposed transfer, (ii) a registration statement under the Securities Act covering such proposed disposition has been filed by the Company
with the Commission and has become effective under the Securities Act, (iii) the Company has received other evidence reasonably satisfactory to the Company that such registration and qualification under the Securities Act and state securities laws
are not required, or (iv) the holder provides the Company with reasonable assurances that such security can be sold pursuant to Rule 144 under the Securities Act; and (b) either (i) the Company has received an opinion of counsel reasonably 

  

 21 

 
satisfactory to the Company, to the effect that registration or qualification under the securities or “blue sky” laws of any state is not required
in connection with such proposed disposition, or (ii) compliance with applicable state securities or “blue sky” laws has been effected or a valid exemption exists with respect thereto. The Company will respond to any such notice from a
holder within five (5) Business Days. In the case of any proposed transfer under this Section 5.1, the Company will use reasonable efforts to comply with any such applicable state securities or “blue sky” laws, but shall in no event be
required, (x) to qualify to do business in any state where it is not then qualified, (y) to take any action that would subject it to tax or to the general service of process in any state where it is not then subject, or (z) to comply with state
securities or “blue sky” laws of any state for which registration by coordination is unavailable to the Company. The restrictions on transfer contained in this Section 5.1 shall be in addition to, and not by way of limitation of, any other
restrictions on transfer contained in any other section of this Agreement. Whenever a certificate representing the Shares or Warrant Shares is required to be issued to a Purchaser without a legend, in lieu of delivering physical certificates
representing the Shares or Warrant Shares, provided the Company’s transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer program, the Company shall use its best efforts to
cause its transfer agent to electronically transmit the Shares or Warrant Shares to a Purchaser by crediting the account of such Purchaser’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system
(to the extent not inconsistent with any provisions of this Agreement). 
  
 ARTICLE VI 
  
 Indemnification 

 
 Section 6.1 General Indemnity. The Company agrees to indemnify and
hold harmless each Purchaser (and its respective directors, officers, affiliates, agents, successors and assigns) from and against any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable
attorneys’ fees, charges and disbursements) (“Losses”) incurred by each Purchaser as a result of any inaccuracy in or breach of the representations, warranties or covenants made by the Company herein. The Purchasers severally
but not jointly agree to indemnify and hold harmless the Company and its directors, officers, affiliates, agents, successors and assigns from and against any and all Losses incurred by the Company as result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Purchasers herein. The maximum aggregate liability of each Purchaser pursuant to its indemnification obligations under this Article VI shall not exceed the portion of the Purchase Price paid by
such Purchaser hereunder. 
  
 Section 6.2 Indemnification
Procedure. Any party entitled to indemnification under this Article VI (an “indemnified party”) will give written notice to the indemnifying party of any matters giving rise to a claim for indemnification; provided, that the failure of
any party entitled to indemnification hereunder to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Article VI except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action, proceeding or claim is brought against an indemnified party in respect of which indemnification is sought hereunder, the indemnifying party shall be entitled to participate in and, unless in the

  

 22 

 
reasonable judgment of the indemnifying party a conflict of interest between it and the indemnified party exists with respect to such action, proceeding or
claim (in which case the indemnifying party shall be responsible for the reasonable fees and expenses of one separate counsel for the indemnified parties), to assume the defense thereof with counsel reasonably satisfactory to the indemnified party.
In the event that the indemnifying party advises an indemnified party that it will not contest such a claim for indemnification hereunder, or fails, within thirty (30) days of receipt of any indemnification notice to notify, in writing, such person
of its election to defend, settle or compromise, at its sole cost and expense, any action, proceeding or claim (or discontinues its defense at any time after it commences such defense), then the indemnified party may, at its option, defend, settle
or otherwise compromise or pay such action or claim. In any event, unless and until the indemnifying party elects in writing to assume and does so assume the defense of any such claim, proceeding or action, the indemnified party’s costs and
expenses arising out of the defense, settlement or compromise of any such action, claim or proceeding shall be losses subject to indemnification hereunder. The indemnified party shall cooperate fully with the indemnifying party in connection with
any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the indemnified party which relates to such action or claim. The indemnifying party
shall keep the indemnified party fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. If the indemnifying party elects to defend any such action or claim, then the indemnified party shall
be entitled to participate in such defense with counsel of its choice at its sole cost and expense. The indemnifying party shall not be liable for any settlement of any action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VI to the contrary, the indemnifying party shall not, without the indemnified party’s prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof which
imposes any future obligation on the indemnified party or which does not include, as an unconditional term thereof, the giving by the claimant or the plaintiff to the indemnified party of a release from all liability in respect of such claim. The
indemnification required by this Article VI shall be made by periodic payments of the amount thereof during the course of investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred, so long as the
indemnified party irrevocably agrees to refund such moneys if it is ultimately determined by a court of competent jurisdiction that such party was not entitled to indemnification. The indemnity agreements contained herein shall be in addition to (a)
any cause of action or similar rights of the indemnified party against the indemnifying party or others, and (b) any liabilities the indemnifying party may be subject to pursuant to the law. 
  
