-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BI7WJo+TxZEFQe+2PYdGBZclkuW99azN3OH4EdHig93uAyJcDzmJtSIr2rpdrmBI k1T9QMvrNYvgbNx/AiNumw== /in/edgar/work/0000950109-00-004587/0000950109-00-004587.txt : 20001116 0000950109-00-004587.hdr.sgml : 20001116 ACCESSION NUMBER: 0000950109-00-004587 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAFLINK CORP CENTRAL INDEX KEY: 0000847555 STANDARD INDUSTRIAL CLASSIFICATION: [7370 ] IRS NUMBER: 954346070 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20270 FILM NUMBER: 768865 BUSINESS ADDRESS: STREET 1: 18650 N E 67TH COURT STREET 2: SUITE 210 CITY: REDMOND STATE: WA ZIP: 98052 BUSINESS PHONE: 8136360099 MAIL ADDRESS: STREET 1: 18650 N E 67TH COURT SUITE 210 CITY: REDMOND STATE: WA ZIP: 98052 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL REGISTRY INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: TOPSEARCH INC DATE OF NAME CHANGE: 19920401 10-Q 1 0001.txt FORM 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 COMMISSION FILE NUMBER 0-20270 SAFLINK CORPORATION (Exact name of registrant as specified in its charter) Delaware 95-4346070 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 18650 N.E. 67th Court, Suite 210, Redmond, WA 98052 (Address of principal executive offices and zip code) (425) 881-6766 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] There were 26,106,680 shares outstanding of SAFLINK Corporation's common stock as of November 10, 2000. Total number of pages: 18 Exhibit Index begins on Page 18 SAFLINK Corporation FORM 10-Q For the Quarter Ended September 30, 2000 INDEX Part I. Financial Information Item 1. Financial Statements a. Condensed Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999........................................... 1 b. Condensed Consolidated Statements of Operations for the Three and Nine Month Periods Ended September 30, 2000 and 1999.................... 2 c. Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2000 and 1999..................................... 3 d. Notes to Condensed Consolidated Financial Statements...................................... 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................. 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk.......................... 13 Part II. Other Information Item 1. Legal Proceedings.................................................................. 14 Item 2. Changes in Securities.............................................................. 14 Item 3. Defaults Upon Senior Securities.................................................... 15 Item 4. Submission of Matters to a Vote of Security Holders................................ 15 Item 5. Other Information.................................................................. 15 Item 6. Exhibits and Reports on Form 8-K................................................... 15 Signature............................................................................................ 17
================================================================================ PART 1 - FINANCIAL INFORMATION ================================================================================ ITEM 1. FINANCIAL STATEMENTS SAFLINK CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30, December 31, ASSETS 2000 1999 ------------- ------------- (In thousands) Current assets: Cash and cash equivalents $ 759 $ 5,335 Accounts receivable, net 232 180 Inventory 16 38 Investments 299 739 Prepaid expenses and other current assets 537 286 -------------- ------------- Total current assets 1,843 6,578 Furniture and equipment, net 409 204 Other assets 625 - -------------- ------------- $ 2,877 $ 6,782 ============== ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 1,429 $ 602 Deferred revenue 455 582 -------------- ------------- Total current liabilities 1,884 1,184 Stockholders' equity: Series A Preferred Stock - Liquidation preference of $10,000,000 in aggregate as of December 31, 1999 - 1 Series D Preferred Stock - Liquidation preference of $5,071,000 as of December 31, 1999 - 1 Common stock 261 186 Additional paid-in capital 56,419 54,577 Accumulated other comprehensive income (loss) (65) 201 Accumulated deficit (55,622) (49,368) -------------- ------------- Total stockholders' equity 993 5,598 -------------- ------------- $ 2,877 $ 6,782 ============== =============
See accompanying notes to condensed consolidated financial statements. 1 SAFLINK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) (Unaudited)
Three Months Ended Nine months ended September 30, September 30, -------------------------------- ------------------------------ 2000 1999 2000 1999 ---- ---- ---- ---- Revenue: Products and services: Software $ 168 $ 53 $ 637 $ 425 Hardware 10 160 257 181 Services and other 99 68 262 188 ------------ ------------ -------------- ------------ 277 281 1,156 794 Post contract services - government - - - 97 ------------ ------------ -------------- ------------ Total revenue 277 281 1,156 891 Cost of revenue: Software 47 3 59 11 Hardware 8 141 207 160 Services and other 24 7 105 34 Post contract services - government - - - 66 ------------ ------------ -------------- ------------ 79 151 371 271 ------------ ------------ -------------- ------------ Gross profit 198 130 785 620 Operating expenses: Product development 1,125 307 3,193 849 Sales and marketing 355 338 1,224 970 Minimum royalty payment - 125 - 375 Relocation 16 - 216 - General and administrative 738 432 2,132 1,306 ------------ ------------ -------------- ------------ Total operating expenses 2,234 1,202 6,765 3,500 ------------ ------------ -------------- ------------ Loss from operations (2,036) (1,072) (5,980) (2,880) Interest and other income (expense) (30) 15 74 5 ------------ ------------ -------------- ------------ Net loss (2,066) (1,057) (5,906) (2,875) Preferred stock dividend 100 - 348 - ------------ ------------ -------------- ------------ Net loss attributable to common stockholders $ (2,166) $ (1,057) $ (6,254) $ (2,875) ============ ============ ============== ============ Basic and diluted loss per common share $ (0.10) $ (0.06) $ (0.32) $ (0.17) Weighted average number of basic and diluted common shares 20,759,175 18,068,937 19,783,831 17,203,466
See accompanying notes to condensed consolidated financial statements. 2 SAFLINK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine months ended September 30, 2000 1999 --------- --------- (In thousands) Cash flows from operating activities: Net loss $ (5,906) $ (2,875) Adjustments to reconcile net loss to net cash used in operating activities: Stock compensation 259 - Depreciation 136 193 Loss on sale of investments 42 - Loss on disposal of furniture and equipment - 15 Changes in operating assets and liabilities: Accounts receivable (52) (75) Inventory 22 (57) Prepaid expenses and other current assets (251) 12 Other assets (346) (561) Accounts payable and accrued liabilities 827 167 Deferred revenue (127) 489 --------- --------- Net cash used in operating activities (5,396) (2,692) Cash flows from investing activities: Proceeds from sale of investments 132 Purchases of equipment (341) (62) --------- --------- Net cash used in investing activities (209) (62) Cash flows from financing activities: Proceeds from issuance of common stock upon exercise of employee stock options and investor warrants 1,029 - Proceeds from common stock subscriptions - 2,256 --------- --------- Net cash provided by financing activities 1,029 2,256 --------- --------- Net decrease in cash and cash equivalents (4,576) (498) Cash and cash equivalents at beginning of period 5,335 1,736 --------- --------- Cash and cash equivalents at end of period $ 759 $ 1,238 ========= ========= Non cash financing and investing activities: Preferred stock dividend $ 348 $ - Stock issued for services to be rendered 105 - Conversion of Series A and Series D Preferred Stock to Common Stock 65 - Warrants issued for product received 174 -
See accompanying notes to condensed consolidated financial statements. 3 SAFLINK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The accompanying consolidated financial statements are unaudited and condensed and, therefore, do not contain certain information included in the annual consolidated financial statements of SAFLINK Corporation and its wholly- owned subsidiary, SAFLINK International, Inc., (the "Company" or "SAFLINK"). In the opinion of management, all adjustments (consisting only of normally recurring items) it considers necessary for a fair presentation have been included in the accompanying consolidated financial statements. The Company's condensed consolidated interim financial statements are not necessarily indicative of results to be expected for a full fiscal year and should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, as filed with the Securities and Exchange Commission (the "SEC") on March 22, 2000. Certain items in the 1999 financial statements and the notes thereto have been reclassified to conform with the 2000 presentation of such items. 2. Investments At September 30, 2000, investments consist of a $101,000 bank time certificate of deposit and an investment in publicly traded equity securities of approximately $198,000. The time certificate of deposit, which is pledged to secure a letter of credit issued in lieu of a security deposit related to the lease of the Company's headquarters facility, is carried at cost and the equity securities are classified as available-for-sale and are recorded at fair value. Unrealized gains and losses on the available-for-sale equity securities are reflected as a component of other comprehensive income until realized. Realized gains and losses from the sale of available-for-sale equity securities are determined on a specific identification method. The Company recognized realized losses of $42,000 during the nine months ended September 30, 2000. No realized gains or losses were recognized during the remaining periods presented. Dividend income is recognized when earned. A decline in market value of the available-for-sale equity securities below cost that is deemed to be other than temporary results in the reduction in the carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. The Company has recorded deferred revenue of approximately $164,000 and $328,000 as of September 30, 2000 and December 31, 1999, respectively, in connection with the receipt of the equity securities as part of a strategic arrangement. For the three months ended September 30, 2000 and 1999, the Company recorded non-cash revenue related to this arrangement of $55,000. For the nine months ended September 30, 2000 and 1999, the Company recorded non-cash revenue related to this arrangement of $164,000 and $55,000, respectively. 3. Stockholders' Equity During the nine months ended September 30, 2000, the Company issued 368,897 shares of Common Stock upon exercise of stock options exercised by certain employees pursuant to provisions of the Company's 1992 Stock Incentive Plan (the "Plan") and 520,585 shares of Common Stock upon 4 SAFLINK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) exercise of investor warrants. The options had exercise prices ranging from $0.64 to $4.68 per share, which equaled fair value on the dates of grant. The warrants had exercise prices ranging from $0.63 to $3.38 per share, which equaled fair value on the date of issuance. During the nine months ended September 30, 2000, the Company issued warrants to purchase up to 350,000 shares of its Common Stock to two vendors as partial consideration for services to be rendered to the Company by such vendors. One warrant to purchase up to 250,000 shares will vest at the rate of approximately 98 shares per hour of service performed by the vendor and is exercisable until July 31, 2005 at an exercise price of $2.19 per share, which equals the closing price of the Common Stock on date of issuance. The other warrant to purchase up to 100,000 shares was fully vested upon grant and is exercisable until September 18, 2005 at an exercise price of $2.00 per share which equals the closing price of the Common Stock on the date of issuance. The value of the warrants, as determined using a Black-Scholes pricing model is being capitalized under FAS No. 86 or recognized as compensation expense over the underlying awards' service period. The Company capitalized $174,000 and recognized expense of approximately $147,000 related to these warrants in 2000. On September 11, 2000, 100,000 shares of the Company's Series D Convertible Preferred Stock were converted into 3,906,007 shares of the Company's Common Stock pursuant to a notice of conversion submitted to the Company by RMS Limited Partnership as the holder of the Series D Convertible Preferred Stock. On September 15, 2000, 100,000 shares of the Company's Series A Convertible Preferred Stock were converted into 2,600,532 shares of the Company's Common Stock pursuant to a notice of conversion submitted to the Company by Home Shopping Network, Inc. as the holder of the Series A Convertible Preferred Stock. On September 29, 2000, the Company issued 60,000 shares of its Common Stock to H.C. Wainwright & Co., Inc. ("HCW") and certain of its affiliates as partial consideration for services performed by HCW in relation to obtaining additional financing and the proposed acquisition of Jotter Technologies Inc. The value of the consideration is being deferred until consummation of the acquisition and financing. 4. Significant Customers Two customers accounted for approximately 44% and 26% of the Company's revenues for the nine months ended September 30, 2000. Two customers accounted for approximately 42% and 21% of the Company's revenues for the nine months ended September 30, 1999. Three customers accounted for approximately 73%, 13% and 10% of the Company's revenues for the three months ended September 30, 2000. Two customers accounted for approximately 67% and 21% of the Company's revenues for the three months ended September 30, 1999. 5. Comprehensive Loss For the nine months ended September 30, 2000, total comprehensive loss was $6,346,000, which consisted of a net loss of $6,080,000 and unrealized holding losses on investments of $266,000. For the nine months ended September 30, 1999, total comprehensive loss was $2,879,000, which consisted of a net loss of $2,875,000 and unrealized holding losses on investments of $4,000. 5 SAFLINK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) For the three months ended September 30, 2000, total comprehensive loss was $2,155,000, which consisted of a net loss of $2,240,000 and unrealized holding gains on investments of $85,000. For the three months ended September 30, 1999, total comprehensive loss was $1,061,000, which consisted of a net loss of $1,057,000 and unrealized holding losses on investments of $4,000. 6. Net Loss Per Share In accordance with Statement of Financial Accounting Standard No. 128, "Earnings Per Share", the Company has reported both basic and diluted net loss per common share for each period presented. Basic net loss per common share is computed on the basis of the weighted-average number of common shares outstanding for the period. Diluted net loss per common share is computed on the basis of the weighted-average number of common shares plus dilutive potential common shares outstanding. Dilutive potential common shares are calculated under the treasury stock method. Securities that could potentially dilute basic income per share consist of outstanding stock options and warrants and, in 1999 and through September 2000, convertible preferred stock. Net loss available to common stockholders includes net loss and preferred stock dividends. As the Company had a net loss available to common stockholders in each of the periods presented, basic and diluted net loss per common share are the same. All outstanding warrants and stock options to purchase common shares and the convertible preferred stock, until conversion, were excluded because their effect was anti-dilutive. Potential common shares consisted of options and warrants to purchase approximately 3.8 million and 4.3 million common shares at September 30, 2000 and 1999, respectively, and preferred stock convertible into approximately 2.6 million common shares at September 30, 1999, respectively. 7. Segment Information Operating segments are revenue-producing components of the enterprise for which separate financial information is produced internally for the Company's management. Under this definition, the Company operated, for all periods presented, as a single segment. 8. Legal Proceedings On June 16, 1999, International Interest Group, Inc. ("IIG") filed suit against the Company and Mr. J. Anthony Forstmann, a former director and chairman of the Company, in the Superior Court of the State of California for the County of Los Angeles (Civil Action No.: BC212033). This lawsuit relates to the alleged failure of the Company to perform under the terms of a settlement agreement relating to another lawsuit filed by IIG. The complaint alleges three causes of action which are described in our Annual Report on Form 10-K which was filed with the SEC on March 22, 2000. The second and third causes of action were dismissed with prejudice by the trial court during the first quarter of 2000 but were reinstated by the appellate court in August 2000. On November 7, 2000, IIG filed a third amended complaint adding two additional alleged causes of action- negligent misrepresentation and breach of fiduciary duties. IIG is seeking actual damages, consequential damages, attorney fees and costs, and punitive damages with respect to these alleged causes of action. The Company does not believe the claims have any merit and it intends to vigorously defend itself in this lawsuit. 9. Recently Issued Accounting Pronouncements The Financial Accounting Standards Board (FASB) issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133) in June 1998. This statement, as amended, establishes accounting and reporting standards for derivative instruments, including certain 6 SAFLINK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) derivative instruments embedded in other contracts, and for hedging activities. It requires that entities recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The adoption of SFAS No. 137 is not expected to have a material impact on the Company's consolidated financial statements. Statement of Position No. 98-9 amends certain paragraphs of SOP No. 97-2, Software Revenue Recognition, to require using the "residual method" of revenue recognition for multiple-element arrangements involving software bundled with one or more undelivered elements. This SOP is effective for the Company beginning January 1, 2000. The adoption of this statement did not have a material impact on the Company's consolidated financial statements. In December 1999, the Securities and Exchange Commission released Staff Accounting Bulletin No. 101 ("SAB No. 101") "Revenue Recognition in Financial Statements". SAB No. 101 provides guidance on revenue recognition issues. The SAB, as amended, is effective no later than the fourth quarter of the 2000 fiscal year. The adoption of SAB No. 101 is not expected to have a material impact on the Company's consolidated financial statements. In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation: an interpretation of APB Opinion No. 25," which was effective July 1, 2000. This interpretation provides guidance for applying provisions of APB Opinion No. 25. The adoption of this interpretation did not have a material impact on the Company's consolidated financial statements. 7 SAFLINK CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Factors That May Affect Future Results Except for the historical information contained herein, certain of the matters discussed in this quarterly report are "forward-looking statements" as defined in Section 21E of the Securities Exchange Act of 1934, as amended, which involve certain risks and uncertainties which could cause actual results to differ materially from those discussed herein. In addition to other information contained in this quarterly report, the following factors, among others, may have affected, and in the future could affect our actual results and could cause future results to differ materially from those in any forward looking statements made by or on behalf of the Company. Factors that could cause future results to differ from expectations include, but are not limited to, the following: . our need for additional funds to continue operations; . control of the Company; . our limited operating history and substantial accumulated net losses; . the SmallCap Market eligibility and maintenance requirements; . the possible delisting of our Common Stock from the SmallCap Market; . technological and market uncertainty; . rapid changes in technology; . competition; . our dependence upon software licensors; . our ability to retain key employees and to attract high quality new employees; . shares eligible for future sale could adversely affect our ability to raise capital and the market price for our stock; . there is a limited public market for our common stock; . the market price for our stock has been and may continue to be volatile; . we are exploring an acquisition strategy with which we have no experience; . our dependence on significant growth in the biometrics market which is a developing market; . our marketing partners' ability to promote our products; and . our failure to pay dividends. These factors are discussed in greater detail in our Annual Report on Form 10-K filed with the SEC on March 22, 2000. A. Recent Events On August 2, 2000, we sent a notice of default to our Australian distributor, Triton Secure, Ltd. as a result of their failure to satisfy the payment terms of the Master Distributor Agreement between them and us. Triton cured the breach on September 1, 2000. The Master Distributor Agreement has been amended to eliminate Triton's obligation to pay SAFLINK quarterly minimum prepaid license fees of US$50,000 through the expiration of the term of the agreement on June 30, 2001. 8 SAFLINK CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS On September 20, 2000 the Company agreed to acquire Jotter Technologies Inc., a Delaware corporation, in exchange for shares of SAFLINK Common Stock to be issued to the shareholders of Jotter pursuant to an Agreement and Plan of Reorganization and Merger ("Merger Agreement") entered into by and among the Company, Jotter, and certain shareholders of Jotter ( the "Merger"). On November __, 2000 the parties to the Merger Agreement entered into an amendment to the Merger Agreement to revise the amount of Jotter liabilities that SAFLINK will assume upon consummation of the Merger from up to $100,000 to up to $2,100,000 and to revise the number of shares of SAFLINK Common Stock that will be issued to shareholders of Jotter from 10,600,000 to 7,800,000. On November 13, 2000 the Company received approximately $2.4 million upon the issuance of $2.5 million of unsecured notes to a group of investors, including the Company's largest stockholder, RMS Limited Partnership, and two of the Company's officers. The notes carry an annual interest rate of 12% and will mature in May 2001. Holders of the notes will be entitled to participate in any financing undertaken by SAFLINK prior to the maturity date of the notes by electing to receive in lieu of repayment of the note securities of the same class and on the same terms as issued in such financing. The Company also agreed to issue warrants allowing the note holders to purchase one share of SAFLINK common stock for each $4.00 invested. RMS and the Company officers participating in the financing elected not to accept the warrants; the Company therefore only issued warrants for the purchase of 362,500 shares of SAFLINK common stock for $1.50 per share at any time until November 2005. B. Results of Operating Activities We incurred net losses attributable to common stockholders of approximately $2.2 million and $6.3 million for the three and nine-month periods ended September 30, 2000 compared to net losses attributable to common stockholders of approximately $1.1 million and $2.9 million for the comparable periods in 1999. These increases in net loss of approximately $1.1 million and $3.4 million, respectively, were primarily due to increases in operating expenses of approximately $1.0 million and $3.3 million coupled with increased preferred stock dividends of approximately $100,000 and $348,000 for the three and nine month periods, respectively. Revenue and Cost of Revenue Revenue of $277,000 for the three months ended September 30, 2000 decreased approximately $4,000 (1%) from revenue of approximately $281,000 for the three months ended September 30, 1999 while revenue of $1.2 million for the nine months ended September 30, 2000 increased approximately $265,000 (30%) from revenue of $891,000 for the nine months ended September 30, 1999. Revenue from sales of commercial products and services increased approximately $362,000 (46%) to approximately $1.2 million for the nine months ended September 30, 2000 from approximately $794,000 for the nine months ended September 30, 1999. Post contract services revenue decreased by approximately $97,000 (100%) due to our decision to divest our contracts to manage the identification and authentication aspects of the Connecticut and New Jersey welfare systems in early 1999. The approximately $72,000 decrease in cost of revenue for the three months ended September 30, 2000 when compared to the same period in 1999 was primarily due to a significant shift in the mix of revenues from hardware sales to software sales. The $100,000 increase in cost of revenue for the 9 nine months ended September 30, 2000 when compared to the same period in 1999 was primarily attributable to the increase in revenue. The Company's gross margin percentages for the three and nine month periods ended September 30, 2000 were approximately 71% and 68%, respectively, compared to approximately 46% and 70% for the three and nine month periods ended September 30, 1999, respectively. The changes from 1999 to 2000 were primarily due to a change in product mix which included the elimination of post contract services revenue and a higher level of software sales in 2000. Operating Expenses Total operating expenses for the three months ended September 30, 2000 increased approximately $1.0 million (100%) to approximately $2.2 million from approximately $1.2 million for the same period in 1999. Total operating expenses for the nine months ended September 30, 2000 increased approximately $3.3 million (98%) to approximately $6.8 million from approximately $3.5 million for the same period in 1999. These increases were primarily due to the expansion of product development, sales and marketing activities in preparation for releases of our new Internet products and, to a lesser degree, the relocation of our headquarters to Redmond, Washington during the first half of this year, partially offset by the expiration of our obligation to make minimum royalty payments of $125,000 per quarter to Cogent Systems, Inc. as of October 1, 1999. The following table provides a breakdown of the dollar and percentage changes in operating expenses for the three and nine-month periods ended September 30, 2000, as compared to the same periods in 1999:
Three Months Nine Months (Dollars in thousands) Increase Increase Increase Increase (Decrease) (Decrease) (Decrease) (Decrease) ----------------- ----------------- ---------------- ------------ Product development $ 818 266% $2,344 276% Sales and marketing 17 5 254 26 Minimum royalty payments (125) (100) (375) (100) Relocation 16 N.M.* 216 N.M.* General and administrative 306 71 826 63 ----------------- ----------------- ---------------- ------------ $1,032 86% $3,265 93% ================= ================= ================ ============