 ARTICLE VII 
  
 Miscellaneous 
  
 Section 7.1 Fees and Expenses. Each party shall pay the fees and
expenses of its advisors, counsel, accountants and other experts, if any, and all other expenses, incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement, provided,
however, that the Company shall pay (i) at Closing, such fees and expenses set forth on Schedule 2.1(p) hereto, including all reasonable attorneys’ fees and expenses up to an aggregate of $30,000 (exclusive of disbursements and
out-of-pocket expenses) 

  

 23 

 
incurred by the Purchasers in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Transaction Documents and
the transactions contemplated thereunder and (ii) the costs of any amendments, modifications or waivers of this Agreement or any of the other Transaction Documents. 
  
 Section 7.2 Specific Performance; Consent to Jurisdiction; Venue. 
  
 (a) The Company and the Purchasers acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement or the other Transaction Documents were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement or the other Transaction Documents and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity. 
  
 (b) The parties agree that venue for any dispute arising under this Agreement will lie exclusively in the state or federal courts located in New York County, New York, and the parties irrevocably waive any right to raise forum non
conveniens or any other argument that New York is not the proper venue. The parties irrevocably consent to personal jurisdiction in the state and federal courts of the state of New York. The Company and each Purchaser consent to process being
served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 7.2 shall affect or limit any right to serve process in any other manner permitted by law. The Company and the Purchasers hereby agree that the prevailing party in any suit, action or proceeding arising out of or
relating to the Securities, this Agreement or the Registration Rights Agreement, shall be entitled to reimbursement for reasonable legal fees from the non-prevailing party. 
  
 Section 7.3 Entire Agreement; Amendment. This Agreement and the Transaction Documents contain the entire
understanding and agreement of the parties with respect to the matters covered hereby and, except as specifically set forth herein or in the other Transaction Documents, neither the Company nor any Purchaser make any representation, warranty,
covenant or undertaking with respect to such matters, and they supersede all prior understandings and agreements with respect to said subject matter, all of which are merged herein. No provision of this Agreement may be waived or amended other than
by a written instrument signed by the Company and the Purchasers holding at least a majority of all Shares then held by the Purchasers. Any amendment or waiver effected in accordance with this Section 7.3 shall be binding upon each Purchaser (and
their permitted assigns) and the Company. 
  
 Section 7.4
Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telecopy or facsimile at the address or number designated
below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to 

  

 24 

 
such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: 
  

			
	 If to the Company:
	 	 Saflink Corporation

	 	 	777 108th Avenue NE, Suite 2100
	 	 	Bellevue, WA 98004
	 	 	Attention: President
	 	 	Tel. No.: (425) 278-1100
	 	 	Fax No.: (425)       -        
		
	with copies (which copies	 	 
	shall not constitute notice	 	 
	to the Company) to:	 	Gray Cary Ware & Freidenrich LLP
	 	 	701 Fifth Avenue, Suite 7000
	 	 	Seattle, Washington 98104
	 	 	Attention: W. Michael Hutchings
	 	 	Fax No.: (206) 839-4801
		
	If to any Purchaser:	 	At the address of such Purchaser set forth on Exhibit A to this Agreement.
		
	with copies to:	 	Jenkens & Gilchrist Parker Chapin LLP
	 	 	The Chrysler Building
	 	 	405 Lexington Ave.
	 	 	New York, New York 10174
	 	 	Attention: Christopher S. Auguste
	 	 	Tel No.: (212) 704-6000
	 	 	Fax No.: (212) 704-6288

  
 Any party hereto may
from time to time change its address for notices by giving written notice of such changed address to the other party hereto. 
  
 Section 7.5 Waivers. No waiver by either party of any default with respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter. 
  
 Section 7.6 Headings. The
article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof. 
  
 Section 7.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns. After the Closing, the assignment by a party to this Agreement of any rights hereunder shall not affect the obligations of such party under this Agreement. Subject to
Section 5.1 hereof, the Purchasers may assign the Securities and its rights under this Agreement and the other Transaction Documents and any other rights hereto and thereto without the consent of the Company. 
  

 25 

 Section 7.8 No 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. 
  
 Section 7.9 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of
the State of New York, without giving effect to the choice of law provisions. This Agreement shall not interpreted or construed with any presumption against the party causing this Agreement to be drafted. 
  
 Section 7.10 Survival. The representations and warranties of the
Company and the Purchasers shall survive the execution and delivery hereof and the Closing until the second anniversary of the Closing Date, except the agreements and covenants set forth in Articles I, III, V, VI and VII of this Agreement shall
survive the execution and delivery hereof and the Closing hereunder. 
  
 Section 7.11 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart. 
  
 Section 7.12 Publicity. The Company agrees that it will not disclose, and will not include in any public announcement, the names of the Purchasers
without the consent of the Purchasers, which consent shall not be unreasonably withheld or delayed, or unless and until such disclosure is required by law, rule or applicable regulation, and then only to the extent of such requirement. 

 
 Section 7.13 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible. 
  
 Section 7.14 Further Assurances. From and after the date of this Agreement, upon the request of the Purchasers or the
Company, the Company and each Purchaser shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement,
the Warrants and the Registration Rights Agreement. 
  
 [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK] 
  

 26 

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

			
	SAFLINK CORPORATION
		
	 By:
	 	  

	 Name:
	 	 
	 Title:
	 	 
	
	PURCHASER:
		
	 By:
	 	  

	 Name:
	 	 
	 Title:
	 	 
	
	PURCHASER:
		
	 By:
	 	  

	 Name:
	 	 
	 Title:
	 	 
	
	PURCHASER:
		
	 By:
	 	  

	 Name:
	 	 
	 Title:
	 	 

  

 EXHIBIT A 
 LIST OF PURCHASERS 
  

			
	 Names and Addresses
 of
Purchasers                

	  	 Number of Shares
 & Warrants
Purchased    

  

 i 

 EXHIBIT B 
 FORM OF WARRANT 
  

 ii 

 EXHIBIT C 
 FORM OF REGISTRATION RIGHTS AGREEMENT 
  

 iii 

 EXHIBIT D 
 INVESTOR QUESTIONNAIRE CERTIFICATION 
  
 SAFLINK CORPORATION 
 INVESTOR QUESTIONNAIRE 
  
 (ALL INFORMATION WILL BE TREATED CONFIDENTIALLY) 
  
 To: Saflink Corporation 
  
 This Investor Questionnaire (“Questionnaire”) must be completed by each potential
investor in connection with the offer and sale of the shares of common stock and warrants of Saflink Corporation (the “Securities”). The Securities are being offered and sold by Saflink Corporation (the “Company”) without
registration under the Securities Act of 1933, as amended (the “Act”), and the securities laws of certain states, in reliance on the exemptions contained in Section 4(2) of the Act and on Regulation D promulgated thereunder and in reliance
on similar exemptions under applicable state laws. The Company must determine that a potential investor meets certain suitability requirements before offering or selling Securities to such investor. The purpose of this Questionnaire is to assure the
Company that each investor will meet the applicable suitability requirements. The information supplied by you will be used in determining whether you meet such criteria, and reliance upon the private offering exemptions from registration is based in
part on the information herein supplied. 
  
 This Questionnaire does not
constitute an offer to sell or a solicitation of an offer to buy any security. Your answers will be kept strictly confidential. However, by signing this Questionnaire, you will be authorizing the Company to provide a completed copy of this
Questionnaire to such parties as the Company deems appropriate in order to ensure that the offer and sale of the Securities will not result in a violation of the Act or the securities laws of any state and that you otherwise satisfy the suitability
standards applicable to purchasers of the Securities. All potential investors must answer all applicable questions and complete, date and sign this Questionnaire. Please print or type your responses and attach additional sheets of paper if necessary
to complete your answers to any item. 
  
 A.
BACKGROUND INFORMATION 
  

			
	 Name:

	 Business Address:

	 	  	(Number and Street)
	  

	(City)	  	(State)                                      
                                        
                                       (Zip
Code)
	
	Telephone Number:
                                        
                    
		
	If an individual:	  	 
	Age:                     	  	Citizenship:
                            
	
	If a corporation, partnership, limited liability company, trust or other entity:
	 Type of entity:

	State of
formation:                                      
   Date of formation:
                                        
        
	
	 Social Security or Taxpayer Identification No.