* Not meaningful Product Development - The increases in product development expenses were primarily due to the addition of new staff to enhance current products as well as to develop new Internet products we plan to introduce later this year or early next year. We expect our product development expenses to continue to increase as we prepare for the expected release of our new Internet products and as we develop other new products and enhance existing products. 10 Sales and Marketing - The increases in sales and marketing expenses were primarily due to increases in employee expenses, travel, and advertising expenses as we added new staff to market our products to both commercial and governmental organizations as they begin to redirect their information technology expenditures to enhanced Internet and network security solutions. The sales cycle for our products has taken longer to develop than management anticipated due to, among other things, the lack of industry standards and acceptance by the commercial market, the cost of hardware associated with the technology, and the extended period of time potential customers require to test, evaluate and pilot applications. However, we believe that a convergence of factors, including recent decreases in hardware costs as well as the development of industry standards, will lead to greater market acceptance of biometric security solutions and we expect our sales and marketing expenses to increase even more as we continue to expand our sales and marketing activities. General and Administrative - The increases in general and administrative expenses were centered in personnel, occupancy and professional services primarily due to additions to infrastructure to support our increased product development and sales and marketing activities. We expect general and administrative costs to continue to increase if sales of our products increase. In addition, we expect general and administrative expenses, particularly personnel and occupancy, to increase even more upon consummation of the proposed acquisition of Jotter Technologies Inc. C. Liquidity and Capital Resources Working Capital Cash and working capital (deficit) as of September 30, 2000 were approximately $759,000 and $(41,000), respectively, compared to approximately $5.3 million and $5.4 million, respectively, as of December 31, 1999. The decrease in the Company's cash and working capital as of September 30, 2000 compared to December 31, 1999 was primarily due to net operating losses, partially offset by proceeds of approximately $1.0 million upon the exercise of employee stock options and investor warrants, and proceeds of approximately $132,000 from the sale of 1.6 million shares of Triton common stock. Cash as of November 13, 2000 was approximately $2.6 million. The increase from September 30, 2000 was primarily due to the receipt of net proceeds of approximately $2.4 million from a six month bridge loan coupled with proceeds of approximately $222,000 from the sale of 2.4 million shares of Triton common stock, partially offset by net operating losses. Absent a significant increase in sales, which itself may require a significant increase in working capital, we will require significant additional funds to continue our operations into 2001. The options we are reviewing to obtain additional financing include, but are not limited to, the sale and issuance of stock, the issuance of debt and the sale of certain of our assets. In addition, we have entered into the Merger Agreement to acquire Jotter in an effort to augment our product development efforts and to assist in our efforts to better position the company to obtain the needed funding. In the event we are able to complete the acquisition of Jotter, our working capital requirements will increase to accommodate Jotter's capital requirements. In addition, we have agreed to use our best efforts to raise sufficient working capital to fund Jotter's operating requirements through the effective time of the merger. Jotter 11 recognized a net loss of $2.8 million for the year ended December 31, 1999 and a net loss of $2.7 million for the six months ended June 30, 2000. In light of our capital requirements and those of Jotter, we are seeking to raise additional capital which will be used in part to accelerate our product development and sales and activities. We have had discussions with a variety of potential strategic partners and sources of capital and will continue to explore and pursue opportunities with such entities, but there can be no assurance that we will be able to obtain additional financing or enter into a strategic transaction or business combination. It is possible that any such infusion of capital would be in the form of the sale and issuance of additional shares of our common stock or securities that are convertible into our common stock, which could substantially increase the number of shares of common stock outstanding on a fully-diluted basis. The failure to obtain such additional funds could cause us to cease or curtail operations. Even if such additional funding is obtained, there is no assurance that we will be able to generate significant sales of our products or services, or, if we are able to consummate significant sales, that any such sales would be profitable. Dividends Since our incorporation, we have not paid or declared dividends on our Common Stock, nor do we intend to pay or declare cash dividends on our Common Stock in the forseeable future. 12 ITEM 3. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE, INVESTMENT and FOREIGN CURRENCY RISK Our exposure to market rate risk for changes in interest rates relates primarily to the time certificate of deposit included in our investment portfolio. Investments in fixed rate earning instruments carry a degree of interest rate risk as their fair market value may be adversely impacted due to a rise in interest rates. We also currently hold equity securities of a publicly traded foreign company. This investment is included in short-term investments and is accounted for in accordance with the provisions of SFAS No. 115. Such an investment is subject to significant fluctuations in fair market value due to the general volatility of the foreign market. As a result, our financial results could be adversely affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. Due in part to these factors, Our future investment income may fall short of expectations due to changes in interest rates, foreign currency exchange rates and foreign economies or we may suffer losses if we are forced to sell securities which have declined in market value due to changes in interest rates, foreign currency exchange rates and foreign economies. At September 30, 2000, we owned a time certificate of deposit in the amount of $101,000 and equity securities with a fair market value of $198,000. 13 PART II - OTHER INFORMATION Item 1. Legal Proceedings On June 16, 1999, International Interest Group, Inc. ("IIG") filed suit against the Company and Mr. J. Anthony Forstmann, a former director and chairman of the Company, in the Superior Court of the State of California for the County of Los Angeles (Civil Action No.: BC212033). This lawsuit relates to the alleged failure of the Company to perform under the terms of a settlement agreement relating to another lawsuit filed by IIG. The complaint alleges three causes of action which are described in our Annual Report on Form 10-K which was filed with the SEC on March 22, 2000. The second and third causes of action were dismissed with prejudice by the trial court during the first quarter of 2000 but were reinstated by the appellate court in August 2000. On November 7, 2000, IIG filed a third amended complaint adding two additional alleged causes of action - negligent misrepresentation and breach of fiduciary duties. IIG is seeking actual damages, consequential damages, attorney fees and costs, and punitive damages with respect to these alleged causes of action. The Company does not believe the claims have any merit and it intends to vigorously defend itself in this lawsuit. Item 2. Changes in Securities On September 6, 2000, the Company issued a warrant to purchase up to 250,000 shares of its Common Stock, $.01 par value, to Solthree Software Corporation ("Solthree") as partial consideration for services to be rendered to the Company by Solthree pursuant to a Software Development Agreement entered into by the Company and Solthree effective July 25, 2000. The warrant will vest at the rate of approximately 98 shares per hour of service performed by Solthree and is exercisable until July 31, 2005. The exercise price of $2.19 per share equals the closing price of the Common Stock on September 6, 2000. The warrant was issued pursuant to an exemption by reason of Section 4(2) of the Securities Act of 1933, as amended. The issuance was made without general solicitation or advertising. Solthree was a sophisticated investor with access to all relevant information. On September 11, 2000, 100,000 shares of the Company's Series D Convertible Preferred Stock were converted into 3,906,007 shares of the Company's common stock pursuant to a notice of conversion submitted to the Company by RMS Limited Partnership as the holder of the Series D Convertible Preferred Stock. The issuance was made pursuant to an exemption by reason of Section 3a9 of the Securities Act of 1933, as amended, which applies to an exchange of securities between an issuer and an existing shareholder. On September 15, 2000, 100,000 shares of the Company's Series A Convertible Preferred Stock was converted into 2,600,532 shares of the Company's common stock pursuant to a notice of conversion submitted to the Company by Home Shopping Network, Inc. as the holder of the Series A Convertible Preferred Stock. The issuance was made pursuant to an exemption by reason of Section 3a9 of the Securities Act of 1933, as amended, which applies to an exchange of securities between an issuer and an existing shareholder. On September 18, 2000, the Company issued a warrant to purchase up to 100,000 shares of its Common Stock, $.01 par value, to Anovea, Inc. ("Anovea") as partial consideration for the license of Anovea's biometric verification algorithms to the Company pursuant to a Development and Distribution Agreement entered into by the Company and Anovea effective 14 September 18, 2000. The warrant was fully vested upon grant and is exercisable until September 18, 2005. The exercise price of $2.00 per share equals the closing price of the Common Stock on September 18, 2000. The warrant was issued pursuant to an exemption by reason of Section 4(2) of the Securities Act of 1933, as amended. The issuance was made without general solicitation or advertising. Anovea had an existing business relationship with the Company prior to the grant of the warrant. On September 29, 2000, the Company issued 60,000 shares of its Common Stock, $.01 par value, to H.C. Wainwright & Co., Inc. ("HCW") and certain of its affiliates in consideration of its agreement to provide services to the company including(i) acting as a financial advisor and exclusive placement agent to arrange financing for the Company pursuant to an engagement letter dated August 15, 2000, and (ii) rendering an opinion as to the fairness, from a financial point of view, of the consideration to be paid by the Company for the acquisition of Jotter Technologies Inc. pursuant to an engagement letter dated August 28, 2000. The issuance was made pursuant to an exemption by reason of Section 4(2) of the Securities Act of 1933, as amended. The issuance was made without general solicitation or advertising. HCW was a sophisticated investor with access to all relevant information. Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibit Exhibit Number ------ 10.1 Agreement and Plan of Reorganization and Merger, dated September 20, 2000, by and among SAFLINK Corporation, Jotter Technologies, and certain shareholders of Jotter (Incorporated by reference to Form 8-K filed on September 26, 2000) 10.2 Amendment No. 1 to Agreement and Plan of Reorganization and Merger, dated November 10, 2000, by and among SAFLINK Corporation, Jotter Technologies, and certain shareholders of Jotter 15 10.3 Voting Agreement between SAFLINK Corporation and RMS Limited Partnership, dated as of September 7, 2000 10.4 Voting Agreement between SAFLINK Corporation and Home Shopping Network, Inc., dated as of September 15, 2000 10.5 Voting Agreement between SAFLINK Corporation and certain Jotter shareholders (Glenn Argenbright, Robert Smibert, Jodie Tessier, Kenneth Wilton, Judy Wilton, Virgin Technologies, Inc., K&J Wilton Limited Partnership, KJWILTON, INC., and Ken and Judy Wilton JT ROS), dated as of September 20, 2000 10.6 Facilities lease agreement, dated May 18, 2000, between SAFLINK Corporation, as tenant, and Carr Redmond Corporation, as Landlord 27 Financial Data Schedule (Electronic filing only) (b) Reports on Form 8-K: (i) The Company filed a Current Report on Form 8-K on September 26, 2000 reporting that it had agreed to acquire Jotter Technologies Inc. in exchange for shares of SAFLINK Common Stock to be issued to the shareholders of Jotter. 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SAFLINK CORPORATION DATE: November 14, 2000 BY: /s/ JAMES W. SHEPPERD ---------------------------- James W. Shepperd Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) 17 EXHIBIT INDEX 10.1 Agreement and Plan of Reorganization and Merger, dated September 20, 2000, by and among SAFLINK Corporation, Jotter Technologies, and certain shareholders of Jotter (Incorporated by reference to Form 8-K filed on September 26, 2000) 10.2 Amendment No. 1 to Agreement and Plan of Reorganization and Merger, dated November 10, 2000, by and among SAFLINK Corporation, Jotter Technologies, and certain shareholders of Jotter 10.3 Voting Agreement between SAFLINK Corporation and RMS Limited Partnership, dated as of September 7, 2000 10.4 Voting Agreement between SAFLINK Corporation and Home Shopping Network, Inc., dated as of September 15, 2000 10.5 Voting Agreement between SAFLINK Corporation and certain Jotter shareholders (Glenn Argenbright, Robert Smibert, Jodie Tessier, Kenneth Wilton, Judy Wilton, Virgin Technologies, Inc., K&J Wilton Limited Partnership, KJWILTON, INC., and Ken and Judy Wilton JT ROS), dated as of September 20, 2000 10.6 Facilities lease agreement, dated May 18, 2000, between SAFLINK Corporation, as tenant, and Carr Redmond Corporation, as Landlord 27 Financial Data Schedule (Electronic Filing Only) 18 EX-10.2 2 0002.txt AMDT #1 TO AGREEMENT & PLAN OF REORGANIZATION Exhibit 10.2 AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF REORGANZIATION AND MERGER This Amendment No. 1 to the Agreement and Plan of Reorganziation and Merger, dated September 20, 2000 (the "Agreement") is made and entered into as of the 10th day of November, 2000, by and among SAFLINK Corporation, a Delaware corporation ("SAFLINK"); Jotter Technologies Inc., a Delaware corporation ("Jotter"); and the shareholders of Jotter listed on the signature pages hereto (collectively, the "Signing Holders"). WITNESSETH: WHEREAS, the parties entered into the Agreement for purposes of setting forth certain representations, warranties, and covenants made by each to the other as an inducement to the execution and delivery of this Agreement and the conditions precedent to the consummation of the Merger and the transactions related thereto; WHEREAS, the parties wish to modify the Agreement in the manner set forth herein; NOW, THEREFORE, the parties agree as follows: 1. Section 1.1. Section 1.1 of the Agreement is hereby amended to delete the following definitions: "List of Shares" is defined in Section 2.3(e)(ii)(A); "Non-U.S. Holders" is defined in Section 2.6(b). "Regulation D Investment Letter" is defined in Section 6.13(a)(ii). "Regulation D Status Letter" is defined in Section 6.13(a)(ii). "Regulation S Investment Letter" is defined in Section 6.13(a)(ii). "Regulation S Status Letter" is defined in Section 6.13(a)(ii). "Rule 501" is defined in Section 6.13(a)(ii). "Rule 502" is defined in Section 6.13(a)(ii). "Rule 903" is defined in Section 6.13(a)(ii). "U.S. Holders" is defined in Section 2.6(a). -1- Section 1.1 of the Agreement is hereby amended to add the following definitions: "Form S-4" is defined in Section 2.6 "Mindquake Agreements" is defined in Section 6.16. 2. Section 2.3(c) of the Agreement is hereby amended in its entirety to read as follows: (i) In consideration of the Merger, SAFLINK shall issue 7,800,000 shares of SAFLINK Common Stock, which shares shall be allocated to the Holders and the holders of Mindquake. capital stock on a pro-rata basis in accordance with Section 2.3(c)(ii). (ii) Except for shares to be canceled pursuant to Section 2.3(b) hereof and Dissenting Shares as provided in Section 2.3(f), and subject to adjustment pursuant to Section 2.3(d), each share of Jotter Common Stock issued and outstanding (all shares of Jotter Common Stock not so excepted, the "Stock"), shall cease to be outstanding and shall be converted by virtue of the Merger and without any action on the part of the holders thereof (collectively, the "Holders") into the following respective number of shares of SAFLINK Common Stock and collectively, the "Merger Shares") as follows: (A) in the case of each such share of Jotter Common Stock constituting the Stock, 0.5309266 (the "Exchange Ratio") shares of SAFLINK Common Stock. Of the Merger Shares, a portion (the "Escrow Shares") in number equal to 100% of the Merger Shares issued to certain Holders identified in Schedule 2.3(c)(ii)(A) ("Indemnifying Holders") shall be issued in accordance with and subject to the terms of the Escrow Agreement in the names of Indemnifying Holders, but shall be delivered at the Effective Time to the Escrow Agent to be held and distributed in accordance with the provisions of Article IX hereof and the Escrow Agreement and subject to claims for indemnification pursuant to Article IX hereof. 3. Section 2.3(d) is hereby amended in its entirety to read as follows: Adjustment of Exchange Ratio or Allocation. If, between the date of this Agreement and the Effective Time, the outstanding shares of SAFLINK Common Stock shall have been changed into a different number of shares or a different class by reason of any reclassification, recapitalization, split-up, combination, exchange of shares or readjustment, the number of shares of SAFLINK Common Stock to be delivered pursuant to this Agreement shall be correspondingly adjusted. No adjustment shall be made in the Exchange Ratio or the number of shares of SAFLINK Common Stock issued in the Merger as a result of any consideration (in any form whatsoever) received by Jotter from the date of this Agreement to the Effective Time as a 2 result of any exercise, conversion or exchange of Jotter Options, Jotter Warrants, Jotter Preferred Stock, or convertible notes of Jotter. 4. Section 2.6 is hereby amended in its entirety to read as follows: 2.6 Registration. The Merger Shares shall be registered and issued pursuant to a registration statement on Form S-4 ("Form S-4") in accordance with the Securities Act of 1933, as amended (the "Securities Act") and the rules and regulations promulgated thereunder by the SEC. SAFLINK and the Affiliates listed on Schedule 6.8 shall be required to enter into the Registration Rights Agreement, in the form attached hereto as Exhibit 7.1(f). 5. Section 2.7 is hereby amended in its entirety to read as follows: Alberta and British Columbia Resident Holders. The Merger Shares to be issued pursuant to Section 2.3 in connection with the Merger will be issued to Holders and the holders of MindQuake capital stock resident in Alberta ("Alberta Holders") and British Columbia ("B.C. Holders") pursuant to an exemption from applicable registration and prospectus requirements in reliance on sections 65(1)(p) and 107(1)(I) of the Securities Act (Alberta) and section 45(2)(9) and 74(1)(8) of the Securities Act (British Columbia). Subject to certain exceptions, the resale of the Merger Shares by Alberta Holders and B.C. Holders is subject to restrictions which restrictions may be set out as a legend on the certificates representing the Merger Shares. 6. Section 3.5(b) is hereby amended in its entirety to read as follows: Jotter will prepare a balance sheet ("Closing Balance Sheet") in accordance with GAAP, applied on a consistent basis, two (2) days before the Closing Date. Such Closing Balance Sheet shall be delivered at Closing and notwithstanding the exceptions set forth in the penultimate sentence in Section 3.5(a), the Closing Balance Sheet shall not reflect liabilities (including accounting and legal expenses relating to the transactions contemplated hereby not to exceed $100,000) in excess of $2,100,000 in the aggregate. 7. Section 3.27 is hereby amended in its entirety to read as follows: Reporting Status. Neither Jotter nor any of its Subsidiaries is, or is under any obligation to become, a reporting issuer or the equivalent in any Canadian territory or province. 8. Section 3.28 is hereby amended in its entirety to read as follows: Knowledge. For purposes of this Agreement, the phrase "to the knowledge of" shall mean the actual knowledge of such Person. 9. Section 3.29 is hereby deleted in its entirety. 10. Section 5.8 is hereby amended by inserting "Except as provided in Section 6.18 of the Agreement," before "neither Jotter nor any of its Subsidiaries..." 3 11. Section 6.13 is hereby amended in its entirety to read as follows: Preparation of Form S-4 and Joint Proxy Statement; Shareholder Vote. (a) Form S-4 and Joint Proxy Statement. As promptly as practicable after the execution of this Agreement, (i) SAFLINK and Jotter shall prepare and file with the SEC a joint proxy statement (together with any amendments thereof or supplements thereto, the "Proxy Statement") relating to the meetings of Jotter's shareholders and SAFLINK's shareholders to be held to consider the approval and adoption of this Agreement and the Merger by Jotter's shareholders and SAFLINK's shareholders, and SAFLINK shall prepare and file with the SEC the Form S-4. (ii) Each of SAFLINK and Jotter shall use reasonable efforts to have the Form S-4 declared effective under the Securities Act as promptly as practicable after such filing and to keep the Form S-4 effective for so long as necessary to complete the Merger. Jotter will use all reasonable efforts to cause the Proxy Statement to be mailed to Jotter's shareholders as promptly as practicable after the Form S-4 is declared effective under the Securities Act. SAFLINK shall take any action (other than qualifying to do business in any jurisdiction in which it is not now so qualified to file a general consent to service of process) required to be taken under any applicable state or provincial securities laws in connection with the issuance of SAFLINK Common Stock in the Merger, and Jotter shall furnish all information concerning Jotter as may be reasonably requested in connection with any such action. No filing of, or amendment or supplement to ,or correspondence to the SEC or its staff with respect to the Form S-4 will be made by SAFLINK, or with respect to the Proxy Statement will be made by SAFLINK or Jotter, without providing the other party a reasonable opportunity to review and comment thereon. SAFLINK will advise Jotter promptly after it receives notice thereof, of the time when the Form S-4 has become effective or any supplement or amendment thereto has been filed, the issuance of any stop order, the suspension of the qualification of the SAFLINK Common Stock issued in connection with the Merger for offering or sale in any jurisdiction of the United States and Canada in which any registered holder or beneficial holder of capital stock of Jotter has an address of record on the record date for determining the shareholders entitled to notice of and to vote on the principal terms of this Agreement and the Merger, or any request by the SEC for amendment of the Form S-4 or the Proxy Statement or comments thereon and responses thereto or requests by the SEC for additional information and will, as promptly as practicable, provide to Jotter copies of all correspondence and filings with the SEC with respect to the Form S-4. If at any time prior to the Effective Time any information relating to Jotter or SAFLINK, or any of their affiliates, directors or officers, should be discovered by Jotter or SAFLINK that should be set forth in an amendment or supplement to the Form S-4 or Proxy Statement, so that any of such documents would include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party that discovers such information shall promptly notify the other parties hereto, and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and, to the extent required by law, disseminated to the shareholders of SAFLINK and Jotter. 4 (b) Jotter shall take all action necessary under all applicable Legal Requirements to solicit the vote of the shareholders of Jotter entitled to vote upon the principal terms of this Agreement, the Plan of Merger and the Merger and will, as promptly as practicable, mail to each holder of capital stock of Jotter a copy of the Proxy Statement, a form of proxy, and such other documents as SAFLINK deems are necessary to comply with applicable law or are otherwise reasonably appropriate. Jotter shall use its best efforts to ensure that the Jotter Required Shareholder Vote will be obtained as promptly as practicable after the Proxy Statement is first sent to the shareholders of Jotter. Jotter shall ensure that the Jotter Required Shareholder Vote is obtained in compliance with all applicable Legal Requirements. (c) The Board of Directors of Jotter shall take all action necessary under all applicable Legal Requirements to solicit the vote of the shareholders of Jotter and to recommend (subject to no conditions or qualifications) that Jotter's shareholders approve the principal terms of this Agreement, the Plan of Merger and the Merger. The Proxy Statement shall include a statement to such effect. Neither the Board of Directors of Jotter nor any committee thereof shall withdraw, amend or modify, or propose or resolve to withdraw, amend or modify, in a manner adverse to SAFLINK, the recommendation of the Board of Directors of Jotter that Jotter's shareholders approve the principal terms of this Agreement, the Plan of Merger and the Merger. (d) SAFLINK shall take all action necessary under all applicable Legal Requirements to solicit the vote of the shareholders of SAFLINK entitled to vote upon the principal terms of this Agreement, the Plan of Merger and the Merger and will, as promptly as practicable, mail to each holder of capital stock of SAFLINK a copy of the Proxy Statement, a form of proxy, and such other documents as Jotter deems are necessary to comply with applicable law or are otherwise reasonably appropriate. SAFLINK shall use its best efforts to ensure that the SAFLINK Required Shareholder Vote will be obtained as promptly as practicable after the Proxy Statement is first sent to the shareholders of SAFLINK. SAFLINK shall ensure that the SAFLINK Required Shareholder Vote is obtained in compliance with all applicable Legal Requirements. 12. Section 7.1(f) is hereby amended to read as follows: Registration Rights Agreement. The Registration Rights Agreement in the form attached hereto as Exhibit 7.1(f) shall have been executed and delivered by SAFLINK and the Affiliates listed on Schedule 6.8. 13. Section 7.1(j) is hereby amended to read as follows: Canadian Securities Filings. To the extent required, SAFLINK has received discretionary relief or consents from applicable securities regulatory authorities in respect of the distribution of the Merger Shares to Alberta Holders and B.C. Holders. 14. Section 7.1(q) is hereby amended to read as follows: Closing Balance Sheet. Jotter shall have prepared the Closing Balance Sheet in accordance with GAAP, applied on a consistent basis, two (2) days before the Closing Date. 5 Such Closing Balance Sheet shall have been delivered at Closing and notwithstanding the exceptions set forth in the penultimate sentence in Section 3.5(a), the Closing Balance Sheet shall not reflect liabilities (including accounting and legal expenses relating to the transactions contemplated hereby not to exceed $100,000) in excess of $2,100,000 in the aggregate. 15. Section 7.1 is hereby amended to add Section 7.1(u) to read as follows: (u) Alex Jones, Ltd Note. Jotter and Alex Jones, Ltd. shall have executed and delivered to SAFLINK an amendment to the promissory note with Alex Jones, Ltd., in the form attached hereto as Exhibit 7.1(u). 16. Section 7.2(e) is hereby amended to read as follows: Opinions of Counsel. SAFLINK shall have received (i) an opinion dated the Closing Date of Titus, Brueckner & Berry, P.C., counsel to Jotter, in the form of Exhibit 7.2(e)(i); and (ii) an opinion dated the Closing Date of Shea Nerland Calnan, Canadian counsel to Jotter in the form of Exhibit 7.2(e)(ii). 17. Sections 7.2(m) - (q) are hereby amended to read as follows: (m) Other Documents and Actions. The Termination Agreements described in Section 6.14 shall have been executed by all parties thereto and delivered to SAFLINK and shall be in full force and effect. (n) Non-Compete Agreements. Signing Holders shall have executed and delivered to SAFLINK an Agreement Not to Compete in the form attached hereto as Exhibit 7.2(n), respectively. (o) Fairness Opinion. SAFLINK shall have received an opinion from H.C. Wainwright & Co., Inc. to the effect that the terms of the transactions contemplated herein are fair from a financial point of view to the shareholders of SAFLINK. (p) Due Diligence. SAFLINK and the SAFLINK Representatives shall have received all information concerning the business, finances, properties and personnel of Jotter and its Subsidiaries reasonably requested by it and SAFLINK shall have determined to its sole satisfaction that the business, financial, legal, and technical aspects of Jotter are as represented by Jotter and no adverse fact or circumstance as determined in SAFLINK's sole discretion relating to the business, financial condition or operations of Jotter shall have come to the attention of SAFLINK as a result of such investigation. (q) Effective Registration Statement. The Form S-4 shall have been declared effective by the SEC. 18. Effect. Except as otherwise set forth in this Amendment, the Agreement shall remain in full force and effect in accordance with its terms. 19. Governing Law. This agreement shall be governed by, construed under and enforced in accordance with the laws of the State of Delaware without regard to any conflict of law principles thereof. 6 20. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 7 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day and year first above written. SAFLINK CORPORATION By: /s/ Jeffrey P. Anthony Jeffrey P. Anthony Chief Executive Officer JOTTER TECHNOLOGIES INC. By: /s/ Glenn Argenbright Glenn Argenbright, President SIGNING HOLDERS /s/ Glenn Argenbright Glenn Argenbright, An Individual /s/ Robert Smibert Robert Smibert, An Individual /s/ Jodi L. Tessier Jodie Tessier, An Individual /s/ Kenneth J. Wilton Kenneth J. Wilton, An Individual /s/ Judy Wilton Judy Wilton, An Individual 8 Virgin Technologies Inc. By: /s/ Robert Smibert Name: Robert Smibert Its: President K & J Wilton Limited Partnership By: /s/ Kenneth J. Wilton Name: Kenneth J. Wilton Its: General Partner KJWILTON, INC. By: /s/ Kenneth J. Wilton Name: Kenneth J. Wilton Its Ken and Judy Wilton JT ROS By: /s/ Kenneth J. Wilton; /s/ Judy Wilton Name: Kenneth J. Wilton Judy Wilton 9 EXHIBITS Exhibit 2.1 Plan of Merger Exhibit 2.2(b) Surviving Corporation's Amended and Restated Certificate of Incorporation Exhibit 2.2(c) Surviving Corporation's Bylaws Exhibit 6.7(a) Jotter Voting Agreement Exhibit 6.7(b) SAFLINK Voting Agreement Exhibit 6.8 Jotter Affiliate Agreement Exhibit 6.14 Termination Agreement Exhibit 6.16 MindQuake Agreement Exhibit 7.1(f) Registration Rights Agreement Exhibit 7.1(i) Escrow Agreement Exhibit 7.1(r) Holder Lock Up Agreement Exhibit 7.1(s) Employee Lock Up Agreement Exhibit 7.1(u) Promissory Note Exhibit 7.2(e)(i) Form of Opinion of Titus, Brueckner & Berry, P.C. Exhibit 7.2(e)(ii) Form of Opinion of Shea Nerland Calnan Exhibit 7.2 (n) Non-Compete Agreements Exhibit 7.3 (f) Form of Opinion of Baker & McKenzie SCHEDULES Schedule 2.3 (c)(ii)(A)Indemnifying Holders Schedule 3.1 (a) Qualified Jurisdictions of Jotter and Subsidiaries Schedule 3.2 (a)(i) Signing Holders' Number of Shares Schedule 3.2 (a)(ii) Restrictions on Transfer Schedule 3.2 (b)(i) Jotter Common Stock subject to Restrictions Schedule 3.2 (b)(ii) Jotter Subsidiaries' capital stock subject to Restrictions Schedule 3.2 (c) Jotter Equity Securities Schedule 3.2 (d) Jotter's and its Subsidiaries Shareholders Schedule 3.2 (e) Jotter Equity-Related Incentive Plans Schedule 3.2 (f)(ii) Accelerated Vesting of Jotter Options and Warrants Schedule 3.2 (g) Jotter Voting Agreements Schedule 3.2 (h) Prior Securities Issuance Schedule 3.3 Equity Investments Schedule 3.4 Required Consents Schedule 3.5 Jotter Financial Statements Exceptions Schedule 3.6 Business Changes Schedule 3.7 (a) Assets and Properties without Good Title Schedule 3.7 (b) Leased/Option to Purchase Real Property Schedule 3.7 (e) Required Permits, Consents and Approvals Schedule 3.10 (a) Directors, Officers, Employees, and Consultants Schedule 3.10 (b) Employment Contracts Schedule 3.10 (c) Employment Laws and Practices 10 Schedule 3.11 Compliance with Law Schedule 3.13 Litigation Schedule 3.14 Contracts Schedule 3.15 (a) Contracts in Default Schedule 3.15 (b) Contracts in Material Default Schedule 3.16 Customers Schedule 3.17 Intellectual Property Disclosure Schedule 3.18 Insurance Schedule 3.19 Bank Accounts Schedule 3.21 Certain Advances Schedule 3.22 Related Parties Schedule 3.23 (a) Employee Benefit Plans Schedule 3.23 (d) Benefits Arrangements Schedule 4.4 SAFLINK Capital Structure Obligations Schedule 5.9 New Employees Schedule 6.6 Treatment of Plans, Agreements and Options Schedule 6.7 (a) Jotter Majority Shareholders Schedule 6.7 (b) SAFLINK Majority Shareholders Schedule 6.8 Affiliates Schedule 6.14 Agreements to be Terminated Schedule 6.16 MindQuake Shareholders Schedule 7.1(s) List of Employees Subject to Lock Up Agreement 11 EX-10.3 3 0003.txt VOTING AGREEMENT BETWEEN SAFLINK & RMS Exhibit 10.3 VOTING AGREEMENT ---------------- THIS VOTING AGREEMENT (this "Agreement") is made as of the 7th day of September, 2000 by and between SAFLINK Corporation, a Delaware corporation ("Company"), and the person or entity whose name appears on the signature page hereto ("Stockholder"); WHEREAS, Stockholder owns the number of shares of Company's capital stock, set forth on the signature page hereto (all of such shares now owned and which may hereafter be acquired by Stockholder from any source prior to the termination of this Agreement, the "Company Shares"); WHEREAS, Jotter Technologies Inc. ("Jotter") and the Company have entered into that certain Agreement and Plan of Reorganization among Jotter, the Company and certain shareholders of Jotter of even date herewith (the "Merger Agreement") pursuant to which a subsidiary of the Company ("Merger Subsidiary") will be merged with and into Jotter (the "Merger") (capitalized terms used and not defined herein have the respective meaning ascribed to them in the Merger Agreement); and WHEREAS, as an inducement and a condition to entering into the Merger Agreement, Company has required that Stockholder agree, and Stockholder has agreed, to enter into this Agreement. NOW THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS: 1. Definitions. For purposes of this Agreement, "Person" shall mean an ----------- individual, corporation, partnership, joint venture, association, trust, unincorporated organization or other entity. "Beneficial ownership," "beneficially own" and similar terms shall refer to beneficial ownership within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13 d-3 thereunder. 2. Provisions Concerning the Company Shares. During the period ---------------------------------------- commencing on the date hereof and continuing until the first to occur of the Effective Time or termination of the Merger Agreement in accordance with its terms, Stockholder agrees that Stockholder shall, at any meeting of the holders of Company Shares, however called, or in connection with any written consent of the holders of Company Shares, vote (or cause to be voted) the Company Shares (if any) then held of record or beneficially owned by such Stockholder, (a) in favor of the Merger, the execution and delivery by Company of the Merger Agreement and the Plan of Merger and the approval of the terms thereof and each other action contemplated by the Merger Agreement and any actions required in furtherance thereof, (b) against any action or agreement that would result in a breach in any material respect of any covenant, representation or warranty of Company under the Merger Agreement, (c) in favor of the adoption of a new Stock Option Plan of the Comany ("Plan"), (d) in favor of amending the Company's Certificate of Incorporation to increase the Company's authorized common stock to 100,000,000 shares ("Amendment of Certificate"), and (e) in favor of each other action contemplated by this Agreement and any actions required in furtherance hereof. Stockholder agrees not to enter into 1 any agreement or understanding with any Person the effect of which would be inconsistent or violative of the provisions and agreements contained in this Section 2. 3. Covenants, Representations and Warranties of Stockholder. -------------------------------------------------------- Stockholder hereby represents and warrants to and agrees with the Company as follows: (a) Ownership of Company Shares. Stockholder is the record and --------------------------- beneficial owner of the Company Shares set forth on the signature page hereto. On the date hereof, Stockholder's Company Shares constitute all of the capital stock of Company that Stockholder has the right to vote with respect to the transactions contemplated by the Merger Agreement and with respect to the adoption of the Plan and Amendment of Certificate. Stockholder has sole voting power and sole power to issue instructions with respect to the matters set forth in Section 2 hereof, sole power of disposition, sole power of conversion, sole power to demand dissenter's rights and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of Stockholder's Company Shares, with no limitations, qualifications or restrictions on such rights, subject to applicable securities laws and the terms of this Agreement. (b) Power; Binding Agreement. Stockholder has the legal capacity, ------------------------ power and authority to enter into and perform all of its obligations under this Agreement. The execution, delivery and performance of this Agreement by Stockholder will not violate any other agreement to which the Stockholder is a party including, without limitation, any voting agreement, proxy arrangement, pledge agreement, shareholders' agreement or voting trust. This Agreement has been duly and validly executed and delivered by Stockholder and constitutes a valid and binding agreement of Stockholder, enforceable against Stockholder in accordance with its terms. There is no beneficiary or holder of a voting trust certificate or other interest of any trust of which Stockholder is a trustee whose consent is required for the execution and delivery of this Agreement or the consummation by Stockholder of the transactions contemplated hereby. (c) No Conflicts. None of the execution and delivery of this ------------ Agreement by Stockholder, the consummation by Stockholder of the actions contemplated hereby or compliance by Stockholder with any of the provisions hereof will (i) conflict with or result in any breach of any applicable organizational documents applicable to Stockholder, (ii) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, modification or acceleration (herein collectively, a "Default")) under any of the terms, conditions or provisions of any note, loan agreement, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which Stockholder is a party or by which Stockholder or any of its properties or assets may be bound, (iii) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to Stockholder or any of its properties or assets or (iv) require any filing with, authorization, consent or approval of (herein collectively, a "Consent"), any state or federal authority; which Default or violation or the failure to obtain any Consent, in the case of clauses (ii), (iii) and (iv) above, would have a material adverse effect on the ability of Stockholder to perform Stockholder's obligations hereunder. (d) No Voting Agreements. Except as permitted by this Agreement, the -------------------- Company Shares of Stockholder and the certificates representing such Company Shares are now, and at all times during the term hereof will be, held by Stockholder, or by a nominee or custodian for the benefit of Stockholder, free and clear of all proxies, voting trusts or agreements, understandings 2 or arrangements or any other encumbrances limiting or granting to any other person the right to vote the Company Shares, except for any such encumbrances or proxies arising hereunder. (e) No Solicitation. Stockholder shall not, directly or indirectly, --------------- solicit (including by way of furnishing information), initiate, facilitate or respond to any inquiries or the making of any proposal or offer by any Person (other than the Company or any affiliate of the Company) concerning any merger, consolidation, business combination, tender offer, exchange offer, sale of assets, sale of Company Shares or capital stock or debt securities or similar transactions involving Company (or any subsidiary, division or operating or principal business unit of Company), or enter into any agreement, arrangement or understanding with respect to such a transaction. Stockholder further agrees that, if Stockholder receives any such inquiry or proposal, then Stockholder shall promptly inform the Company of the existence thereof and the nature of the inquiry or terms of the proposal, in each case in reasonable detail; and Stockholder will immediately cease (and will ensure that his or her Representatives cease) and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. (f) Non-Interference. Stockholder shall not, directly or indirectly, ---------------- take any action that would make any representation or warranty of Stockholder contained herein untrue or incorrect or have the effect of preventing or disabling Stockholder from performing its obligations under this Agreement. (g) Reliance by the Company. Stockholder understands and acknowledges ----------------------- that the Company is entering into the Merger Agreement upon Stockholder's execution and delivery of this Agreement. (h) Waiver of Appraisal Rights. Stockholder hereby irrevocably and -------------------------- unconditionally waives, and agrees to cause to be waived and to prevent the exercise of, any rights of appraisal, any dissenter's rights and any similar rights relating to the Merger or any related transaction that Stockholder or any other Person may have by virtue of Stockholder's beneficial or record ownership of any shares of Company capital stock. 4. Covenants, Representations and Warranties of the Company. The -------------------------------------------------------- Company hereby represents and warrants to each Stockholder as follows: (a) Power; Binding Agreement. The Company has the corporate power and ------------------------ authority to enter into and perform all of its obligations under this Agreement. The execution, delivery and performance of this Agreement by the Company will not violate any other agreement to which it is a party. This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms. (b) No Conflicts. None of the execution and delivery of this ------------ Agreement by the Company, the consummation by the Company of the transactions contemplated hereby or compliance by the Company with any of the provisions hereof shall (i) conflict with or result in any breach of any applicable organizational documents applicable to the Company, (ii) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, loan agreement, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, 3 agreement or other instrument or obligation of any kind to which the Company is a party or by which the Company or any of its properties or assets may be bound, (iii) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to the Company or any of its properties or assets or (iv) require any filing with, authorization, consent or approval of, any state or federal authority, except as set forth in the Merger Agreement. 5. Further Assurances. From time to time, at the Company's request ------------------ and without further consideration, Stockholder shall execute and deliver such additional documents and take all such further lawful action as may be necessary or desirable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement. 6. Stop Transfer. Stockholder agrees that it shall not request that ------------- Company or any other Person register the transfer (by book-entry or otherwise) of any certificate or uncertificated interest representing any of Stockholder's Company Shares, unless such transfer is made in compliance with this Agreement and unless the transferee agrees in writing, in form and substance satisfactory to the Company, to be bound by the provisions hereof for the benefit of the Company. 7. Termination. This Agreement shall terminate upon the earlier to ----------- occur of (a) the termination of the Merger Agreement in accordance with its terms, (b) the written agreement of the parties hereto to terminate this Agreement, or (c) the Effective Time of the Merger. 8. Confidentiality. Stockholder recognizes that successful --------------- consummation of the transactions contemplated by this Agreement may be dependent upon confidentiality with respect to the matters referred to herein. In this connection, pending public disclosure thereof, each Stockholder agrees that Stockholder shall not, and Stockholder shall use its best efforts to cause its Representatives not to, disclose or discuss such matters with anyone not a party to this Agreement (other than Stockholder's Representatives, if any) without the prior written consent of the Company, except for disclosures which Stockholder's counsel advises are necessary in order to fulfill Stockholder's obligations imposed by law, in which event Stockholder shall give prior notice of such disclosure to the Company as promptly as practicable and in any event prior to the time any such disclosure is made. 9. Miscellaneous. ------------- (a) Entire Agreement. Except as otherwise provided herein or in the ---------------- Merger Agreement, this Agreement contains the entire understanding of the parties with respect to the matters covered herein and supersedes all prior agreements and understandings, written or oral, between the parties relating to the subject matter hereof. (b) Binding Agreement. This Agreement and the obligations hereunder ----------------- shall attach to the Company Shares and shall be binding upon any Person to which record or beneficial ownership of such Company Shares shall pass, whether by operation of law or otherwise. Notwithstanding any transfer of Company Shares, the transferor shall remain liable for the performance of all obligations under this Agreement of the transferor. (c) Assignment. This Agreement shall not be assignable by operation ---------- of law or otherwise without the prior written consent of the other parties, provided that the Company may 4 assign, in its sole discretion, its rights and obligations hereunder to any wholly-owned direct or indirect subsidiary of the Company. (d) Amendments, Waivers, Etc. This Agreement may not be amended, ------------------------ changed, supplemented, waived or otherwise modified or terminated, except upon the execution and delivery of a written agreement executed by the parties hereto. (e) Notices. Unless otherwise provided, any notice, request, demand ------- or other communication required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified, or when sent by telecopier (with receipt confirmed), or overnight courier service, or upon deposit with the United States Post Office, by registered or certified mail, postage prepaid and addressed as follows (or at such other address as a party may designate by notice to the other): If to the Company: SAFLINK Corporation 18650 N.E. 67/th/ Court Suite 210 Redmond, WA 98052 Attention: Chief Financial Officer Telecopier: (425) 497-1778 with a copy to: Baker & McKenzie 815 Connecticut Avenue, N.W. Washington, D.C. 20006 Attention: Thomas J. Egan, Jr., Esq. Telecopier: (202) 452-7074 If to the Stockholder, to the address set forth on the signature page hereto. (f) Severability. If one or more provisions of this Agreement are ------------ held to be unenforceable, invalid or void by a court of competent jurisdiction, such provision shall be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. (g) Specific Performance. Each of the parties hereto recognizes and -------------------- acknowledges that a breach by it of any covenants or agreements contained in this Agreement will cause the other party to sustain damages for which it would not have an adequate remedy at law for money damages, and, therefore, in the event of any such breach, the aggrieved party shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. (h) Remedies Cumulative. All rights, powers and remedies provided ------------------- under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any right, power or remedy by any party shall not preclude the simultaneous or later exercise of any other right, power or remedy by such party. 5 (i) No Waiver. The observance of any term of this Agreement may be ---------- waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the party against whom such waiver is sought to be enforced. No waiver by either party of any default with respect to any provision, condition or requirement hereof shall be deemed to be a continuing waiver in the future thereof or a waiver of any other provision, condition or requirement hereof; nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (j) No Third Party Beneficiaries. This Agreement is not intended to ---------------------------- be for the benefit of, and shall not be enforceable by, any Person that is not a party hereto. (k) Governing Law. This Agreement shall be governed and construed in ------------- accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof. (l) Titles and Subtitles. The titles and subtitles used in this -------------------- Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. Any reference in this Agreement to a statutory provision or rule or regulation promulgated thereunder shall be deemed to include any similar successor statutory provision or rule or regulation promulgated thereunder. (m) Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 6 IN WITNESS WHEREOF, the parties have executed this Agreement as of the ------------------ date first above written. SAFLINK CORPORATION By: /s/ James W. Shepperd Name: James W. Shepperd Title: CFO RMS LIMITED PARTNERSHIP By: /s/ Richard W. Baker Name: Richard W. Baker Title: Secretary/Treasurer of Crystal Diamond, Inc. General Partner Address: Shares Beneficially Owned (indicate class or series of stock and manner held, if not record owner): [SIGNATURE PAGE TO VOTING AGREEMENT] 7 EX-10.4 4 0004.txt VOTING AGREEMENT BETWEEN SAFLINK & HSN Exhibit 10.4 VOTING AGREEMENT ---------------- THIS VOTING AGREEMENT (this "Agreement") is made as of the 15th day of September, 2000 by and between SAFLINK Corporation, a Delaware corporation ("Company"), and the person or entity whose name appears on the signature page hereto ("Stockholder"); WHEREAS, Stockholder owns the number of shares of Company's capital stock, set forth on the signature page hereto (all of such shares now owned and which may hereafter be acquired by Stockholder from any source prior to the termination of this Agreement, the "Company Shares"); WHEREAS, Jotter Technologies Inc. ("Jotter") and the Company have entered into that certain Agreement and Plan of Reorganization among Jotter, the Company and certain shareholders of Jotter of even date herewith (the "Merger Agreement") pursuant to which a subsidiary of the Company ("Merger Subsidiary") will be merged with and into Jotter (the "Merger") (capitalized terms used and not defined herein have the respective meaning ascribed to them in the Merger Agreement); and WHEREAS, as an inducement and a condition to entering into the Merger Agreement, Company has required that Stockholder agree, and Stockholder has agreed, to enter into this Agreement. NOW THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS: 1. Definitions. For purposes of this Agreement, "Person" shall mean an ----------- individual, corporation, partnership, joint venture, association, trust, unincorporated organization or other entity. "Beneficial ownership," "beneficially own" and similar terms shall refer to beneficial ownership within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13 d-3 thereunder. 2. Provisions Concerning the Company Shares. During the period ---------------------------------------- commencing on the date hereof and continuing until the first to occur of the Effective Time or termination of the Merger Agreement in accordance with its terms, Stockholder agrees that Stockholder shall, at any meeting of the holders of Company Shares, however called, or in connection with any written consent of the holders of Company Shares, vote (or cause to be voted) the Company Shares (if any) then held of record or beneficially owned by such Stockholder, (a) in favor of the Merger, the execution and delivery by Company of the Merger Agreement and the Plan of Merger and the approval of the terms thereof and each other action contemplated by the Merger Agreement and any actions required in furtherance thereof, (b) against any action or agreement that would result in a breach in any material respect of any covenant, representation or warranty of Company under the Merger Agreement, (c) in favor of the adoption of a new Stock Option Plan of the Company ("Plan"), (d) in favor of amending the Company's Certificate of Incorporation to increase the Company's authorized common stock to 100,000,000 shares 1 ("Amendment of Certificate"), and (e) in favor of each other action contemplated by this Agreement and any actions required in furtherance hereof. Stockholder agrees not to enter into any agreement or understanding with any Person the effect of which would be inconsistent or violative of the provisions and agreements contained in this Section 2. 3. Covenants, Representations and Warranties of Stockholder. -------------------------------------------------------- Stockholder hereby represents and warrants to and agrees with the Company as follows: (a) Ownership of Company Shares. Stockholder is the record and --------------------------- beneficial owner of the Company Shares set forth on the signature page hereto. On the date hereof, Stockholder's Company Shares constitute all of the capital stock of Company that Stockholder has the right to vote with respect to the transactions contemplated by the Merger Agreement and with respect to the adoption of the Plan and Amendment of Certificate. Stockholder has sole voting power and sole power to issue instructions with respect to the matters set forth in Section 2 hereof, sole power of disposition, sole power of conversion, sole power to demand dissenter's rights and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of Stockholder's Company Shares, with no limitations, qualifications or restrictions on such rights, subject to applicable securities laws and the terms of this Agreement. (b) Power; Binding Agreement. Stockholder has the legal capacity, power ------------------------ and authority to enter into and perform all of its obligations under this Agreement. The execution, delivery and performance of this Agreement by Stockholder will not violate any other agreement to which the Stockholder is a party including, without limitation, any voting agreement, proxy arrangement, pledge agreement, shareholders' agreement or voting trust. This Agreement has been duly and validly executed and delivered by Stockholder and constitutes a valid and binding agreement of Stockholder, enforceable against Stockholder in accordance with its terms. There is no beneficiary or holder of a voting trust certificate or other interest of any trust of which Stockholder is a trustee whose consent is required for the execution and delivery of this Agreement or the consummation by Stockholder of the transactions contemplated hereby. (c) No Conflicts. None of the execution and delivery of this Agreement ------------ by Stockholder, the consummation by Stockholder of the actions contemplated hereby or compliance by Stockholder with any of the provisions hereof will (i) conflict with or result in any breach of any applicable organizational documents applicable to Stockholder, (ii) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, modification or acceleration (herein collectively, a "Default")) under any of the terms, conditions or provisions of any note, loan agreement, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which Stockholder is a party or by which Stockholder or any of its properties or assets may be bound, (iii) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to Stockholder or any of its properties or assets or (iv) require any filing with, authorization, consent or approval of (herein collectively, a "Consent"), any state or federal authority; which Default or violation or the failure to obtain any Consent, in the case of clauses (ii), (iii) and (iv) above, would have a material adverse effect on the ability of Stockholder to perform Stockholder's obligations hereunder. (d) No Voting Agreements. Except as permitted by this Agreement, the -------------------- Company Shares of Stockholder and the certificates representing such Company Shares are now, and at all 2 times during the term hereof will be, held by Stockholder, or by a nominee or custodian for the benefit of Stockholder, free and clear of all proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances limiting or granting to any other person the right to vote the Company Shares, except for any such encumbrances or proxies arising hereunder. (e) No Solicitation. Stockholder shall not, directly or indirectly, --------------- solicit (including by way of furnishing information), initiate, facilitate or respond to any inquiries or the making of any proposal or offer by any Person (other than the Company or any affiliate of the Company) concerning any merger, consolidation, business combination, tender offer, exchange offer, sale of assets, sale of Company Shares or capital stock or debt securities or similar transactions involving Company (or any subsidiary, division or operating or principal business unit of Company), or enter into any agreement, arrangement or understanding with respect to such a transaction. Stockholder further agrees that, if Stockholder receives any such inquiry or proposal, then Stockholder shall promptly inform the Company of the existence thereof and the nature of the inquiry or terms of the proposal, in each case in reasonable detail; and Stockholder will immediately cease (and will ensure that his or her Representatives cease) and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. (f) Non-Interference. Stockholder shall not, directly or indirectly, ---------------- take any action that would make any representation or warranty of Stockholder contained herein untrue or incorrect or have the effect of preventing or disabling Stockholder from performing its obligations under this Agreement. (g) Reliance by the Company. Stockholder understands and acknowledges ----------------------- that the Company is entering into the Merger Agreement upon Stockholder's execution and delivery of this Agreement. (h) Waiver of Appraisal Rights. Stockholder hereby irrevocably and -------------------------- unconditionally waives, and agrees to cause to be waived and to prevent the exercise of, any rights of appraisal, any dissenter's rights and any similar rights relating to the Merger or any related transaction that Stockholder or any other Person may have by virtue of Stockholder's beneficial or record ownership of any shares of Company capital stock. 