  

 iv 

 B. STATUS AS ACCREDITED INVESTOR 
  
 The undersigned is an “accredited investor” as such term is defined in Regulation
D under the Act, as at the time of the sale of the Securities the undersigned falls within one or more of the following categories (Please initial one or more, as applicable): 1 
  
          (1) a bank as defined in Section 3(a)(2) of the Act, or a savings and loan
association or other institution as defined in Section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; an insurance
company as defined in Section 2(13) of the Act; an investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; a plan established and maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions for the benefit of its employees, if such plan has total assets in excess of $5,000,000; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has
total assets in excess of $5,000,000 or, if a self-directed plan, with the investment decisions made solely by persons that are accredited investors; 
  
          (2) a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act
of 1940; 
  
          (3) an
organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the
Securities offered, with total assets in excess of $5,000,000; 
  
          (4) a natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of such person’s purchase of the Securities exceeds
$1,000,000; 
  
          (5) a
natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching
the same income level in the current year; 
  
          (6) a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities offered, whose purchase is directed by a sophisticated
person as described in Rule 506(b)(2)(ii) of Regulation D; and 
  
          (7) an entity in which all of the equity owners are accredited investors (as defined above). 
  
 IN WITNESS WHEREOF, the undersigned has executed this Questionnaire this      day of
                    , 2004, and declares under oath that it is truthful and correct. 
  

	1	As used in this Questionnaire, the term “net worth” means the excess of total assets over total liabilities. In computing net worth for the purpose of subsection (4), the
principal residence of the investor must be valued at cost, including cost of improvements, or at recently appraised value by an institutional lender making a secured loan, net of encumbrances. In determining income, the investor should add to the
investor’s adjusted gross income any amounts attributable to tax exempt income received, losses claimed as a limited partner in any limited partnership, contributions to an IRA or KEOGH retirement plan, alimony payments, and any amount by which
income from long-term capital gains has been reduced in arriving at adjusted gross income. 

  

 v 

			
	

	 Print Name

	
	 By:

		
	 Signature
	 	 
	
	 Title:

  
 (required for any
purchaser that is a corporation, partnership, trust or other entity) 
  

 vi 

 EXHIBIT E 
 FORM OF OPINION 
  
 1. The
Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power to own, lease and operate its properties and assets, and to carry on its business as
presently conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the failure to so qualify would have a Material Adverse Effect. 
  
 2. The Company has the requisite corporate power and authority to enter into
and perform its obligations under the Transaction Documents and to issue the Shares and the Warrants. The execution, delivery and performance of each of the Transaction Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly and validly authorized by all necessary corporate action and no further consent or authorization of the Company or its Board of Directors is required. Each of the Transaction Documents have been duly executed and
delivered and each of the Transaction Documents constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its respective terms. The Shares are not subject to any preemptive rights under the
Certificate of Incorporation or the Bylaws. 
  
 3. The Shares and
the Warrants have been duly authorized and, the Shares when delivered against payment in full as provided in the Purchase Agreement, will be validly issued, fully paid and nonassessable. The shares of Common Stock issuable upon exercise of the
Warrants have been duly authorized and reserved for issuance, and when delivered against payment in full as provided in the Warrants, will be validly issued, fully paid and nonassessable. 
  
 4. The execution, delivery and performance of and compliance with the terms of the Transaction Documents and the issuance of
the Shares and the Warrants do not (a) violate any provision 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 material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party and which is
known to us, (c) create or impose a lien, charge or encumbrance on any property of the Company under any agreement or any commitment known to us to which the Company is a party or by which the Company is bound or by which any of its respective
properties or assets are bound, or (d) result in a violation of any Federal, state, local or foreign statute, rule, regulation, order, judgment, injunction or decree (including Federal and state securities laws and regulations) applicable to the
Company or by which any property or asset of the Company is bound or affected, except, in all cases other than violations pursuant to clauses (a) and (d) above, for such conflicts, default, terminations, amendments, acceleration, cancellations and
violations as would not, individually or in the aggregate, have a Material Adverse Effect. 
  
 5. No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of the Company is required under Federal, state or local law, rule or regulation in
connection with the valid execution, delivery and performance of the 

  

 vii 

 
Transaction Documents, or the offer, sale or issuance of the Shares and the Warrants other than filings as may be required by applicable Federal and state
securities laws and regulations and the Nasdaq rules and regulations. 
  
 6. To our knowledge, there is no action, suit, claim, investigation or proceeding pending or threatened against the Company which questions the validity of the Agreement or the transactions contemplated thereby or any action taken or to be
taken pursuant thereto. There is no action, suit, claim, investigation or proceeding pending, or to our knowledge, threatened, against or involving the Company or any of its properties or assets and which, if adversely determined, is reasonably
likely to result in a Material Adverse Effect. There are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company or any officers or directors of the Company in
their capacities as such. 
  
 7. The offer, issuance and sale of
the Shares and the Warrants are exempt from the registration requirements of the Securities Act of 1933, as amended. 
  

 viii

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