4. Covenants, Representations and Warranties of the Company. The -------------------------------------------------------- Company hereby represents and warrants to each Stockholder as follows: (a) Power; Binding Agreement. The Company has the corporate power and ------------------------ authority to enter into and perform all of its obligations under this Agreement. The execution, delivery and performance of this Agreement by the Company will not violate any other agreement to which it is a party. This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms. (b) No Conflicts. None of the execution and delivery of this Agreement ------------ by the Company, the consummation by the Company of the transactions contemplated hereby or compliance by the Company with any of the provisions hereof shall (i) conflict with or result in any breach of any applicable organizational documents applicable to the Company, (ii) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or 3 acceleration) under any of the terms, conditions or provisions of any note, loan agreement, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which the Company is a party or by which the Company or any of its properties or assets may be bound, (iii) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to the Company or any of its properties or assets or (iv) require any filing with, authorization, consent or approval of, any state or federal authority, except as set forth in the Merger Agreement. 5. Further Assurances. From time to time, at the Company's request ------------------ and without further consideration, Stockholder shall execute and deliver such additional documents and take all such further lawful action as may be necessary or desirable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement. 6. Stop Transfer. Stockholder agrees that it shall not request that ------------- Company or any other Person register the transfer (by book-entry or otherwise) of any certificate or uncertificated interest representing any of Stockholder's Company Shares, unless such transfer is made in compliance with this Agreement and unless the transferee agrees in writing, in form and substance satisfactory to the Company, to be bound by the provisions hereof for the benefit of the Company. 7. Termination. This Agreement shall terminate upon the earlier to ----------- occur of (a) the termination of the Merger Agreement in accordance with its terms, (b) the written agreement of the parties hereto to terminate this Agreement, or (c) the Effective Time of the Merger. 8. Confidentiality. Stockholder recognizes that successful --------------- consummation of the transactions contemplated by this Agreement may be dependent upon confidentiality with respect to the matters referred to herein. In this connection, pending public disclosure thereof, each Stockholder agrees that Stockholder shall not, and Stockholder shall use its best efforts to cause its Representatives not to, disclose or discuss such matters with anyone not a party to this Agreement (other than Stockholder's Representatives, if any) without the prior written consent of the Company, except for disclosures which Stockholder's counsel advises are necessary in order to fulfill Stockholder's obligations imposed by law, in which event Stockholder shall give prior notice of such disclosure to the Company as promptly as practicable and in any event prior to the time any such disclosure is made. 9. Miscellaneous. ------------- (a) Entire Agreement. Except as otherwise provided herein or in the ---------------- Merger Agreement, this Agreement contains the entire understanding of the parties with respect to the matters covered herein and supersedes all prior agreements and understandings, written or oral, between the parties relating to the subject matter hereof. (b) Binding Agreement. This Agreement and the obligations hereunder ----------------- shall attach to the Company Shares and shall be binding upon any Person to which record or beneficial ownership of such Company Shares shall pass, whether by operation of law or otherwise. Notwithstanding any transfer of Company Shares, the transferor shall remain liable for the performance of all obligations under this Agreement of the transferor. 4 (c) Assignment. This Agreement shall not be assignable by operation of ---------- law or otherwise without the prior written consent of the other parties, provided that the Company may assign, in its sole discretion, its rights and obligations hereunder to any wholly-owned direct or indirect subsidiary of the Company. (d) Amendments, Waivers, Etc. This Agreement may not be amended, ------------------------ changed, supplemented, waived or otherwise modified or terminated, except upon the execution and delivery of a written agreement executed by the parties hereto. (e) Notices. Unless otherwise provided, any notice, request, demand or ------- other communication required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified, or when sent by telecopier (with receipt confirmed), or overnight courier service, or upon deposit with the United States Post Office, by registered or certified mail, postage prepaid and addressed as follows (or at such other address as a party may designate by notice to the other): If to the Company: SAFLINK Corporation 18650 N.E. 67/th/ Court Suite 210 Redmond, WA 98052 Attention: Chief Financial Officer Telecopier: (425) 497-1778 with a copy to: Baker & McKenzie 815 Connecticut Avenue, N.W. Washington, D.C. 20006 Attention: Thomas J. Egan, Jr., Esq. Telecopier: (202) 452-7074 If to the Stockholder, to the address set forth on the signature page hereto. (f) Severability. If one or more provisions of this Agreement are held ------------ to be unenforceable, invalid or void by a court of competent jurisdiction, such provision shall be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. (g) Specific Performance. Each of the parties hereto recognizes and -------------------- acknowledges that a breach by it of any covenants or agreements contained in this Agreement will cause the other party to sustain damages for which it would not have an adequate remedy at law for money damages, and, therefore, in the event of any such breach, the aggrieved party shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. (h) Remedies Cumulative. All rights, powers and remedies provided ------------------- under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and 5 not alternative, and the exercise of any right, power or remedy by any party shall not preclude the simultaneous or later exercise of any other right, power or remedy by such party. (i) No Waiver. The observance of any term of this Agreement may be --------- waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the party against whom such waiver is sought to be enforced. No waiver by either party of any default with respect to any provision, condition or requirement hereof shall be deemed to be a continuing waiver in the future thereof or a waiver of any other provision, condition or requirement hereof; nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (j) No Third Party Beneficiaries. This Agreement is not intended to be ---------------------------- for the benefit of, and shall not be enforceable by, any Person that is not a party hereto. (k) Governing Law. This Agreement shall be governed and construed in ------------- accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof. (1) Titles and Subtitles. The titles and subtitles used in this -------------------- Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. Any reference in this Agreement to a statutory provision or rule or regulation promulgated thereunder shall be deemed to include any similar successor statutory provision or rule or regulation promulgated thereunder. (m) Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 6 IN WITNESS WHEREOF, the parties have executed this Agreement as of the ------------------ date first above written. SAFLINK CORPORATION By: /s/ James W. Shepperd Name: James W. Shepperd Title: CFO HOME SHOPPING NETWORK, INC. By: /s/ Robert Rosenblatt Name: Robert Rosenblatt Title: Chief Operating Officer Address: Shares Beneficially Owned (indicate class or series of stock and manner held, if not record owner): [SIGNATURE PAGE TO VOTING AGREEMENT] 7 EX-10.5 5 0005.txt VOTING AGREEMENT BETWEEN SAFLINK & CERTAIN JOTTER Exhibit 10.5 VOTING AGREEMENT ---------------- THIS VOTING AGREEMENT (this "Agreement") is made as of the 20th day of September, 2000 by and between SAFLINK Corporation, a Delaware corporation ("SAFLINK"), and the person or entity whose name appears on the signature page hereto ("Stockholder"). WHEREAS, Stockholder owns the number of shares of Jotter Technologies Inc. ("Company") capital stock, set forth on the signature page hereto (all of such shares now owned and which may hereafter be acquired by Stockholder from any source prior to the termination of this Agreement, the "Company Shares"); WHEREAS, SAFLINK and the Company have entered into that certain Agreement and Plan of Reorganization among SAFLINK, Company and certain shareholders of the Company of even date herewith (the "Merger Agreement") pursuant to which a subsidiary of SAFLINK ("Merger Subsidiary") will be merged with and into Jotter (the "Merger") (capitalized terms used and not defined herein have the respective meaning ascribed to them in the Merger Agreement); and WHEREAS, as an inducement and a condition to entering into the Merger Agreement, SAFLINK has required that Stockholder agree, and Stockholder has agreed, to enter into this Agreement. NOW THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS: 1. Definitions. For purposes of this Agreement, "Person" shall mean ----------- an individual, corporation, partnership, joint venture, association, trust, unincorporated organization or other entity. "Beneficial ownership," "beneficially own" and similar terms shall refer to beneficial ownership within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13 d-3 thereunder. 2. Provisions Concerning the Company Shares. During the period ---------------------------------------- commencing on the date hereof and continuing until the first to occur of the Effective Time or termination of the Merger Agreement in accordance with its terms, Stockholder agrees that Stockholder shall, at any meeting of the holders of Company Shares, however called, or in connection with any written consent of the holders of Company Shares, vote (or cause to be voted) the Company Shares (if any) then held of record or beneficially owned by such Stockholder, (a) in favor of the Merger, the execution and delivery by Company of the Merger Agreement and the Plan of Merger and the approval of the terms thereof and each other action contemplated by the Merger Agreement and this Agreement and any actions required in furtherance thereof and hereof and (b) against any action or agreement that would result in a breach in any material respect of any covenant, representation or warranty of Company under the Merger Agreement. Stockholder 1 agrees not to enter into any agreement or understanding with any Person the effect of which would be inconsistent or violative of the provisions and agreements contained in this Section 2. Stockholder, in furtherance of the transactions contemplated hereby and by the Merger Agreement, and in order to secure the performance of Stockholder's duties under this Agreement, shall concurrently with the execution of this Agreement execute and deliver to SAFLINK an irrevocable proxy, substantially in the form of Exhibit A hereto, and irrevocably appoint --------- SAFLINK or its designees, with full power of substitution, its attorney, agent and proxy to vote (or cause to be voted) or, if applicable, to give consent with respect to, all of the Company Shares in the manner, and with respect to the matters, set forth above. Stockholder acknowledges that the proxy executed and delivered by it shall be coupled with an interest, shall constitute, among other things, an inducement for SAFLINK to enter into the Merger Agreement and the Plan of Merger, shall be irrevocable and binding on any successor in interest of Stockholder and shall not be terminated by operation of law upon the occurrence of any event, including, without limitation, the death or incapacity of Stockholder. Such proxy shall operate to revoke and render void any prior proxy as to the Company Shares heretofore granted by Stockholder. Such proxy shall terminate upon the first to occur of the Effective Time or termination of the Merger Agreement in accordance with its terms (the "Expiration Date"). Stockholder shall promptly cause to be delivered to SAFLINK an additional proxy in the form attached hereto as Exhibit A executed on behalf of the record owner of any outstanding capital stock of Company that Stockholder owned beneficially (but not of record). 3. Covenants, Representations and Warranties of Stockholder. -------------------------------------------------------- Stockholder hereby represents and warrants to and agrees with SAFLINK as follows: (a) Ownership of Company Shares. Stockholder is the record and --------------------------- beneficial owner of the Company Shares set forth on the signature page hereto. On the date hereof, Stockholder's Company Shares constitute all of the capital stock of Company that Stockholder has the right to vote with respect to the transactions contemplated by the Merger Agreement. Stockholder has sole voting power and sole power to issue instructions with respect to the matters set forth in Section 2 hereof, sole power of disposition, sole power of conversion, sole power to demand dissenter's rights and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of Stockholder's Company Shares, with no limitations, qualifications or restrictions on such rights, subject to applicable securities laws and the terms of this Agreement. (b) Power; Binding Agreement. Stockholder has the legal capacity, ------------------------ power and authority to enter into and perform all of its obligations under this Agreement. The execution, delivery and performance of this Agreement by Stockholder will not violate any other agreement to which the Stockholder is a party including, without limitation, any voting agreement, proxy arrangement, pledge agreement, shareholders' agreement or voting trust. This Agreement has been duly and validly executed and delivered by Stockholder and constitutes a valid and binding agreement of Stockholder, enforceable against Stockholder in accordance with its terms. There is no beneficiary or holder of a voting trust certificate or other interest of any trust of which Stockholder is a trustee whose consent is required for the execution and delivery of this Agreement or the consummation by Stockholder of the transactions contemplated hereby. (c) No Conflicts. None of the execution and delivery of this ------------ Agreement by Stockholder, the consummation by Stockholder of the transactions contemplated hereby 2 or compliance by Stockholder with any of the provisions hereof will (i) conflict with or result in any breach of any applicable organizational documents applicable to Stockholder, (ii) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, modification or acceleration (herein collectively, a "Default")) under any of the terms, conditions or provisions of any note, loan agreement, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which Stockholder is a party or by which Stockholder or any of its properties or assets may be bound, (iii) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to Stockholder or any of its properties or assets or (iv) require any filing with, authorization, consent or approval of (herein collectively, a "Consent"), any state or federal authority; which Default or violation or the failure to obtain any Consent, in the case of clauses (ii), (iii) and (iv) above, would have a material adverse effect on the ability of Stockholder to perform Stockholder's obligations hereunder. (d) No Encumbrances. Except as permitted by this Agreement, the --------------- Company Shares of Stockholder and the certificates representing such Company Shares are now, and at all times during the term hereof will be, held by Stockholder, or by a nominee or custodian for the benefit of Stockholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances or proxies arising hereunder. (e) No Solicitation. Stockholder shall not, directly or indirectly, --------------- solicit (including by way of furnishing information), initiate, facilitate or respond to any inquiries or the making of any proposal or offer by any Person (other than the Company or any affiliate of the Company) concerning any merger, consolidation, business combination, tender offer, exchange offer, sale of assets, sale of Company Shares or capital stock or debt securities or similar transactions involving Company (or any subsidiary, division or operating or principal business unit of Company), or enter into any agreement, arrangement or understanding with respect to such a transaction. Stockholder further agrees that, if Stockholder receives any such inquiry or proposal, then Stockholder shall promptly inform the Company of the existence thereof and the nature of the inquiry or terms of the proposal, in each case in reasonable detail; and Stockholder will immediately cease (and will ensure that his or her Representatives cease) and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. (f) Non-Interference. Stockholder shall not, directly or indirectly, ---------------- take any action that would make any representation or warranty of Stockholder contained herein untrue or incorrect or have the effect of preventing or disabling Stockholder from performing its obligations under this Agreement. (g) Reliance by SAFLINK. Stockholder understands and acknowledges ------------------- that SAFLINK is entering into the Merger Agreement in reliance upon Stockholder's execution and delivery of this Agreement. (h) Waiver of Appraisal Rights. Stockholder hereby irrevocably and -------------------------- unconditionally waives, and agrees to cause to be waived and to prevent the exercise of, any rights of appraisal, any dissenter's rights and any similar rights relating to the Merger or any related transaction that 3 Stockholder or any other Person may have by virtue of Stockholder's beneficial or record ownership of any shares of Company capital stock. 4. Covenants, Representations and Warranties of SAFLINK. SAFLINK ---------------------------------------------------- hereby represents and warrants to each Stockholder as follows: (a) Power; Binding Agreement. SAFLINK has the corporate power and ------------------------ authority to enter into and perform all of its obligations under this Agreement. The execution, delivery and performance of this Agreement by SAFLINK will not violate any other agreement to which it is a party. This Agreement has been duly and validly executed and delivered by SAFLINK and constitutes a valid and binding agreement of SAFLINK, enforceable against SAFLINK in accordance with its terms. (b) No Conflicts. None of the execution and delivery of this ------------ Agreement by SAFLINK, the consummation by SAFLINK of the transactions contemplated hereby or compliance by SAFLINK with any of the provisions hereof shall (i) conflict with or result in any breach of any applicable organizational documents applicable to SAFLINK, (ii) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, loan agreement, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which SAFLINK is a party or by which SAFLINK or any of its properties or assets may be bound, (iii) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to SAFLINK or any of its properties or assets or (iv) require any filing with, authorization, consent or approval of, any state or federal authority, except as set forth in the Merger Agreement. 5. Further Assurances. From time to time, at SAFLINK's request and ------------------ without further consideration, Stockholder shall execute and deliver such additional documents and take all such further lawful action as may be necessary or desirable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement. 6. Stop Transfer. Stockholder agrees that it shall not request that ------------- Company or any other Person register the transfer (by book-entry or otherwise) of any certificate or uncertificated interest representing any of Stockholder's Company Shares, unless such transfer is made in compliance with this Agreement and unless the transferee agrees in writing, in form and substance satisfactory to SAFLINK, to be bound by the provisions hereof for the benefit of SAFLINK. 7. Termination. This Agreement shall terminate upon the earlier to ----------- occur of (a) the termination of the Merger Agreement in accordance with its terms, (b) the written agreement of the parties hereto to terminate this Agreement, or (c) the Effective Time of the Merger. 8. Confidentiality. Stockholder recognizes that successful --------------- consummation of the transactions contemplated by this Agreement may be dependent upon confidentiality with respect to the matters referred to herein. In this connection, pending public disclosure thereof, each Stockholder agrees that Stockholder shall not, and Stockholder shall use its best efforts to cause its Representatives not to, disclose or discuss such matters with anyone not a party to this Agreement (other than Stockholder's Representatives, if any) without the prior written consent of SAFLINK, except for disclosures which Stockholder's counsel advises are necessary in 4 order to fulfill Stockholder's obligations imposed by law, in which event Stockholder shall give prior notice of such disclosure to SAFLINK as promptly as practicable and in any event prior to the time any such disclosure is made. 9. Miscellaneous. ------------- (a) Entire Agreement. Except as otherwise provided herein or in the ---------------- Merger Agreement, this Agreement contains the entire understanding of the parties with respect to the matters covered herein and supersedes all prior agreements and understandings, written or oral, between the parties relating to the subject matter hereof. (b) Binding Agreement. This Agreement and the obligations hereunder ----------------- shall attach to the Company Shares and shall be binding upon any Person to which record or beneficial ownership of such Company Shares shall pass, whether by operation of law or otherwise. Notwithstanding any transfer of Company Shares, the transferor shall remain liable for the performance of all obligations under this Agreement of the transferor. (c) Assignment. This Agreement shall not be assignable by operation ---------- of law or otherwise without the prior written consent of the other parties, provided that SAFLINK may assign, in its sole discretion, its rights and obligations hereunder to any wholly-owned direct or indirect subsidiary of SAFLINK. (d) Amendments, Waivers, Etc. This Agreement may not be amended, ------------------------ changed, supplemented, waived or otherwise modified or terminated, except upon the execution and delivery of a written agreement executed by the parties hereto. (e) Notices. Unless otherwise provided, any notice, request, demand ------- or other communication required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified, or when sent by telecopier (with receipt confirmed), or overnight courier service, or upon deposit with the United States Post Office, by registered or certified mail, postage prepaid and addressed as follows (or at such other address as a party may designate by notice to the other): If to SAFLINK: SAFLINK Corporation 18650 N.E. 67/th/ Court Suite 210 Redmond, WA 98052 Attention: Chief Financial Officer Telecopier: (425) 497-1778 with a copy to: Baker & McKenzie 815 Connecticut Ave., N.W. Washington, D.C. 20006 Attention: Thomas J. Egan, Jr., Esq. Telecopier: (202) 452-7074 5 If to the Stockholder, to the address set forth on the signature page hereto. (f) Severability. If one or more provisions of this Agreement are ------------ held to be unenforceable, invalid or void by a court of competent jurisdiction, such provision shall be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. (g) Specific Performance. Each of the parties hereto recognizes and -------------------- acknowledges that a breach by it of any covenants or agreements contained in this Agreement will cause the other party to sustain damages for which it would not have an adequate remedy at law for money damages, and, therefore, in the event of any such breach, the aggrieved party shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. (h) Remedies Cumulative. All rights, powers and remedies provided ------------------- under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any right, power or remedy by any party shall not preclude the simultaneous or later exercise of any other right, power or remedy by such party. (i) No Waiver. The observance of any term of this Agreement may be --------- waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the party against whom such waiver is sought to be enforced. No waiver by either party of any default with respect to any provision, condition or requirement hereof shall be deemed to be a continuing waiver in the future thereof or a waiver of any other provision, condition or requirement hereof; nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (j) No Third Party Beneficiaries. This Agreement is not intended to ---------------------------- be for the benefit of, and shall not be enforceable by, any Person that is not a party hereto. (k) Governing Law. This Agreement shall be governed and construed in ------------- accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof. (l) Titles and Subtitles. The titles and subtitles used in this -------------------- Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. Any reference in this Agreement to a statutory provision or rule or regulation promulgated thereunder shall be deemed to include any similar successor statutory provision or rule or regulation promulgated thereunder. (m) Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 6 IN WITNESS WHEREOF, the parties have executed this Agreement as of the ------------------ date first above written. SAFLINK Corporation By: /s/ James W. Shepperd --------------------- Name: James W. Shepperd Title: Chief Financial Officer /s/ Glenn Argenbright --------------------------- Glenn Argenbright, an individual _______________________________ Address: 9595 Harbour Bay Place Elk Grove, California 95758 Shares Beneficially Owned (indicate class or series of stock and manner held, if not record owner): 77,564 Jotter Options 150,000 Jotter Warrants /s/ Robert Smibert ------------------ ------------------------------- Robert Smibert, an individual Address: 9119 82/nd/ Avenue, Suite 300 Edmonton, Alberta T6C 0Z4 Shares Beneficially Owned (indicate class or series of stock and manner held, if not record owner): 1,812,500 /s/ Jodie Tessier ----------------- JodieTessier, an individual Address: 9119 82/nd/ Avenue, Suite 300 Edmonton, Alberta T6C 0Z4 Shares Beneficially Owned (indicate class or series of stock and manner held, if not record owner): 7 1,819,022 /s/ Kenneth J. Wilton --------------------- Kenneth J. Wilton, an individual Address: 4222 East Brown Road #29 Mesa, Arizona 85205 Shares Beneficially Owned (indicate class or series of stock and manner held, if not record owner): 1,592,500 /s/ Judy Wilton --------------- Judy Wilton, an individual Address: 4222 East Brown Road #29 Mesa, Arizona 85205 Shares Beneficially Owned (indicate class or series of stock and manner held, if not record owner): 1,612,500 Virgin Technologies Inc. By: /s/ Robert Smibert ------------------ Name: Robert Smibert Its President Address: 73 - 52306 RR 212 Sherwood Park, Alberta T8G 1A9 Shares Beneficially Owned (indicate class or series of stock and manner held, if not record owner): 6,522 K & J Wilton Limited Partnership By: /s/ Ken Wilton -------------- Name: Ken Wilton Its President, KJ WILTON Inc. 8 Its General Partner Address: 4222 East Brown Road #29 Mesa, Arizona 85205 Shares Beneficially Owned (indicate class or series of stock and manner held, if not record owner): 396,000 KJWILTON, INC. By: /s/ Ken Wilton -------------- Name: Ken Wilton Its President Address: 4222 East Brown Road #29 Mesa, Arizona 85205 Shares Beneficially Owned (indicate class or series of stock and manner held, if not record owner): 4,000 Ken and Judy Wilton JT ROS By: /s/ Ken and Judy Wilton ----------------------- Name: Its Address: 4222 East Brown Road #29 Mesa, Arizona 85205 Shares Beneficially Owned (indicate class or series of stock and manner held, if not record owner): 52,176 [SIGNATURE PAGE TO VOTING AGREEMENT] 9 EXHIBIT A Irrevocable Proxy In order to secure the performance of the duties of the undersigned pursuant to the Voting Agreement, dated as of ___________, 2000 (the "Voting Agreement"), between the undersigned and SAFLINK Corporation, a Delaware corporation (the "SAFLINK"), a copy of such agreement being attached hereto and incorporated by reference herein, the undersigned hereby irrevocably appoints Jeffery P. Anthony and James W. Shepperd, and each of them, the attorneys, agents and proxies, with full power of substitution in each of them, for the undersigned, and in the name, place and stead of the undersigned, to vote (or cause to be voted) or, if applicable, to give consent, in such manner as each such attorney, agent and proxy or his/her substitute shall in his/her sole discretion deem proper to record such vote (or consent) in the manner, and with respect to the matters, set forth in Section 2 of the Voting Agreement with respect to all shares of common stock, par value $0.01 per share (collectively, the "Shares"), of Jotter Technologies Inc. (the "Company"), which the undersigned is or may be entitled to vote at any meeting of Company held after the date hereof, whether annual or special and whether or not an adjourned meeting, or, if applicable, to give written consent with respect thereto. This Proxy is coupled with an interest, shall be irrevocable and binding on any successor in interest of the undersigned and shall not be terminated by operation of law upon the occurrence of any event, including, without limitation, the death or incapacity of the undersigned. This Proxy shall operate to revoke and render void any prior proxy as to the Shares heretofore granted by the undersigned, and the undersigned agrees that no subsequent proxies will be given by the undersigned with respect to any of the Shares. This Proxy shall terminate upon the Expiration Date (as defined in the Voting Agreement). If any provision of this proxy or any part of such provision is held to be invalid or unenforceable in any circumstances and in any jurisdiction, then (a) such provision or part thereof shall, with respect to such circumstance and jurisdiction, be deemed amended to conform to applicable law so as to be valid and enforceable to the fullest extent possible, and (b) the invalidity or unenforceability of such provision or part of a provision under such circumstances and in such jurisdiction shall not affect the validity or enforceability (i) of such provision or part thereof under any other circumstance or in any other jurisdiction, (ii) of the remainder of such provision or (iii) of any other provision of this proxy. Dated: September __, 2000 By: _________________________ Name: _________________________ Title:_________________________ 10 EX-10.6 6 0006.txt LEASE AGREEMENT Exhibit 10.6 * * * * * * * * * * * * * * * * * * * * Lease * * * * * * * * * * * * * * * * * * * * Between SAFLINK CORPORATION (Tenant) and CARR REDMOND CORPORATION (Landlord) May 18, 2000 1 LEASE THIS LEASE (the "Lease") is made as of , 2000 between Carr Redmond ----- Corporation, a Washington corporation (the "Landlord") and the Tenant as named -------- in the Schedule below. The term "Project" means the building (the "Building") ------- -------- known as Redmond East Business Campus, Building 6, and the land (the "Land") ---- located at 18650 N.E. 67th Court, Redmond, Washington 98052. "Premises" means -------- that part of the Project leased to Tenant described in the Schedule and outlined on Appendix A. The land is legally described on Appendix F hereto. The following schedule (the "Schedule") is an integral part of this -------- Lease. Terms defined in this Schedule shall have the same meaning throughout the Lease. SCHEDULE 1. Tenant: Saflink Corporation 2. Premises: Suites 110 and 210, being a portion of Floors 1 and 2 of Building 6, Redmond East Business Campus, 18650 N.E. 67th Court, Redmond, WA 98052 3. Rentable Square Feet of the Premises: 18,734 4. Tenant's Proportionate Share: (a) 52.94% (based upon a total of 35,385 rentable square feet for Building 6) as to all Operating Costs relating solely to Building 6, including, without limitation, HVAC maintenance and repairs, elevator maintenance and repairs, building management fee, janitorial services and supplies, window cleaning, property insurance, landscape costs, parking lot repair and maintenance, and Landlord's liability insurance costs; (b) 26.33% of all Taxes; and (c) an amount fairly and equitably apportioned by Landlord, based on the rentable square feet in the Premises and the total rentable square feet in the buildings in Landlord's Pacific Northwest portfolio, of Landlord's administration and overhead costs. 5. Security Deposit: $100,000 (subject to the terms of Section 20, below) 6. Tenant's Real Estate Broker for this Lease: Cushman and Wakefield 7. Landlord's Real Estate Broker for this Lease: The Broderick Group, Inc. 8. Tenant Improvements, if any: None; provided, however, that Landlord shall make those modifications to the Premises listed on Appendix H hereto promptly following the Commencement Date. 9. Commencement Date: June 1, 2000, but if the Premises are subject to new construction pursuant to Appendix C, then the Completion Date, as defined therein, if it is later; Landlord and Tenant shall execute a Commencement Date Confirmation substantially in the form of Appendix E promptly following the Commencement Date. 10. Termination Date/Term: Five (5) years after the Commencement Date, or if the Commencement Date is not the first day of a month, then after the first day of the following month. Tenant shall have one five (5)-year option to renew the term of this Lease, as set forth in Rider 1 hereto. 11. Guarantor: N/A 2 12. Base Rent:
Annual Base Rent Per Rentable Annual Monthly Period Square Foot Base Rent Base Rent ------ ----------- --------- --------- Years 1 - 3 $ 16.00 $ 299,744.00 $ 24,978.67 Years 4 - 5 $ 18.40 $ 344,705.60 $ 28,725.47
1. LEASE AGREEMENT. On the terms stated in this Lease, Landlord leases --------------- the Premises to Tenant, and Tenant leases the Premises from Landlord, for the Term beginning on the Commencement Date and ending on the Termination Date unless extended or sooner terminated pursuant to this Lease. 2. RENT. ---- A. Types of Rent. Tenant shall pay the following Rent in accordance ------------- with the terms of this Lease in the form of a check to Landlord at the following address: Carr Redmond Corporation t/a Redmond East Business Campus P.O. Box 277918 Atlanta, GA 30384-7918 or by wire transfer as follows: NationsBank, N.A. (South) ABA Number 061-000-052 Account Number #00 325 183 2509 or in such other manner as Landlord may notify Tenant: (1) Base Rent in monthly installments in advance, the first --------- monthly installment payable concurrently with the execution of this Lease and thereafter on or before the first day of each month of the Term in the amount set forth on the Schedule. (2) Operating Cost Share Rent in an amount equal to the Tenant's ------------------------- Proportionate Share of the Operating Costs for the applicable fiscal year of the Lease, paid monthly in advance in an estimated amount. Definitions of Operating Costs and Tenant's Proportionate Share, and the method for billing and payment of Operating Cost Share Rent are set forth in Sections 2B, 2C and 2D. 3 (3) Tax Share Rent in an amount equal to the Tenant's Proportionate -------------- Share of the Taxes for the applicable fiscal year of this Lease, paid monthly in advance in an estimated amount. A definition of Taxes and the method for billing and payment of Tax Share Rent are set forth in Sections 2B, 2C and 2D. (4) Additional Rent in the amount of all costs, expenses, --------------- liabilities, and amounts which Tenant is required to pay under this Lease, excluding Base Rent, Operating Cost Share Rent, and Tax Share Rent, but including any interest for late payment of any item of Rent. (5) Rent as used in this Lease means Base Rent, Operating Cost Share ---- Rent, Tax Share Rent and Additional Rent. Tenant's agreement to pay Rent is an independent covenant, with no right of setoff, deduction or counterclaim of any kind. B. Payment of Operating Cost Share Rent and Tax Share Rent. ------------------------------------------------------- (1) Payment of Estimated Operating Cost Share Rent and Tax Share ------------------------------------------------------------ Rent. Landlord shall provide Tenant with a written estimate of the ---- Operating Costs and Taxes of the Project by April 1 of each fiscal year, or as soon as reasonably possible thereafter. Landlord may revise these estimates whenever it obtains more accurate information, such as the final real estate tax assessment or tax rate for the Project. Within ten (10) days after receiving the original or revised estimate from Landlord, Tenant shall pay Landlord one-twelfth (1/12th) of Tenant's Proportionate Share of this estimate, multiplied by the number of months that have elapsed in the applicable fiscal year to the date of such payment including the current month, minus payments previously made by Tenant for the months elapsed. On the first day of each month thereafter, Tenant shall pay Landlord one-twelfth (1/12th) of Tenant's Proportionate Share of this estimate, until a new estimate becomes applicable. (2) Correction of Operating Cost Share Rent. Landlord shall --------------------------------------- deliver to Tenant a report for the previous fiscal year (the "Operating --------- Cost Report") by May 15 of each year, or as soon as reasonably possible ----------- thereafter, setting forth (a) the actual Operating Costs incurred, (b) the amount of Operating Cost Share Rent due from Tenant, and (c) the amount of Operating Cost Share Rent paid by Tenant. Within twenty (20) days after such delivery, Tenant shall pay to Landlord the amount due minus the amount paid. If the amount paid exceeds the amount due, Landlord shall apply the excess to Tenant's payments of Operating Cost Share Rent next coming due. To the extent any excess occurring within sixty (60) days before the end of the Lease term exceeds the amount of Operating Cost Share Rent next coming due for the then balance of the term, Landlord shall refund the same to Tenant in cash or immediately available funds. (3) Correction of Tax Share Rent. Landlord shall deliver to Tenant a ---------------------------- report for the previous fiscal year (the "Tax Report") by May 15 of each ---------- year, or as soon as reasonably possible thereafter, setting forth (a) the actual Taxes, (b) the amount of Tax Share Rent due from Tenant, and (c) the amount of Tax Share Rent paid by Tenant. Within 4 twenty (20) days after such delivery, Tenant shall pay to Landlord the amount due from Tenant minus the amount paid by Tenant. If the amount paid exceeds the amount due, Landlord shall apply the excess to Tenant's payments of Tax Share Rent next coming due. To the extent any excess occurring within sixty (60) days before the end of the Lease term exceeds the amount of Tax Share Rent next coming due for the then balance of the term, Landlord shall refund the same to Tenant in cash or immediately available funds. C. Definitions. ----------- (1) Included Operating Costs. "Operating Costs" means any expenses, ------------------------ --------------- costs and disbursements of any kind other than Taxes, paid or incurred by Landlord in connection with the management, maintenance, operation, insurance, repair and other related activities in connection with any part of the Project and of the personal property, fixtures, machinery, equipment, systems and apparatus used in connection therewith, including the cost of providing those services required to be furnished by Landlord under this Lease. Operating Costs shall also include the costs of any capital improvements which are intended to reduce Operating Costs or improve safety, and those made to keep the Project in compliance with governmental requirements applicable from time to time (collectively, "Included Capital Items"); provided, that the costs of any Included Capital ---------------------- Item shall be amortized by Landlord, together with an amount equal to interest at ten percent (10%) per annum, over the estimated useful life of such item and such amortized costs are only included in Operating Costs for that portion of the useful life of the Included Capital Item which falls within the Term. If the Project is not fully occupied during any portion of any fiscal year, Landlord may adjust (an "Equitable Adjustment") among Tenant and all -------------------- other tenants in the Project ratably, in accordance with the percentage space each tenant occupies, Tenant's Proportionate Share of the Operating Costs otherwise payable as Operating Cost Share Rent so that the sum of all of the then Project tenants' contributions to the Operating Costs equal Landlord's actual Operating Costs for the Project. This Equitable Adjustment shall apply only to Operating Costs which are variable and therefore increase as occupancy of the Project increases. Landlord may incorporate the Equitable Adjustment in its estimates of Operating Costs. If Landlord does not furnish any particular service whose cost would have constituted an Operating Cost to a tenant other than Tenant who has undertaken to perform such service itself, then with respect to the cost of that service, Landlord may likewise make an Equitable Adjustment in Tenant's Proportionate Share of Operating Costs among Tenant and all other tenants in the Project to whom Landlord furnishes the service, ratably, in accordance with the percentage space each such tenant occupies in the Project, so that the sum of the contributions toward the cost of the service by Project tenants who receive the service equal the cost actually incurred by Landlord for the service. (2) Excluded Operating Costs. Operating Costs shall not include: ------------------------ (a) costs of alterations of tenant premises; 5 (b) costs of capital improvements other than Included Capital Items; (c) interest and principal payments on mortgages or any other debt costs, or rental payments on any ground lease of the Project; (d) real estate brokers' leasing commissions; (e) legal fees, space planner fees and advertising expenses incurred with regard to leasing the Building or portions thereof; (f) any cost or expenditure for which Landlord is reimbursed, by insurance proceeds or otherwise, except by Operating Cost Share Rent; (g) the cost of any service furnished to any office tenant of the Project which Landlord does not make available to Tenant; (h) depreciation (except on any Included Capital Items); (i) franchise or income taxes imposed upon Landlord, except to the extent imposed in lieu of all or any part of Taxes; (j) costs of correcting defects in construction of the Building (as opposed to the cost of normal repair, maintenance and replacement expected with the construction materials and equipment installed in the Building in light of their specifications); (k) legal and auditing fees which are for the benefit of Landlord such as collecting delinquent rents, preparing tax returns and other financial statements, and audits other than those incurred in connection with the preparation of reports required pursuant to Section 2B above; (l) the wages of any employee for services not related directly to the management, maintenance, operation and repair of the Building; and (m) fines, penalties and interest. (3) Taxes. "Taxes" means any and all taxes, assessments and charges ----- ----- of any kind, general or special, ordinary or extraordinary, levied against the Project, which Landlord shall pay or become obligated to pay in connection with the ownership, leasing, renting, management, use, occupancy, control or operation of the Project or of the personal property, fixtures, machinery, equipment, systems and apparatus used in connection therewith. Taxes shall include real estate taxes, personal property taxes, sewer rents, water rents, special or general assessments, transit taxes, ad valorem taxes, and any tax levied on the rents hereunder or the interest of Landlord under this Lease (the "Rent Tax"). Taxes shall also include all -------- fees and other costs and expenses paid by Landlord in 6 reviewing any tax and in seeking a refund or reduction of any Taxes, whether or not the Landlord is ultimately successful. For any year, the amount to be included in Taxes (a) from taxes or assessments payable in installments, shall be the amount of the installments (with any interest) due and payable during such year, and (b) from all other Taxes, shall at Landlord's election be the amount accrued, assessed, or otherwise imposed for such year or the amount due and payable in such year. Any refund or other adjustment to any Taxes by the taxing authority, shall apply during the year in which the adjustment is made. Taxes shall not include any net income (except Rent Tax), capital, stock, succession, transfer, franchise, gift, estate or inheritance tax, except to the extent that such tax shall be imposed in lieu of any portion of Taxes. (4) Lease Year. "Lease Year" means each consecutive twelve-month ---------- ---------- period beginning with the Commencement Date, except that if the Commencement Date is not the first day of a calendar month, then the first Lease Year shall be the period from the Commencement Date through the final day of the twelve months after the first day of the following month, and each subsequent Lease Year shall be the twelve months following the prior Lease Year. (5) Fiscal Year. "Fiscal Year" means the calendar year, except that ---------- ----------- the first fiscal year and the last fiscal year of the Term may be a partial calendar year. D. Computation of Base Rent and Rent Adjustments. --------------------------------------------- (1) Prorations. If this Lease begins on a day other than the first ---------- day of a month, the Base Rent, Operating Cost Share Rent and Tax Share Rent shall be prorated for such partial month based on the actual number of days in such month. If this Lease begins on a day other than the first day, or ends on a day other than the last day, of the fiscal year, Operating Cost Share Rent and Tax Share Rent shall be prorated for the applicable fiscal year. (2) Default Interest. Any sum due from Tenant to Landlord not paid ---------------- when due shall bear interest from the date due until paid at eighteen percent (18%) per annum. (3) Rent Adjustments. The square footage of the Premises and the ---------------- Building set forth in the Schedule are conclusively deemed to be the actual square footage thereof, without regard to any subsequent remeasurement of the Premises or the Building. If any Operating Cost paid in one fiscal year relates to more than one fiscal year, Landlord may proportionately allocate such Operating Cost among the related fiscal years. (4) Books and Records. Landlord shall maintain books and records ----------------- reflecting the Operating Costs and Taxes in accordance with sound accounting and management practices. Tenant, its attorneys and its certified public accountant shall have the right to inspect Landlord's records at Landlord's office upon at least seventy-two (72) hours' prior 7 notice during normal business hours during the ninety (90) days following the respective delivery of the Operating Cost Report or the Tax Report. The results of any such inspection shall be kept strictly confidential by Tenant and its agents, and Tenant and its certified public accountant must agree, in their contract for such services, to such confidentiality restrictions and shall specifically agree that the results shall not be made available to any other tenant of the Building. Unless Tenant sends to Landlord any written exception to either such report within said ninety (90) day period, such report shall be deemed final and accepted by Tenant. Tenant shall pay the amount shown on both reports in the manner prescribed in this Lease, whether or not Tenant takes any such written exception, without any prejudice to such exception. If Tenant makes a timely exception, Landlord shall cause an independent certified public accountant (who shall be subject to the approval of Tenant, such approval not to be unreasonably withheld or delayed) to issue a final and conclusive resolution of Tenant's exception. Tenant shall pay the cost of such certification unless Landlord's original determination of annual Operating Costs or Taxes overstated the amounts thereof by more than five percent (5%). (5) Miscellaneous. So long as Tenant is in default of any -------------- obligation under this Lease, Tenant shall not be entitled to any refund of any amount from Landlord. If this Lease is terminated for any reason prior to the annual determination of Operating Cost Share Rent or Tax Share Rent, either party shall pay the full amount due to the other within fifteen (15) days after Landlord's notice to Tenant of the amount when it is determined. Landlord may commingle any payments made with respect to Operating Cost Share Rent or Tax Share Rent, without payment of interest. 3. PREPARATION AND CONDITION OF PREMISES; POSSESSION AND ----------------------------------------------------- SURRENDER OF PREMISES. - --------------------- A. Condition of Premises. Landlord shall make those modifications ---------------------- to the Premises listed on Appendix H hereto promptly following prior to the Commencement Date. Landlord is otherwise leasing the Premises to Tenant "AS IS", without any obligation to alter, remodel, improve, repair or decorate any part of the Premises. B. Tenant's Possession. Tenant's taking possession of any portion -------------------- of the Premises shall be conclusive evidence that the Premises was in good order, repair and condition. If Landlord authorizes Tenant to take possession of any part of the Premises prior to the Commencement Date for purposes of doing business, all terms of this Lease shall apply to such pre-Term possession, including Base Rent at the rate set forth for the First Lease Year in the Schedule prorated for any partial month. C. Maintenance. Throughout the Term, Tenant shall maintain the ------------ Premises in their condition as of the Completion Date, loss or damage caused by the elements, ordinary wear, and fire and other casualty excepted, and at the termination of this Lease, or Tenant's right to possession, Tenant shall return the Premises to Landlord in broom-clean condition; provided, however, that Landlord shall be responsible for maintenance of the structural soundness of the roof, foundation, and exterior walls of the Building in good repair, reasonable wear and tear and damage by Tenant, its agents, employees, contractors and invitees excluded. Landlord's 8 obligation to maintain the exterior walls shall not include the windows, glass, doors or entries or any other non-structural portion thereof. To the extent Tenant fails to perform its obligations under this section, Landlord may, but need not, restore the Premises to the condition required hereunder and Tenant shall pay the cost thereof. 4. PROJECT SERVICES. ---------------- Landlord shall furnish services as follows: A. Heating and Air Conditioning. During Tenant's normal business ----------------------------- hours of 7:00 a.m. to 12:00 a.m., Monday through Friday, and 8:00 a.m. to 1:00 p.m. on Saturday, Landlord shall furnish heating and air conditioning to provide a comfortable temperature, in Landlord's judgment, for normal business operations, except to the extent Tenant installs equipment which adversely affects the temperature maintained by the air conditioning system. If Tenant installs such equipment, Landlord may install supplementary air conditioning units in the Premises, and Tenant shall pay to Landlord upon demand as Additional Rent the cost of installation, operation and maintenance thereof. Tenant shall pay Landlord all then current charges for the heating or air conditioning to the Premises to the extent the cost of the same for the Tenant's normal business hours exceeds the cost otherwise applicable to Landlord's normal operating hours for the Building (8:00 a.m. to 6:00 p.m., Monday through Friday, and 8:00 a.m. to 1:00 p.m. on Saturday), as reasonably determined by Landlord. Landlord currently estimates that Tenant's obligation for such additional HVAC will be $25 per hour. B. Elevators. Landlord shall provide passenger elevator service --------- during Tenant's normal business hours to Tenant in common with Landlord and all other tenants. Landlord shall provide limited passenger service at other times, except in case of an emergency. C. Electricity. Landlord shall provide sufficient electricity to ----------- operate normal office lighting and equipment. Tenant shall not install or operate in the Premises any electrically operated equipment or other machinery, other than business machines and equipment normally employed for general office use, including software development, which do not require high electricity consumption for operation, without obtaining the prior written consent of Landlord. If any or all of Tenant's equipment requires electricity consumption in excess of that which is necessary to operate normal office equipment, such consumption (including consumption for computer or telephone rooms and special HVAC equipment) shall be submetered by Landlord at Tenant's expense, and Tenant shall reimburse Landlord as Additional Rent for the cost of its submetered consumption based upon Landlord's average cost of electricity. Such Additional Rent shall be in addition to Tenant's obligations pursuant to Section 2A(2) to pay its Proportionate Share of Operating Costs. D. Water. Landlord shall furnish hot and cold tap water for ----- drinking, cleaning and toilet purposes. Tenant shall pay Landlord for water furnished for any other purpose as Additional Rent at rates fixed by Landlord. Tenant shall not knowingly permit water to be wasted. 9 E. Janitorial Service. If Tenant elects to have Landlord provide ------------------ janitorial service, Landlord shall furnish such janitorial service as generally provided to other tenants in the Building. F. Interruption of Services. If any of the Building equipment or ------------------------ machinery ceases to function properly for any cause Landlord shall use reasonable diligence to repair the same promptly. Landlord's inability to furnish, to any extent, the Project services set forth in this Section 4, or any cessation thereof resulting from any causes, including any entry for repairs pursuant to this Lease, and any renovation, redecoration or rehabilitation of any area of the Building shall not render Landlord liable for damages to either person or property or for interruption or loss to Tenant's business, nor be construed as an eviction of Tenant, nor work an abatement of any portion of Rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof. However, in the event that an interruption of the Project services set forth in this Section 4 causes the Premises to be untenantable for a period of at least ten (10) consecutive business days, monthly Rent shall thereafter be abated proportionately. If the cause of such interruption is within the reasonable control of Landlord and causes the Premises to be untenantable for a period of at least sixty (60) consecutive days, Tenant shall have the right to terminate this Lease on ten (10) days' written notice to Landlord, and this Lease shall terminate on the 10th day following such notice, as if such date were originally set forth as the termination date herein, unless the Project services are restored within such ten-day period. 5. ALTERATIONS AND REPAIRS. ----------------------- A. Landlord's Consent and Conditions. ---------------------------------- Tenant shall not make any improvements or alterations to the Premises (the "Work") without in each instance submitting plans and specifications for ---- the Work to Landlord and obtaining Landlord's prior written consent which shall not be unreasonably withheld or delayed, provided that (a) such Work does not impact the base structural components or systems of the Building, (b) such Work will not impact any other tenant's premises, and (c) such Work is not visible from outside the Premises. Tenant shall pay Landlord's standard charge for review of the plans and all other items submitted by Tenant. Landlord may withhold its consent in its sole discretion for any Work which (a) impacts the base structural components or systems of the Building, (b) impacts any other tenant's premises, or (c) is visible from outside the Premises. Tenant shall reimburse Landlord for actual costs incurred for review of the plans and all other items submitted by Tenant. Tenant shall pay for the cost of all Work. The following requirements shall apply to all Work: (1) Prior to commencement, Tenant shall furnish to Landlord building permits, certificates of insurance satisfactory to Landlord, and, at Landlord's request, security for payment of all costs. 10 (2) Tenant shall perform all Work so as not to unreasonably interfere with other contractors serving the Project or other work to be performed or services to be rendered in the Project. (3) The Work shall be performed in a good and workmanlike manner, meeting the standard for construction and quality of materials in the Building, and shall comply with all insurance requirements and all applicable governmental laws, ordinances and regulations ("Governmental Requirements"). ------------------------- (4) Tenant shall perform all Work so as to minimize or prevent disruption to other tenants, and Tenant shall comply with all reasonable requests of Landlord in response to complaints from other tenants. (5) Tenant shall perform all Work in compliance with Landlord's "Policies, Rules and Procedures for Construction Projects" in effect at the time the Work is performed. (6) Tenant shall permit Landlord to supervise all Work. If Landlord's employees or contractors perform the Work, Landlord may charge a supervisory fee not to exceed fifteen percent (15%) of labor, material, and all other costs of the Work. (7) Upon completion, Tenant shall furnish Landlord with contractor's affidavits and full and final statutory waivers of liens, as-built plans and specifications, and receipted bills covering all labor and materials, and all other close-out documentation required in Landlord's "Policies, Rules and Procedures for Construction Projects". B. Damage to Systems. If any part of the mechanical, electrical ------------------ or other systems in the Premises shall be damaged, Tenant shall promptly notify Landlord, and Landlord shall repair such damage reasonably promptly following receipt of written notice from Tenant. Landlord may also at any reasonable time make any repairs or alterations which Landlord deems necessary for the safety or protection of the Project, or which Landlord is required to make by any court or pursuant to any Governmental Requirement. Tenant shall at its expense make all other repairs necessary to keep the Premises and Tenant's fixtures in good order, condition and repair; to the extent Tenant fails to do so, Landlord may make such repairs itself. The cost of any repairs made by Landlord on account of Tenant's default, or on account of the mis-use or neglect by Tenant or its invitees, contractors or agents anywhere in the Project, shall become Additional Rent payable by Tenant on demand. C. No Liens. Tenant has no authority to cause or permit any lien --------- or encumbrance of any kind to affect Landlord's interest in the Project; any such lien or encumbrance shall attach to Tenant's interest only. If any mechanic's lien shall be filed or claim of lien made for work or materials furnished to Tenant, then Tenant shall at its expense within ten (10) days thereafter either discharge or contest the lien or claim. If Tenant contests the lien or claim, then Tenant shall (i) within such ten (10) day period, provide Landlord adequate security for the lien or claim, (ii) contest the lien or claim in good faith by appropriate proceedings that operate to stay its enforcement, and (iii) pay promptly any final adverse judgment entered in any such proceeding. 11 If Tenant does not comply with these requirements, Landlord may discharge the lien or claim, and the amount paid, as well as attorney's fees and other expenses incurred by Landlord, shall become Additional Rent payable by Tenant on demand. D. Ownership of Improvements. All Work as defined in this Section -------------------------- 5, partitions, hardware, equipment, machinery and all other improvements and all fixtures except Tenant's trade fixtures (and Tenant's movable equipment, furniture and other personal property), constructed in the Premises by either Landlord or Tenant, (i) shall become Landlord's property upon the expiration or sooner termination of the Lease, and (ii) shall at Landlord's option either (a) be surrendered to Landlord with the Premises at the termination of the Lease or of Tenant's right to possession, or (b) be removed at Tenant's cost in accordance with Subsection 5E below (unless Landlord at the time it gives its consent to the performance of such construction expressly waives in writing the right to require such removal). E. Removal at Termination. Upon the termination of this Lease or ----------------------- Tenant's right of possession Tenant shall remove from the Project its trade fixtures, furniture, moveable equipment and other personal property, any improvements which Landlord elects shall be removed by Tenant pursuant to Section 5D, and any improvements to any portion of the Project other than the Premises. Tenant shall repair all damage caused by the installation or removal of any of the foregoing items. If Tenant does not timely remove such property, then Tenant shall be conclusively presumed to have, at Landlord's election (i) conveyed such property to Landlord without compensation or (ii) abandoned such property, and Landlord may dispose of or store any part thereof in any manner at Tenant's sole cost, without waiving Landlord's right to claim from Tenant all expenses arising out of Tenant's failure to remove the property, and without liability to Tenant or any other person. Landlord shall have no duty to be a bailee of any such personal property. If Landlord elects abandonment, Tenant shall pay to Landlord, upon demand, any expenses incurred for disposition. 6. USE OF PREMISES. Tenant shall use the Premises only for --------------- general office purposes, including software development. Tenant shall not allow any use of the Premises which will negatively affect the cost of coverage of Landlord's insurance on the Project. Subject to the provisions of Section 28, below, Tenant shall not allow any inflammable or explosive liquids or materials to be kept on the Premises. Tenant shall not allow any use of the Premises which would cause the value or utility of any part of the Premises to diminish or would interfere with any other Tenant or with the operation of the Project by Landlord. Tenant shall not permit any nuisance or waste upon the Premises, or allow any offensive noise or odor in or around the Premises. If any governmental authority shall deem the Premises to be a "place of public accommodation" under the Americans with Disabilities Act or any other comparable law as a result of Tenant's use, Tenant shall either modify its use to cause such authority to rescind its designation or be responsible for any alterations, structural or otherwise, required to be made to the Building or the Premises under such laws. 7. GOVERNMENTAL REQUIREMENTS AND BUILDING RULES. Tenant shall -------------------------------------------- comply with all Governmental Requirements applying to its use of the Premises. Tenant 12 shall also comply with all reasonable rules established for the Project from time to time by Landlord; provided, however, that as to any future rules and regulations, Tenant shall be required to comply with the same only to the extent they do not materially decrease Tenant's rights or materially increase Tenant's obligations under this Lease. The present rules and regulations are contained in Appendix B. Failure by another tenant to comply with the rules or failure by Landlord to enforce them shall not relieve Tenant of its obligation to comply with the rules or make Landlord responsible to Tenant in any way. Landlord shall use reasonable efforts to apply the rules and regulations uniformly with respect to Tenant and tenants in the Building under leases containing rules and regulations similar to this Lease. In the event of alterations and repairs performed by Tenant, Tenant shall comply with the provisions of Section 5 of this Lease and also Landlord's "Policies, Rules and Regulations for Construction Projects". 8. WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE. -------------------------------------------- A. Indemnification. Tenant shall indemnify, defend and hold ---------------- harmless Landlord and its officers, directors, employees and agents against any claim by any third party for injury to any person or damage to or loss of any property occurring in the Project and arising from the use of the Premises or from any other act or omission or negligence of Tenant or any of Tenant's employees or agents. Tenant's obligations under this section shall survive the termination of this Lease. Landlord shall indemnify, defend and hold harmless Tenant and its officers, directors, employees and agents against any claim by any third party for injury to any person or damage to or any loss of any property occurring on the Project and arising from any act or omission or negligence of Landlord or any of Landlord's employees or agents. Landlord's obligations under this section shall survive the termination of this Lease. AS BETWEEN LANDLORD AND TENANT, TENANT HEREBY WAIVES ITS IMMUNITY WITH RESPECT TO LANDLORD UNDER THE INDUSTRIAL INSURANCE ACT (RCW TITLE 51) AND/OR THE LONGSHOREMAN'S AND HARBORWORKER'S ACT AND/OR ANY EQUIVALENT ACTS AND TENANT EXPRESSLY AGREES TO ASSUME POTENTIAL LIABILITY FOR ACTIONS BROUGHT AGAINST LANDLORD BY TENANT'S EMPLOYEES. THIS WAIVER HAS BEEN SPECIFICALLY NEGOTIATED BY THE PARTIES TO THIS LEASE AND TENANT HAS HAD THE OPPORTUNITY TO, AND HAS BEEN ENCOURAGED, TO CONSULT WITH INDEPENDENT COUNSEL REGARDING THIS WAIVER. B. Tenant's Insurance. Tenant shall maintain insurance as ------------------- follows, with such other terms, coverages and insurers, as Landlord shall reasonably require from time to time: (1) Commercial General Liability Insurance, with (a) Contractual Liability including the indemnification provisions contained in this Lease, (b) a severability of interest endorsement, (c) limits of not less than One Million Dollars ($1,000,000) combined single limit per occurrence and not less than Two Million Dollars ($2,000,000) in the aggregate for bodily injury, sickness or death, and property damage, and umbrella coverage of not less than Five Million Dollars ($5,000,000). 13 (2) Property Insurance against "All Risks" of physical loss covering the replacement cost of all improvements, fixtures and personal property. (3) Workers' compensation or similar insurance in form and amounts required by law, and Employer's Liability with not less than the following limits: Each Accident $500,000 Disease--Policy Limit $500,000 Disease--Each Employee $500,000 Tenant's insurance shall be primary and not contributory to that carried by Landlord, its agents, or mortgagee. Landlord, and if any, Landlord's building manager or agent and ground lessor shall be named as additional insureds as respects to insurance required of the Tenant in Section 8C(1). The company or companies writing any insurance which Tenant is required to maintain under this Lease, as well as the form of such insurance, shall at all times be subject to Landlord's approval, which approval shall not be unreasonably withheld, and any such company shall be licensed to do business in the state in which the Building is located. Such insurance companies shall have a A.M. Best rating of A VI or better. Tenant shall cause any contractor of Tenant performing work on the Premises to maintain insurance as follows, with such other terms, coverages and insurers, as Landlord shall reasonably require from time to time: (1) Commercial General Liability Insurance, including contractor's liability coverage, contractual liability coverage, completed operations coverage, broad form property damage endorsement, and contractor's protective liability coverage, to afford protection with limits, for each occurrence, of not less than One Million Dollars ($1,000,000) with respect to personal injury, death or property damage. (2) Workers' compensation or similar insurance in form and amounts required by law, and Employer's Liability with not less than the following limits: Each Accident $500,000 Disease--Policy Limit $500,000 Disease--Each Employee $500,000 Such insurance shall contain a waiver of subrogation provision in favor of Landlord and its agents. Tenant's contractor's insurance shall be primary and not contributory to that carried by Tenant, Landlord, their agents or mortgagees. Tenant and Landlord, and if any, Landlord's building manager or agent, mortgagee or ground lessor shall be named as additional insured on Tenant's contractor's insurance policies. 14 C. Insurance Certificates. Tenant shall deliver to Landlord ----------------------- certificates evidencing all required insurance no later than five (5) days prior to the Commencement Date and each renewal date. Each certificate will provide for thirty (30) days prior written notice of cancellation to Landlord and Tenant. D. Landlord's Insurance. Landlord shall maintain "All-Risk" --------------------- property insurance at replacement cost, including loss of rents, on the Building, and Commercial General Liability insurance policies covering the common areas of the Building, each with such terms, coverages and conditions as are normally carried by reasonably prudent owners of properties similar to the Project. E. Waiver of Subrogation. The "All-Risk" property insurance ---------------------- obtained by Landlord and Tenant shall include a waiver of subrogation by the insurers and all rights based upon an assignment from its insured, against Landlord or Tenant, respectively, and to the extent obtainable, their respective officers, directors, employees, managers, agents, invitees and contractors in connection with any loss or damage thereby insured against. Neither party nor, to the extent such waiver is obtainable, its officers, directors, employees, managers, agents or contractors, shall be liable to the other for loss or damage caused by any risk actually covered or required hereunder to be covered by "All- Risk" property insurance and each party waives any claims against the other party and its officers, directors, employees, managers, agents, invitees and contractors for such loss or damage. The failure of a party to insure its property shall not void this waiver. 9. FIRE AND OTHER CASUALTY. ----------------------- A. Termination. If a fire or other casualty causes substantial ------------ damage to the Building or the Premises, Landlord shall engage a registered architect to certify within one (1) month of the casualty to both Landlord and Tenant the amount of time needed to restore the Building and the Premises to tenantability, using standard working methods. If the time needed exceeds twelve (12) months from the beginning of the restoration, or two (2) months therefrom if the restoration would begin during the last twelve (12) months of the Lease, then in the case of the Premises, either Landlord or Tenant may terminate this Lease, and in the case of the Building, Landlord may terminate this Lease, by notice to the other party within ten (10) days after the notifying party's receipt of the architect's certificate. Notwithstanding the foregoing, if flood, earthquake, or other peril for which Landlord does not carry insurance causes substantial damage to the Building or the Premises, Landlord may also terminate this Lease by written notice given to Tenant within thirty (30) days from the date of the casualty. The termination shall be effective thirty (30) days from the date of the notice and Rent shall be paid by Tenant to that date, with an abatement for any portion of the Premises which has been untenantable after the casualty. B. Restoration. If a casualty causes damage to the Building or ------------ the Premises but this Lease is not terminated for any reason, then subject to the rights of any mortgagees or ground lessors, Landlord shall obtain the applicable insurance proceeds and use reasonable efforts to restore the Building and the Premises within a reasonable amount of time, subject to current Governmental Requirements. Tenant shall replace its damaged improvements, personal property and fixtures. Rent shall be abated on a per diem basis during the restoration for any portion of 15 the Premises which is untenantable, except to the extent that Tenant's negligence caused the casualty. 10. EMINENT DOMAIN. If a part of the Project is taken by eminent -------------- domain or deed in lieu thereof which is so substantial that the Premises cannot reasonably be used by Tenant for the operation of its business, then either party may terminate this Lease effective as of the date of the taking. If any substantial portion of the Project is taken without affecting the Premises, then Landlord may terminate this Lease as of the date of such taking. Rent shall abate from the date of the taking in proportion to any part of the Premises taken. The entire award for a taking of any kind shall be paid to Landlord, and Tenant shall have no right to share in the award. All obligations accrued to the date of the taking shall be performed by the party liable to perform said obligations, as set forth herein. 11. RIGHTS RESERVED TO LANDLORD. --------------------------- Landlord may exercise at any time any of the following rights respecting the operation of the Project without liability to the Tenant of any kind: A. Name. To change the name or street address of the Building or ---- the suite number(s) of the Premises. B. Signs. To install and maintain any signs on the exterior and ----- in the interior of the Building (other than on the interior of the Premises), and to approve at its sole discretion, prior to installation, any of Tenant's signs in the Premises visible from the common areas or the exterior of the Building. C. Window Treatments. To approve, at its discretion, prior to ----------------- installation, any shades, blinds, ventilators or window treatments of any kind, as well as any lighting within the Premises that may be visible from the exterior of the Building or any interior common area. D. Keys. To retain and use at any time passkeys to enter the ---- Premises or any door within the Premises. Tenant shall not alter or add any lock or bolt. E. Access. To have access to inspect the Premises, and to perform ------ its obligations, or make repairs, alterations, additions or improvements, as permitted by this Lease. F. Preparation for Reoccupancy. To decorate, remodel, repair, --------------------------- alter or otherwise prepare the Premises for reoccupancy at any time after Tenant abandons the Premises, without relieving Tenant of any obligation to pay Rent. G. Heavy Articles. To approve the weight, size, placement and -------------- time and manner of movement within the Building of any safe, central filing system or other heavy article of Tenant's property. Tenant shall move its property entirely at its own risk. H. Show Premises. To show the Premises to prospective purchasers, ------------- tenants, brokers, lenders, investors, rating agencies or others at any reasonable time, provided that Land- 16 lord gives reasonable prior notice to Tenant and does not materially interfere with Tenant's use of the Premises. I. Relocation of Tenant. To relocate the Tenant, upon thirty -------------------- days' prior written notice, from all or part of the Premises (the "Old --- Premises") to another area in the Project (the "New Premises"), provided that: - -------- ------------ (1) the size of the New Premises is at least equal to the size of the Old Premises; (2) such relocation shall not cause unreasonable interference with Tenant's business; (3) Landlord pays the cost of moving the Tenant and improving the New Premises to the standard of the Old Premises. Tenant shall cooperate with Landlord in all reasonable ways to facilitate the move, including supervising the movement of files or fragile equipment, designating new locations for furniture, equipment and new telephone and electrical outlets, and determining the color of paint in the new premises; and (4) if the New Premises is larger than the Old Premises, Tenant shall have no obligation to pay Rent, nor shall Tenant's Proportionate Share of Operating Costs or Taxes increase, to the extent Tenant does not use or occupy any portion of the increased premises area. Any such area of the New Premises not intended for Tenant's use or occupancy shall be identified at the time of the relocation. J. Use of Lockbox. To designate a lockbox collection agent for --------------- collections of amounts due Landlord. In that case, the date of payment of Rent or other sums shall be the date of the agent's receipt of such payment or the date of actual collection if payment is made in the form of a negotiable instrument thereafter dishonored upon presentment. However, Landlord may reject any payment for all purposes as of the date of receipt or actual collection by mailing to Tenant within 21 days after such receipt or collection a check equal to the amount sent by Tenant; provided, however, that the foregoing shall not apply to any payments timely made in full performance of Tenant's obligations under this Lease, inclusive of any payments made within any applicable cure period. It is the intent of this provision to prevent waiver of claims for payment as the result of any partial payments or of any full payments made after the expiration of any applicable cure period. K. Repairs and Alterations. To make repairs or alterations to the ------------------------ Project and in doing so transport any required material through the Premises, to close entrances, doors, corridors, elevators and other facilities in the Project, to open any ceiling in the Premises, or to temporarily suspend services or use of common areas in the Buildings; provided, however, that Landlord shall use reasonable efforts to avoid unreasonable interference with Tenant's business operations in the Premises while nevertheless completing the Work to be performed. Landlord may perform any such repairs or alterations during Landlord's ordinary business hours, except that Tenant may require any Work in the Premises to be done between the hours of 6:00 p.m. and 8:00 a.m. if Tenant pays Landlord for overtime and any other expenses incurred as a result of performing the 17 Work during such hours. Landlord may do or permit any work on any nearby building, land, street, alley or way. L. Landlord's Agents. If Tenant is in default under this Lease, ------------------ possession of Tenant's funds or negotiation of Tenant's negotiable instrument by any of Landlord's agents shall not waive any breach by Tenant or any remedies of Landlord under this Lease. M. Building Services. To install, use and maintain through the ------------------ Premises, pipes, conduits, wires and ducts serving the Building, provided that such installation, use and maintenance does not unreasonably interfere with Tenant's use of the Premises. N. Other Actions. To take any other action which Landlord deems -------------- reasonable in connection with the operation, maintenance or preservation of the Building. 12. TENANT'S DEFAULT. ---------------- Any of the following shall constitute a default by Tenant: A. Rent Default. Tenant fails to pay any Rent when due. ------------- B. Assignment/Sublease or Hazardous Substances Default. Tenant ---------------------------------------------------- defaults in its obligations under Section 17 Assignment and Sublease or Section 28 Hazardous Substances; C. Other Performance Default. Tenant fails to perform any other -------------------------- obligation to Landlord under this Lease, and this failure continues for ten (10) days after written notice from Landlord, except that if Tenant begins to cure its failure within the ten (10) day period but cannot reasonably complete its cure within such period, then, so long as Tenant continues to diligently attempt to cure its failure, the ten (10) day period shall be extended to sixty (60) days, or such lesser period as is reasonably necessary to complete the cure; D. Credit Default. One of the following credit defaults occurs: --------------- (1) Tenant commences any proceeding under any law relating to bankruptcy, insolvency, reorganization or relief of debts, or seeks appointment of a receiver, trustee, custodian or other similar official for the Tenant or for any substantial part of its property, or any such proceeding is commenced against Tenant and either remains undismissed for a period of thirty days or results in the entry of an order for relief against Tenant which is not fully stayed within fifteen days after entry; (2) Tenant becomes insolvent or bankrupt, does not generally pay its debts as they become due, or admits in writing its inability to pay its debts, or makes a general assignment for the benefit of creditors; (3) Any third party obtains a levy or attachment under process of law against Tenant's leasehold interest. 18 E. Vacation or Abandonment Default. Tenant vacates or abandons -------------------------------- the Premises. 13. LANDLORD REMEDIES. ----------------- A. Termination of Lease or Possession. If Tenant defaults, ----------------------------------- Landlord may elect by notice to Tenant given at any time before Tenant shall have cured the default either to terminate this Lease or to terminate Tenant's possession of the Premises without terminating this Lease. In either case, Tenant shall immediately vacate the Premises and deliver possession to Landlord, and Landlord may repossess the Premises and may, at Tenant's sole cost, remove any of Tenant's signs and any of its other property, without relinquishing its right to receive Rent or any other right against Tenant. B. Lease Termination Damages. If Landlord terminates the Lease, -------------------------- Tenant shall pay to Landlord all Rent due on or before the date of termination, plus Landlord's reasonable estimate of the aggregate Rent that would have been payable from the date of termination through the Termination Date, reduced by the rental value of the Premises calculated as of the date of termination for the same period, taking into account anticipated vacancy prior to reletting, reletting expenses and market concessions, both discounted to present value at the rate of five percent (5%) per annum. If Landlord shall relet any part of the Premises for any part of such period before such present value amount shall have been paid by Tenant or finally determined by a court, then the amount of Rent payable pursuant to such reletting (taking into account vacancy prior to reletting and any reletting expenses or concessions) shall be deemed to be the reasonable rental value for that portion of the Premises relet during the period of the reletting. C. Possession Termination Damages. If Landlord terminates ------------------------------- Tenant's right to possession without terminating the Lease and Landlord takes possession of the Premises itself, Landlord shall use reasonable efforts to relet the Premises for such Rent, for such time, and upon such terms as Landlord in its sole discretion shall determine, without any obligation to do so prior to renting other vacant areas in the Building. Any proceeds from reletting the Premises shall first be applied to the expenses of reletting, including redecoration, repair, alteration, advertising, brokerage, legal, and other reasonably necessary expenses. If the reletting proceeds after payment of expenses are insufficient to pay the full amount of Rent under this Lease, Tenant shall pay such deficiency to Landlord monthly upon demand as it becomes due. Any excess proceeds shall be retained by Landlord. D. Landlord's Remedies Cumulative. All of Landlord's remedies ------------------------------- under this Lease shall be in addition to all other remedies Landlord may have at law or in equity. Waiver by Landlord of any breach of any obligation by Tenant shall be effective only if it is in writing, and shall not be deemed a waiver of any other breach, or any subsequent breach of the same obligation. Landlord's acceptance of payment by Tenant shall not constitute a waiver of any breach by Tenant, and if the acceptance occurs after Landlord's notice to Tenant, or termination of the Lease or of Tenant's right to possession, the acceptance shall not affect such notice or termination. Acceptance of payment by Landlord after commencement of a legal proceeding or final judgment shall not affect such proceeding or judgment. Landlord may advance such monies and take such other actions for Tenant's account as reasonably may be required to cure or mitigate 19 any default by Tenant. Tenant shall immediately reimburse Landlord for any such advance, and such sums shall bear interest at the default interest rate until paid. E. WAIVER OF TRIAL BY JURY. EACH PARTY WAIVES TRIAL BY JURY IN ------------------------ THE EVENT OF ANY LEGAL PROCEEDING BROUGHT BY THE OTHER IN CONNECTION WITH THIS LEASE. EACH PARTY SHALL BRING ANY ACTION AGAINST THE OTHER IN CONNECTION WITH THIS LEASE IN A FEDERAL OR STATE COURT LOCATED IN WASHINGTON, CONSENTS TO THE JURISDICTION OF SUCH COURTS, AND WAIVES ANY RIGHT TO HAVE ANY PROCEEDING TRANSFERRED FROM SUCH COURTS ON THE GROUND OF IMPROPER VENUE OR INCONVENIENT FORUM. F. Litigation Costs. In the event of Tenant's default hereunder, ----------------- Tenant shall pay Landlord's reasonable attorneys' fees and other costs in enforcing this Lease, whether or not suit is filed. In the event of any litigation between the parties, the prevailing party shall be entitled to recover from the non-prevailing party, the prevailing party's reasonable attorney's fees and expenses of litigation. 14. SURRENDER. Upon termination of this Lease or Tenant's right to ---------- possession, Tenant shall return the Premises to Landlord in good order and condition, ordinary wear and casualty damage excepted. If Landlord requires Tenant to remove any alterations, then Tenant shall remove the alterations in a good and workmanlike manner and restore the Premises to its condition prior to their installation. 15. HOLDOVER. Tenant shall have no right to holdover possession of --------- the Premises after the expiration or termination of this Lease without Landlord's prior written consent, which consent may be withheld in Landlord's sole and absolute discretion. If Tenant retains possession of any part of the Premises after the Term, Tenant shall become a month-to-month tenant for the entire Premises upon all of the terms of this Lease as might be applicable to such month-to-month tenancy, except that Tenant shall pay all of Base Rent, Operating Cost Share Rent and Tax Share Rent at double the rate in effect immediately prior to such holdover, computed on a monthly basis for each full or partial month Tenant remains in possession. Tenant shall also pay Landlord all of Landlord's direct and consequential damages if Tenant holds over in the Premises without the prior written approval of Landlord. No acceptance of Rent or other payments by Landlord under these holdover provisions shall operate as a waiver of Landlord's right to regain possession or any other of Landlord's remedies. 16. SUBORDINATION TO GROUND LEASES AND MORTGAGES. -------------------------------------------- A. Subordination. This Lease shall be subordinate to any present ------------- or future ground lease or mortgage respecting the Project, and any amendments to such ground lease or mortgage, at the election of the ground lessor or mortgagee as the case may be, effected by notice to Tenant in the manner provided in this Lease. The subordination shall be effective upon such notice, but at the request of Landlord or ground lessor or mortgagee, Tenant shall within ten (10) days of the request, execute and deliver to the requesting party any reasonable documents provided to evi- 20 dence the subordination. Any mortgagee has the right, at its option, to subordinate its mortgage to the terms of this Lease, without notice to, nor the consent of, Tenant. B. Termination of Ground Lease or Foreclosure of Mortgage. If any ------------------------------------------------------ ground lease is terminated or mortgage foreclosed or deed in lieu of foreclosure given and the ground lessor, mortgagee, or purchaser at a foreclosure sale shall thereby become the owner of the Project, Tenant shall attorn to such ground lessor or mortgagee or purchaser without any deduction or setoff by Tenant, and this Lease shall continue in effect as a direct lease between Tenant and such ground lessor, mortgagee or purchaser. The ground lessor or mortgagee or purchaser shall be liable as Landlord only during the time such ground lessor or mortgagee or purchaser is the owner of the Project. At the request of Landlord, ground lessor or mortgagee, Tenant shall execute and deliver within ten (10) days of the request any document furnished by the requesting party to evidence Tenant's agreement to attorn. C. Security Deposit. Any ground lessor or mortgagee shall be ----------------- responsible for the return of any security deposit by Tenant only to the extent the security deposit is received by such ground lessor or mortgagee. D. Notice and Right to Cure. The Project is subject to any ground ------------------------ lease and mortgage identified with name and address of ground lessor or mortgagee in Appendix D to this Lease (as the same may be amended from time to time by written notice to Tenant). Tenant agrees to send by registered or certified mail to any ground lessor or mortgagee identified either in such Appendix or in any later notice from Landlord to Tenant a copy of any notice of default sent by Tenant to Landlord. If Landlord fails to cure such default within the required time period under this Lease, but ground lessor or mortgagee begins to cure within ten (10) days after such period and proceeds diligently to complete such cure, then ground lessor or mortgagee shall have such additional time as is necessary to complete such cure, including any time necessary to obtain possession if possession is necessary to cure, and Tenant shall not begin to enforce its remedies so long as the cure is being diligently pursued. E. Definitions. As used in this Section 16, "mortgage" shall ------------ include "deed of trust" and/or "trust deed" and "mortgagee" shall include "beneficiary" and/or "trustee", "mortgagee" shall include the mortgagee of any ground lessee, and "ground lessor", "mortgagee", and "purchaser at a foreclosure sale" shall include, in each case, all of its successors and assigns, however remote. 17. ASSIGNMENT AND SUBLEASE. ----------------------- A. In General. Tenant shall not, without the prior consent of ----------- Landlord in each case, (i) make or allow any assignment or transfer, by operation of law or otherwise, of any part of Tenant's interest in this Lease, (ii) grant or allow any lien or encumbrance, by operation of law or otherwise, upon any part of Tenant's interest in this Lease, (iii) sublet any part of the Premises, or (iv) permit anyone other than Tenant and its employees to occupy any part of the Premises. Tenant shall remain primarily liable for all of its obligations under this Lease, notwithstanding any assignment or transfer. No consent granted by Landlord shall be deemed to be a consent to any subsequent assignment or transfer, lien or encumbrance, sublease or occupancy. Tenant shall 21 pay all of Landlord's reasonable attorneys' fees and other expenses incurred in connection with any consent requested by Tenant or in reviewing any proposed assignment or subletting. Any assignment or transfer, grant of lien or encumbrance, or sublease or occupancy without Landlord's prior written consent shall be void. If Tenant shall assign this Lease or sublet the Premises in its entirety any rights of Tenant to renew this Lease, extend the Term or to lease additional space in the Project shall be extinguished thereby and will not be transferred to the assignee or subtenant, all such rights being personal to the Tenant named herein. B. Landlord's Consent. Landlord will not unreasonably withhold its ------------------ consent to any proposed assignment or subletting. It shall be reasonable for Landlord to withhold its consent to any assignment or sublease if (i) Tenant is in default under this Lease, (ii) the proposed assignee or sublessee is a tenant in the Project or an affiliate of such a tenant or a party that Landlord has identified as a prospective tenant in the Project, (iii) the financial responsibility, nature of business, and character of the proposed assignee or subtenant are not all reasonably satisfactory to Landlord, (iv) in the reasonable judgment of Landlord the purpose for which the assignee or subtenant intends to use the Premises (or a portion thereof) is not in keeping with Landlord's standards for the Building or are in violation of the terms of this Lease or any other leases in the Project, (v) the proposed assignee or subtenant is a government entity, or (vi) the proposed assignment is for less than the entire Premises or for less than the remaining Term of the Lease. The foregoing shall not exclude any other reasonable basis for Landlord to withhold its consent. C. Procedure. Tenant shall notify Landlord of any proposed assignment --------- or sublease at least thirty (30) days prior to its proposed effective date. The notice shall include the name and address of the proposed assignee or subtenant, its corporate affiliates in the case of a corporation and its partners in a case of a partnership, an execution copy of the proposed assignment or sublease, and sufficient information to permit Landlord to determine the financial responsibility and character of the proposed assignee or subtenant. As a condition to any effective assignment of this Lease, the assignee shall execute and deliver in form satisfactory to Landlord at least fifteen (15) days prior to the effective date of the assignment, an assumption of all of the obligations of Tenant under this Lease. As a condition to any effective sublease, subtenant shall execute and deliver in form satisfactory to Landlord at least fifteen (15) days prior to the effective date of the sublease, an agreement to comply with all of Tenant's obligations under this Lease, and at Landlord's option, an agreement (except for the economic obligations which subtenant will undertake directly to Tenant) to attorn to Landlord under the terms of the sublease in the event this Lease terminates before the sublease expires. D. Change of Management or Ownership. Any transfer of the direct or --------------------------------- indirect power to affect the management or policies of Tenant or direct or indirect acquisition of or transfer of control of twenty-five percent (25%) or more of the ownership interest in Tenant to any individual or entity and/or their affiliate shall constitute an assignment of this Lease. E. Permitted Transfers. Landlord hereby consents to Tenant's assignment ------------------- of this Lease or sublease of all or any part of the Premises to any affiliate of Tenant or to any corporation resulting from the reorganization, merger, or consolidation with Tenant (any of the foregoing referred to herein as a "Permitted Transfer"); provided, however, that in the case of a permitted assignment, the assignee shall assume in writing all of the Tenant's obligations under 22 this Lease arising after the effective date of the transfer, and in the case of a permitted sublease, Tenant shall execute an agreement to comply with all of the Tenant's obligations under this Lease, and at Landlord's option, an agreement (except for economic obligations which such subtenant will under take directly to Tenant), to attorn to Landlord under the terms of the sublease in the event this Lease terminates before the sublease expires. Tenant shall provide Landlord with written notice of any proposed Permitted Transfer as soon as reasonably practical prior to the effective date thereof, and shall provide Landlord with a final execution copy of the assignment or sublease as soon as reasonably possible thereafter. F. Excess Payments. If Tenant shall assign this Lease or sublet any --------------- part of the Premises for consideration in excess of the pro-rata portion of Rent applicable to the space subject to the assignment or sublet, then Tenant shall pay to Landlord as Additional Rent 50% of any such excess immediately upon receipt. G. Recapture. Landlord may, by giving written notice to Tenant within --------- thirty (30) days after receipt of Tenant's notice of assignment or subletting, terminate this Lease with respect to the space described in Tenant's notice, as of the effective date of the proposed assignment or sublease and all obligations under this Lease as to such space shall expire except as to any obligations that expressly survive any termination of this Lease. 18. CONVEYANCE BY LANDLORD. If Landlord shall at any time transfer its ---------------------- interest in the Project or this Lease, Landlord shall be released of any obligations occurring after such transfer, except the obligation to return to Tenant any security deposit not delivered to its transferee, and Tenant shall look solely to Landlord's successors for performance of such obligations. This Lease shall not be affected by any such transfer. 19. ESTOPPEL CERTIFICATE. Each party shall, within ten (10) days of -------------------- receiving a request from the other party, execute, acknowledge in recordable form, and deliver to the other party or its designee a certificate stating, subject to a specific statement of any applicable exceptions, that the Lease as amended to date is in full force and effect, that the Tenant is paying Rent and other charges on a current basis, and that to the best of the knowledge of the certifying party, the other party has committed no uncured defaults and has no offsets or claims. The certifying party may also be required to state the date of commencement of payment of Rent, the Commencement Date, the Termination Date, the Base Rent, the current Operating Cost Share Rent and Tax Share Rent estimates, the status of any improvements required to be completed by Landlord, the amount of any security deposit, and such other matters as may be reasonably requested. Failure to deliver such statement within the time required shall be conclusive evidence against the non-certifying party that this Lease, with any amendments identified by the requesting party, is in full force and effect, that there are no uncured defaults by the requesting party, that not more than one month's Rent has been paid in advance, that the non-certifying party has not paid any security deposit, and that the non-certifying party has no claims or offsets against the requesting party. 20. SECURITY DEPOSIT. Tenant shall deposit with Landlord on the date of ---------------- this Lease, as security for the performance of all of its obligations, an irrevocable, unconditional standby letter of credit (the "Letter of Credit") in form and content reasonably satisfactory to Landlord, in 23 the amount of One Hundred Thousand Dollars ($100,000.00). Tenant may at any time deposit cash amounts with Landlord equivalent to such amount, and such cash or the Letter of Credit or any combination thereof, shall be deemed the "Security Deposit." If Tenant defaults under the Lease, Landlord may use any part of the Security Deposit to make any defaulted payment, to pay for Landlord's cure of any defaulted obligation or to compensate Landlord for any loss or damage resulting from any default. To the extent any portion of the deposit is used, Tenant shall, within five (5) days after demand from Landlord, restore the deposit to its full amount, as adjusted pursuant to the foregoing provisions of this Section 20. Landlord may keep the Security Deposit, if cash, in its general funds and shall not be required to pay interest to Tenant on the deposit amount. So long as Tenant shall have timely performed its obligations under this Lease prior to such date, Landlord shall agree to reduction of the amount of the Security Deposit to Fifty Thousand Dollars ($50,000.00) on the first day of the fourth (4th) year of the Lease term, and at such time shall return to Tenant any cash that has been deposited in excess of such Fifty Thousand Dollars ($50,000.00). If Tenant shall perform all of its obligations under this Lease and return the Premises to Landlord at the end of the Term, Landlord shall return all of the remaining Security Deposit to Tenant within thirty (30) days after the end of the Term. The Security Deposit shall not serve as an advance payment of Rent or a measure of Landlord's damages for any default under this Lease. If Landlord transfers its interest in the Project or this Lease, Landlord shall transfer the Security Deposit or the unused portion to its transferee or shall refund it to Tenant. Upon such transfer, Landlord shall have no further obligation to return the Security Deposit to Tenant, and Tenant's right to the return of the Security Deposit shall apply solely against Landlord's transferee. The terms of the Security Deposit shall not be affected by any such transfer. 21. FORCE MAJEURE. Landlord shall not be in default under this Lease to ------------- the extent Landlord is unable to perform any of its obligations on account of any strike or labor problem, energy shortage, governmental pre-emption or prescription, national emergency, or any other cause of any kind beyond the reasonable control of Landlord ("Force Majeure"). ------------- 22. [INTENTIONALLY OMITTED.] 23. NOTICES. All notices, consents, approvals and similar ------- communications to be given by one party to the other under this Lease, shall be given in writing, mailed or personally delivered as follows: A. Landlord. To Landlord as follows: -------- Carr Redmond Corporation 10785 Willows Road N.E., Suite 250 Redmond, Washington 98052 Attn: Market Officer 24 with a copy to: CarrAmerica Realty Corporation 1850 K Street, NW Suite 500 Washington, D.C. 20006 Attn: Lease Administration or to such other person at such other address as Landlord may designate by notice to Tenant. B. Tenant. To Tenant as follows: ------- Saflink Corporation Redmond East Business Campus, Building 6, Suite 110 18650 N.E. 67th Court Redmond, Washington 98032 Attn: Chief Financial Officer or to such other person at such other address as Tenant may designate by notice to Landlord. Mailed notices shall be sent by United States certified or registered mail, or by a reputable national overnight courier service, postage prepaid. Mailed notices shall be deemed to have been given on the earlier of actual delivery or three (3) business days after posting in the United States mail in the case of registered or certified mail, and one business day in the case of overnight courier. 24. QUIET POSSESSION. So long as Tenant shall perform all of its ----------------- obligations under this Lease, Tenant shall have peaceful and quiet possession and enjoyment of the Premises against any party claiming through the Landlord. 25. REAL ESTATE BROKER. Each party represents to the other party that ------------------ the representing party has not dealt with any real estate broker with respect to this Lease except for any broker(s) listed in the Schedule, and no other broker is in any way entitled to any broker's fee or other payment in connection with this Lease. The party so representing shall indemnify and defend the other party against any claims by any other broker or third party for any payment of any kind in connection with this Lease. 26. MISCELLANEOUS. ------------- A. Successors and Assigns. Subject to the limits on Tenant's ---------------------- assignment contained in Section 17, the provisions of this Lease shall be binding upon and inure to the benefit of all successors and assigns of Landlord and Tenant. B. Date Payments Are Due. Except for payments to be made by Tenant --------------------- under this Lease which are due upon demand or are due in advance (such as Base Rent), Tenant shall pay to 25 Landlord any amount for which Landlord renders a statement of account within ten days of Tenant's receipt of Landlord's statement. C. Meaning of "Landlord", "Re-Entry, "including" and "Affiliate". The ------------------------------------------------------------ term "Landlord" means only the owner of the Project and the lessor's interest in this Lease from time to time. The words "re-entry" and "re-enter" are not restricted to their technical legal meaning. The words "including" and similar words shall mean "without limitation." The word "affiliate" shall mean a person or entity controlling, controlled by or under common control with the applicable entity. "Control" shall mean the power directly or indirectly, by contract or otherwise, to direct the management and policies of the applicable entity. D. Time of the Essence. Time is of the essence of each provision of ------------------- this Lease. E. No Option. This document shall not be effective for any purpose --------- until it has been executed and delivered by both parties; execution and delivery by one party shall not create any option or other right in the other party. F. Severability. The unenforceability of any provision of this Lease ------------ shall not affect any other provision. G. Governing Law. This Lease shall be governed in all respects by -------------- the laws of the state in which the Project is located, without regard to the principles of conflicts of laws. H. Lease Modification. Tenant agrees to modify this Lease in any way ------------------- requested by a mortgagee which does not cause increased expense to Tenant or otherwise materially adversely affect Tenant's interests under this Lease. I. No Oral Modification. No modification of this Lease shall be ---------------------- effective unless it is a written modification signed by both parties. J. Landlord's Right to Cure. If Landlord breaches any of its ------------------------ obligations under this Lease, Tenant shall notify Landlord in writing and shall take no action respecting such breach so long as Landlord promptly begins to cure the breach and diligently pursues such cure to its completion. Landlord may cure any default by Tenant; any expenses incurred shall become Additional Rent due from Tenant on demand by Landlord. K. Captions. The captions used in this Lease shall have no effect on -------- the construction of this Lease. L. Authority. Landlord and Tenant each represents to the other that --------- it has full power and authority to execute and perform this Lease. M. Landlord's Enforcement of Remedies. Landlord may enforce any of ---------------------------------- its remedies under this Lease either in its own name or through an agent. 26 N. Entire Agreement. This Lease, together with all Appendices, ---------------- constitutes the entire agreement between the parties. No representations or agreements of any kind have been made by either party which are not contained in this Lease. O. Landlord's Title. Landlord's title shall always be paramount to ----------------- the interest of the Tenant, and nothing in this Lease shall empower Tenant to do anything which might in any way impair Landlord's title. P. Light and Air Rights. Landlord does not grant in this Lease any -------------------- rights to light and air in connection with Project. Landlord reserves to itself, the Land, the Building below the improved floor of each floor of the Premises, the Building above the ceiling of each floor of the Premises, the exterior of the Premises and the areas on the same floor outside the Premises, along with the areas within the Premises required for the installation and repair of utility lines and other items required to serve other tenants of the Building. Q. Singular and Plural. Wherever appropriate in this Lease, a ------------------- singular term shall be construed to mean the plural where necessary, and a plural term the singular. For example, if at any time two parties shall constitute Landlord or Tenant, then the relevant term shall refer to both parties together. R. No Recording by Tenant. Tenant shall not record in any public ---------------------- records any memorandum or any portion of this Lease. The preceding sentence shall not prohibit, nor shall it be deemed to prohibit or be construed to prohibit, Tenant from complying with all applicable laws including, but not limited to, the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder. S. Exclusivity. Landlord does not grant to Tenant in this Lease any ----------- exclusive right except the right to occupy its Premises. T. No Construction Against Drafting Party. The rule of construction -------------------------------------- that ambiguities are resolved against the drafting party shall not apply to this Lease. U. Survival. All obligations of Landlord and Tenant under this Lease -------- shall survive the termination of this Lease. V. Rent Not Based on Income. No rent or other payment in respect of ------------------------ the Premises shall be based in any way upon net income or profits from the Premises. Tenant may not enter into or permit any sublease or license or other agreement in connection with the Premises which provides for a rental or other payment based on net income or profit. W. Building Manager and Service Providers. Landlord may perform any -------------------------------------- of its obligations under this Lease through its employees or third parties hired by the Landlord. X. Late Charge and Interest on Late Payments. Without limiting the ----------------------------------------- provisions of Section 12A, if Tenant fails to pay any installment of Rent or other charge to be paid by Tenant pursuant to this Lease within five (5) business days after the same becomes due and payable, then 27 Tenant shall pay a late charge equal to the greater of five percent (5%) of the amount of such payment or $250. In addition, interest shall be paid by Tenant to Landlord on any late payments of Rent from the date due until paid at the rate provided in Section 2D(2). Such late charge and interest shall constitute Additional Rent due and payable by Tenant to Landlord upon the date of payment of the delinquent payment referenced above. Y. Tenant's Financial Statements. Within ten (10) days after ----------------------------- Landlord's written request therefor, Tenant shall deliver to Landlord the current audited annual financial statements and quarterly financial statements of Tenant, and annual audited financial statements of the two (2) years prior to the current year's financial statements, each with an option of a certified public accountant and including a balance sheet and profit and loss statement, all prepared in accordance with generally accepted accounting principles consistently applied. Z. Parking. Landlord shall maintain a parking ratio of three (3) ------- cars per 1,000 rentable square feet of Premises in the parking area serving the Premises. Such parking shall be provided at no additional cost to Tenant. AA. Signs. Subject to Section 11B, Tenant shall have the right to ----- place a sign displaying the name of its business above the door to the Premises. BB. Television and Radio Equipment. Notwithstanding Rule 26 of the ------------------------------ rules and regulations contained in Appendix B, Landlord hereby consents to Tenant's use inside the Premises of its computer equipment and television and radio reception and related equipment. 27. UNRELATED BUSINESS INCOME. If Landlord is advised by its counsel ------------------------- at any time that any part of the payments by Tenant to Landlord under this Lease may be characterized as unrelated business income under the United States Internal Revenue Code and its regulations, then Tenant shall enter into any amendment proposed by Landlord to avoid such income, so long as the amendment does not require Tenant to make more payments or accept fewer services from Landlord, than this Lease provides. 28. HAZARDOUS SUBSTANCES. Tenant shall not cause or permit any -------------------- Hazardous Substances to be brought upon, produced, stored, used, discharged or disposed of in or near the Project unless Landlord has consented to such storage or use in its sole discretion. "Hazardous Substances" include those hazardous -------------------- substances described in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq., any other applicable federal, state or local law, and the regulations adopted under these laws. If any lender or governmental agency shall require testing for Hazardous Substances in the Premises, Tenant shall pay for such testing to the extent that such testing is necessitated by action taken by Tenant since the Commencement Date. Landlord agrees that Tenant may use and store in the Premises such inks, document duplication fluids, and janitorial supplies (the "Necessary Hazardous Substances") as are necessary for the normal ------------------------------ operation of Tenant's business in the Premises if Tenant (i) uses and stores all Necessary Hazardous Substances in strict compliance with all applicable Governmental Requirements; (ii) indemnifies and holds Landlord harmless from any claims, costs, damages, fines, liabilities or expenses, including reasonable attorney's 28 and expert fees, arising from the presence of Tenant's Necessary Hazardous Substances in the Building; and (iii) pays any increased insurance premium arising from the presence of any such Necessary Hazardous Substances in the Building. 29. EXCULPATION. Landlord shall have no personal liability under this ----------- Lease; its liability shall be limited to its interest in the Project, and shall not extend to any other property or assets of the Landlord. In no event shall any officer, director, employee, agent, shareholder, partner, member or beneficiary of Landlord be personally liable for any of Landlord's obligations hereunder. 30. STOCK WARRANTS. As additional consideration for Landlord entering -------------- into this Lease, Tenant shall execute and deliver to Landlord, simultaneously with Tenant's execution and delivery of this Lease to Landlord, a stock warrant subscription and purchase agreement (the "Warrant Subscription and Purchase Agreement") and a warrant to purchase up to twenty-five thousand (25,000) shares of Tenant's common stock (the "Stock Warrant") in the forms attached as Appendix G hereto. The issuance of the Stock Warrant shall be subject to and in accordance with the terms and conditions of the Warrant Subscription and Purchase Agreement. 29 IN WITNESS WHEREOF, the parties hereto have executed this Lease. LANDLORD: CARR REDMOND CORPORATION, a Washington corporation By: _______________________________ Print Name: _______________________ Print Title:_______________________ TENANT: SAFLINK CORPORATION, a Washington corporation By: _______________________________ Print Name: _______________________ Print Title:_______________________ 30 DISTRICT OF COLUMBIA ) ) ss. ) On this _______ day of __________, 2000, before me, the undersigned, a Notary Public in and for the District of Columbia, duly commissioned and sworn as such, personally appeared _________________, to me known to be the ___________________ of Carr Redmond Corporation, the corporation that executed the within and foregoing instrument, and acknowledged the said instrument to be the free and voluntary act and deed of said corporation for the uses and purposes therein mentioned, and on oath stated that he was authorized to execute said instrument, and that the seal affixed is the corporate seal of said corporation. WITNESS my hand and official seal the day and year in this certificate first above written. ____________________________________ Printed Name:_______________________ NOTARY PUBLIC in and for the District of Columbia residing at ________________________ My commission expires:______________ STATE OF WASHINGTON ) ) ss. COUNTY OF KING ) I CERTIFY that I know or have satisfactory evidence that __________________________ is the person who appeared before me, and acknowledged that signed this instrument, on oath stated that was authorized to execute the instrument, and acknowledged it as the ______________ _________________ of Saflink Corporation, to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument. DATED:______________________________ _________________________________ _________________________________ (Print Name) NOTARY PUBLIC in and for the State of Washington, residing at______________________ My commission expires:___________ 31 APPENDIX A PLAN OF THE PREMISES (attach floor plan depicting the Premises) 32 APPENDIX B RULES AND REGULATIONS 1. Tenant shall not place anything, or allow anything to be placed near the glass of any window, door, partition or wall which may, in Landlord's judgment, appear unsightly from outside of the Project. 2. The Project directory shall be available to Tenant solely to display names and their location in the Project, which display shall be as directed by Landlord. 3. The sidewalks, halls, passages, exits, entrances, elevators and stairways shall not be obstructed by Tenant or used by Tenant for any purposes other than for ingress to and egress from the Premises. Tenant shall lend its full cooperation to keep such areas free from all obstruction and in a clean and sightly condition and shall move all supplies, furniture and equipment as soon as received directly to the Premises and move all such items and waste being taken from the Premises (other than waste customarily removed by employees of the Building) directly to the shipping platform at or about the time arranged for removal therefrom. The halls, passages, exits, entrances, elevators, stairways, balconies and roof are not for the use of the general public and Landlord shall, in all cases, retain the right to control and prevent access thereto by all persons whose presence in the judgment of Landlord, reasonably exercised, shall be prejudicial to the safety, character, reputation and interests of the Project. Neither Tenant nor any employee or invitee of Tenant shall go upon the roof of the Project. 4. The toilet rooms, urinals, wash bowls and other apparatuses shall not be used for any purposes other than that for which they were constructed, and no foreign substance of any kind whatsoever shall be thrown therein, and to the extent caused by Tenant or its employees or invitees, the expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by Tenant. 5. Tenant shall not cause any unnecessary janitorial labor or services by reason of Tenant's carelessness or indifference in the preservation of good order and cleanliness. 6. Tenant shall not install or operate any refrigerating, heating or air conditioning apparatus, or carry on any mechanical business without the prior written consent of Landlord; use the Premises for housing, lodging or sleeping purposes; or permit preparation or warming of food in the Premises (warming of coffee and individual meals with employees and guests excepted). Tenant shall not occupy or use the Premises or permit the Premises to be occupied or used for any purpose, act or thing which is in violation of any Governmental Requirement or which may be dangerous to persons or property. 7. Tenant shall not bring upon, use or keep in the Premises or the Project any kerosene, gasoline or inflammable or combustible fluid or material, or any other articles deemed hazardous to persons or property, or use any method of heating or air conditioning other than that supplied by Landlord. 33 8. Landlord shall have sole power to direct electricians as to where and how telephone and other wires are to be introduced. No boring or cutting for wires is to be allowed without the consent of Landlord. The location of telephones, call boxes and other office equipment affixed to the Premises shall be subject to the approval of Landlord. 9. No additional locks shall be placed upon any doors, windows or transoms in or to the Premises. Tenant shall not change existing locks or the mechanism thereof. Upon termination of the lease, Tenant shall deliver to Landlord all keys and passes for offices, rooms, parking lot and toilet rooms which shall have been furnished Tenant. In the event of the loss of keys so furnished, Tenant shall pay Landlord therefor. Tenant shall not make, or cause to be made, any such keys and shall order all such keys solely from Landlord and shall pay Landlord for any keys in addition to the two sets of keys originally furnished by Landlord for each lock. 10. Tenant shall not install linoleum, tile, carpet or other floor covering so that the same shall be affixed to the floor of the Premises in any manner except as approved by Landlord. 11. No furniture, packages, supplies, equipment or merchandise will be received in the Project or carried up or down in the freight elevator, except between such hours and in such freight elevator as shall be designated by Landlord. Tenant shall not take or permit to be taken in or out of other entrances of the Building, or take or permit on other elevators, any item normally taken in or out through the trucking concourse or service doors or in or on freight elevators. 12. Tenant shall cause all doors to the Premises to be closed and securely locked and shall turn off all utilities, lights and machines before leaving the Project at the end of the day. 13. Without the prior written consent of Landlord, Tenant shall not use the name of the Project or any picture of the Project in connection with, or in promoting or advertising the business of, Tenant, except Tenant may use the address of the Project as the address of its business. 14. Tenant shall cooperate fully with Landlord to assure the most effective operation of the Premises' or the Project's heating and air conditioning, and shall refrain from attempting to adjust any controls, other than room thermostats installed for Tenant's use. Tenant shall keep corridor doors closed. 15. Tenant assumes full responsibility for protecting the Premises from theft, robbery and pilferage, which may arise from a cause other than Landlord's negligence, which includes keeping doors locked and other means of entry to the Premises closed and secured. 16. Peddlers, solicitors and beggars shall be reported to the office of the Project or as Landlord otherwise requests. 17. Tenant shall not advertise the business, profession or activities of Tenant conducted in the Project in any manner which violates the letter or spirit of any code of ethics 34 adopted by any recognized association or organization pertaining to such business, profession or activities. 18. No bicycle or other vehicle and no animals or pets shall be allowed in the Premises, halls, freight docks, or any other parts of the Building except that blind persons may be accompanied by "seeing eye" dogs. Tenant shall not make or permit any noise, vibration or odor to emanate from the Premises, or do anything therein tending to create, or maintain, a nuisance, or do any act tending to injure the reputation of the Building. 19. Tenant acknowledges that Building security problems may occur which may require the employment of extreme security measures in the day-to-day operation of the Project. Accordingly: (a) Landlord may, at any time, or from time to time, or for regularly scheduled time periods, as deemed advisable by Landlord and/or its agents, in their sole discretion, require that persons entering or leaving the Project or the Property identify themselves to watchmen or other employees designated by Landlord, by registration, identification or otherwise. (b) Tenant agrees that it and its employees will cooperate fully with Project employees in the implementation of any and all security procedures. (c) Such security measures shall be the sole responsibility of Landlord, and Tenant shall have no liability for any action taken by Landlord in connection therewith, it being understood that Landlord is not required to provide any security procedures and shall have no liability for such security procedures or the lack thereof. 20. Tenant shall not do or permit the manufacture, sale, purchase, use or gift of any fermented, intoxicating or alcoholic beverages without obtaining written consent of Landlord. 21. Tenant shall not disturb the quiet enjoyment of any other tenant. 22. Tenant shall not provide any janitorial services or cleaning without Landlord's written consent and then only subject to supervision of Landlord and at Tenant's sole responsibility and by janitor or cleaning contractor or employees at all times satisfactory to Landlord. 23. Landlord may retain a pass key to the Premises and be allowed admittance thereto at all times to enable its representatives to examine the Premises from time to time and to exhibit the same and Landlord may place and keep on the windows and doors of the Premises at any time signs advertising the Premises for Rent. 24. No equipment, mechanical ventilators, awnings, special shades or other forms of window covering shall be permitted either inside or outside the windows of the Premises without the prior written consent of Landlord, and then only at the expense and risk of Tenant, and they shall be of such shape, color, material, quality, design and make as may be approved by Landlord. 35 25. Tenant shall not during the term of this Lease canvas or solicit other tenants of the Building for any purpose. 26. Tenant shall not install or operate any phonograph, musical or sound- producing instrument or device, radio receiver or transmitter, TV receiver or transmitter, or similar device in the Building, nor install or operate any antenna, aerial, wires or other equipment inside or outside the Building, nor operate any electrical device from which may emanate electrical waves which may interfere with or impair radio or television broadcasting or reception from or in the Building or elsewhere, without in each instance the prior written approval of Landlord. The use thereof, if permitted, shall be subject to control by Landlord to the end that others shall not be disturbed. 27. Tenant shall promptly remove all rubbish and waste from the Premises. 28. Tenant shall not exhibit, sell or offer for sale, Rent or exchange in the Premises or at the Project any article, thing or service, except those ordinarily embraced within the use of the Premises specified in Section 6 of this Lease, without the prior written consent of Landlord. 29. Tenant shall list all furniture, equipment and similar articles Tenant desires to remove from the Premises or the Building and deliver a copy of such list to Landlord and procure a removal permit from the Office of the Building authorizing Building employees to permit such articles to be removed. 30. Tenant shall not overload any floors in the Premises or any public corridors or elevators in the Building. 31. Tenant shall not do any painting in the Premises, or mark, paint, cut or drill into, drive nails or screws into, or in any way deface any part of the Premises or the Building, outside or inside, without the prior written consent of Landlord. 32. Whenever Landlord's consent, approval or satisfaction is required under these Rules, then unless otherwise stated, any such consent, approval or satisfaction must be obtained in advance, such consent or approval may be granted or withheld in Landlord's sole discretion, and Landlord's satisfaction shall be determined in its sole judgment. 33. Tenant and its employees shall cooperate in all fire drills conducted by Landlord in the Building. 36 APPENDIX C TENANT IMPROVEMENT AGREEMENT N/A 37 APPENDIX D MORTGAGES CURRENTLY AFFECTING THE PROJECT ----------------------------------------- 38 APPENDIX E COMMENCEMENT DATE CONFIRMATION ------------------------------ Landlord: Carr Redmond Corporation, a Washington corporation Tenant: Saflink Corporation, a Washington corporation This Commencement Date Confirmation is made by Landlord and Tenant pursuant to that certain Lease dated as of _________, 2000 (the "Lease") for certain premises known as Suites 110 and 210 in the building commonly known as Building 6, Redmond East Business Campus, 18650 N.E. 67th Court, Redmond, Washington 98032 (the "Premises"). This Confirmation is made pursuant to Item 9 of the Schedule to the Lease. 1. Lease Commencement Date, Termination Date. Landlord and Tenant ----------------------------------------- hereby agree that the Commencement Date of the Lease is _____________, 2000, and the Termination Date of the Lease is ________________, _________. 2. Acceptance of Premises. Tenant has inspected the Premises and ----------------------- affirms that the Premises is acceptable in all respects in its current "as is" condition. 3. Incorporation. This Confirmation is incorporated into the Lease, ------------- and forms an integral part thereof. This Confirmation shall be construed and interpreted in accordance with the terms of the Lease for all purposes. TENANT: Saflink Corporation, a Washington corporation By: _____________________________________ Name: ___________________________________ Title: __________________________________ LANDLORD: Carr Redmond Corporation, a Washington corporation By: _____________________________________ Name: ___________________________________ Title: __________________________________ 39 APPENDIX F LEGAL DESCRIPTION 40 RIDER 1 EXTENSION OPTION. Subject to Subsection B below, Tenant may at its option extend the Term of this Lease for one (1) period of five (5) years. Such period is called a "Renewal Term." The Renewal Term shall be upon the same terms ------------ contained in this Lease except for the payment of Base Rent during the Renewal Term; and any reference in the Lease to the "Term" of the Lease shall be deemed to include any Renewal Term and apply thereto, unless it is expressly provided otherwise. Tenant shall have no additional extension options. A. The Base Rent during the Renewal Term shall be the greater of (i) the Base Rent applicable to the last day of the final Lease Year prior to the Renewal Term, or (ii) the Market Rate (defined hereinafter) for such space for a term commencing on the first day of the Renewal Term. "Market Rate" shall mean ----------- the then prevailing market rate for a comparable term commencing on the first day of the Renewal Term for tenants of comparable size and creditworthiness for comparable space in the Building and other first class office buildings in the vicinity of the Building. B. To exercise any option, Tenant must deliver a binding notice to Landlord not less than twelve (12) months prior to the expiration of the initial Term of this Lease. Thereafter, the Market Rate for the particular Renewal Term shall be calculated pursuant to Subsection C below and Landlord shall inform Tenant of the Market Rate. Such calculations shall be final and shall not be recalculated at the actual commencement of such Renewal Term. If Tenant fails to timely give its notice of exercise, Tenant will be deemed to have waived its option to extend. C. Market Rate shall be determined as follows: (i) If Tenant provides Landlord with its binding notice of exercise pursuant to Subsection B above, then at some point between thirteen (13) and eleven (11) months prior to the commencement of the applicable Renewal Term (or, at Landlord's election, at an earlier point), Landlord shall calculate and inform Tenant of the Market Rate. If Tenant rejects the Market Rate as calculated by Landlord, Tenant shall inform Landlord of its rejection within ten (10) days after Tenant's receipt of Landlord's calculation, and Landlord and Tenant shall commence negotiations to agree upon the Market Rate. If Tenant fails to timely reject Landlord's calculation of the Market Rate it will be deemed to have accepted such calculation. If Landlord and Tenant are unable to reach agreement within twenty-one (21) days after Landlord's receipt of Tenant's notice of rejection, then the Market Rate shall be determined in accordance with (ii) below. (ii) If Landlord and Tenant are unable to reach agreement on the Market Rate within said twenty-one (21) day period, then within seven (7) days, Landlord and Tenant shall each simultaneously submit to the other in a sealed envelope its good faith estimate of the Market Rate. If the higher of such estimates is not more than one hundred five percent (105%) of the lower, then the Market Rate shall be the average of the two. Otherwise, the dispute shall be resolved by arbitration in accordance with (iii) and (iv) below. 41 (iii) Within seven (7) days after the exchange of estimates, the parties shall select as an arbitrator an independent MAI appraiser with at least five (5) years of experience in appraising office space in the metropolitan area in which the Project is located (a "Qualified --------- Appraiser"). If the parties cannot agree on a Qualified Appraiser, then --------- within a second period of seven (7) days, each shall select a Qualified Appraiser and within ten (10) days thereafter the two appointed Qualified Appraisers shall select a third Qualified Appraiser and the third Qualified Appraiser shall be the sole arbitrator. If one party shall fail to select a Qualified Appraiser within the second seven (7) day period, then the Qualified Appraiser chosen by the other party shall be the sole arbitrator. (iv) Within twenty-one (21) days after submission of the matter to the arbitrator, the arbitrator shall determine the Market Rate by choosing whichever of the estimates submitted by Landlord and Tenant the arbitrator judges to be more accurate. The arbitrator shall notify Landlord and Tenant of its decision, which shall be final and binding. If the arbitrator believes that expert advice would materially assist him, the arbitrator may retain one or more qualified persons to provide expert advice. The fees of the arbitrator and the expenses of the arbitration proceeding, including the fees of any expert witnesses retained by the arbitrator, shall be paid by the party whose estimate is not selected. Each party shall pay the fees of its respective counsel and the fees of any witness called by that party. The arbitration shall take place in King County, Washington. D. Tenant's option to extend this Lease is subject to the conditions that: (i) on the date that Tenant delivers its binding notice exercising an option to extend, Tenant is not in default under this Lease after the expiration of any applicable notice and cure periods, and (ii) Tenant shall not have assigned the Lease, or sublet any portion of the Premises under a sublease which is effective at any time during the final twelve (12) months of the initial Term or the First Renewal Term, as applicable. 42 NET RENT FORM TABLE OF CONTENTS
Page ---- 1. LEASE AGREEMENT 3 2. RENT 3 A. Types of Rent 3 (1) Base Rent 3 (2) Operating Cost Share Rent 3 (3) Tax Share Rent 4 (4) Additional Rent 4 (5) Rent 4 B. Payment of Operating Cost Share Rent and Tax Share Rent 4 (1) Payment of Estimated Operating Cost Share Rent and Tax Share Rent 4 (2) Correction of Operating Cost Share Rent 4 (3) Correction of Tax Share Rent 4 C. Definitions 5 (1) Included Operating Costs 5 (2) Excluded Operating Costs 5 (3) Taxes 6 (4) Lease Year 7 (5) Fiscal Year 7 D. Computation of Base Rent and Rent Adjustments 7 (1) Prorations 7 (2) Default Interest 7 (3) Rent Adjustments 7 (4) Books and Records 7 (5) Miscellaneous 8 3. PREPARATION AND CONDITION OF PREMISES; POSSESSION AND SURRENDER OF PREMISES 8 A. Condition of Premises 8 B. Tenant's Possession 8 C. Maintenance 8 4. PROJECT SERVICES 9 A. Heating and Air Conditioning 9 B. Elevators 9 C. Electricity 9 D. Water 9 E. Janitorial Service 10 F. Interruption of Services 10
43 5. ALTERATIONS AND REPAIRS 10 A. Landlord's Consent and Conditions 10 B. Damage to Systems 11 C. No Liens 11 D. Ownership of Improvements 12 E. Removal at Termination 12 6. USE OF PREMISES 12 7. GOVERNMENTAL REQUIREMENTS AND BUILDING RULES 13 8. WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE 13 A. Indemnification 13 B. Tenant's Insurance 13 C. Insurance Certificates 15 D. Landlord's Insurance 15 E. Waiver of Subrogation 15 9. FIRE AND OTHER CASUALTY 15 A. Termination 15 B. Restoration 15 10. EMINENT DOMAIN 16 11. RIGHTS RESERVED TO LANDLORD 16 A. Name 16 B. Signs 16 C. Window Treatments 16 D. Keys 16 E. Access 16 F. Preparation for Reoccupancy 16 G. Heavy Articles 16 H. Show Premises 17 I. Relocation of Tenant 17 J. Use of Lockbox 17 K. Repairs and Alterations 17 L. Landlord's Agents 18 M. Building Services 18 N. Other Actions 18 12. TENANT'S DEFAULT 18 A. Rent Default 18 B. Assignment/Sublease or Hazardous Substances Default 18 C. Other Performance Default 18 D. Credit Default 18 E. Vacation or Abandonment Default 19 13. LANDLORD REMEDIES 19 A. Termination of Lease or Possession 19
44 B. Lease Termination Damages 19 C. Possession Termination Damages 19 D. Landlord's Remedies Cumulative 19 E. WAIVER OF TRIAL BY JURY 20 F. Litigation Costs 20 14. SURRENDER 20 15. HOLDOVER 20 16. SUBORDINATION TO GROUND LEASES AND MORTGAGES 20 A. Subordination 20 B. Termination of Ground Lease or Foreclosure of Mortgage 21 C. Security Deposit 21 D. Notice and Right to Cure 21 E. Definitions 21 17. ASSIGNMENT AND SUBLEASE 21 A. In General 21 B. Landlord's Consent 22 C. Procedure 22 D. Change of Management or Ownership 22 E. Permitted Transfers 22 F. Excess Payments 23 G. Recapture 23 18. CONVEYANCE BY LANDLORD 23 19. ESTOPPEL CERTIFICATE 23 20. SECURITY DEPOSIT 23 21. FORCE MAJEURE 24 22. [INTENTIONALLY OMITTED] 24
45 23. NOTICES 24 A. Landlord 24 B. Tenant 25 24. QUIET POSSESSION 25 25. REAL ESTATE BROKER 25 26. MISCELLANEOUS 25 A. Successors and Assigns 25 B. Date Payments Are Due 25 C. Meaning of "Landlord", "Re-Entry, "including" and "Affiliate" 26 D. Time of the Essence 26 E. No Option 26 F. Severability 26 G. Governing Law 26 H. Lease Modification 26 I. No Oral Modification 26 J. Landlord's Right to Cure 26 K. Captions 26 L. Authority 26 M. Landlord's Enforcement of Remedies 26 N. Entire Agreement 27 O. Landlord's Title 27 P. Light and Air Rights 27 Q. Singular and Plural 27 R. No Recording by Tenant 27 S. Exclusivity 27 T. No Construction Against Drafting Party 27 U. Survival 27 V. Rent Not Based on Income 27 W. Building Manager and Service Providers 27 X. Late Charge and Interest on Late Payments 27 Y. Tenant's Financial Statements 28 Z. Parking 28 A A. Signs 28 BB. Television and Radio Equipment 28 27. UNRELATED BUSINESS INCOME 28 28. HAZARDOUS SUBSTANCES 28 29. EXCULPATION 29 30. STOCK WARRANTS 29
46 APPENDIX A - PLAN OF THE PREMISES APPENDIX B - RULES AND REGULATIONS APPENDIX C - TENANT IMPROVEMENT AGREEMENT APPENDIX D - MORTGAGES CURRENTLY AFFECTING THE PROJECT APPENDIX E - COMMENCEMENT DATE CONFIRMATION APPENDIX F - LEGAL DESCRIPTION APPENDIX G - WARRANT SUBSCRIPTION AND PURCHASE AGREEMENT APPENDIX H - LANDLORD'S WORK LETTER RIDER 1 47 EX-27 7 0007.txt FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 759 299 248 16 16 1,843 1,565 1,156 2,877 1,884 0 0 0 261 732 2,703 1,156 1,156 371 6,765 0 0 0 (5,906) 0 (5,906) 0 0 0 (5,906) (0.32) (0.32)
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