-----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, FMAIaHLCDa82/7S3TSsvNufuWzXyb7NbGuY3erCbRhCWdoFdmUP8Ql23eicB7pZB KMn7Gpjv1DrPhpQANKsjiQ== 0000897101-01-500405.txt : 20010704 0000897101-01-500405.hdr.sgml : 20010704 ACCESSION NUMBER: 0000897101-01-500405 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20010702 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VISIONICS CORP CENTRAL INDEX KEY: 0000868373 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 411545069 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 333-72031 FILM NUMBER: 1674574 BUSINESS ADDRESS: STREET 1: 5600 ROWLAND RD CITY: MINNETONKA STATE: MN ZIP: 55343 BUSINESS PHONE: 6129320888 MAIL ADDRESS: STREET 1: 5600 ROWLAND RD STREET 2: 5600 ROWLAND RD CITY: MINNETONKA STATE: MN ZIP: 55343 FORMER COMPANY: FORMER CONFORMED NAME: DIGITAL BIOMETRICS INC DATE OF NAME CHANGE: 19930328 8-K 1 visionics012306_8k.txt VISIONICS CORPORTATION FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 1 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 July 2, 2001 Date of Report (date of earliest event reported) VISIONICS CORPORATION (Exact name of Registrant as Specified in Charter) Delaware 0-18856 41-1545069 (State or Other Jurisdiction (Commission File No.) (IRS Employer ID No.) of Incorporation) 5600 Rowland Road, Suite 205, Minnetonka, Minnesota 55343-4315 (Address of principal executive offices) (952) 932-0888 (Registrant's telephone number, including area code) 1 ITEM 5. Other Events On June 29, 2001, Visionics Corporation (the "Company") closed on a private placement offering of common stock and warrants. A total of 1,302,862 shares were sold to accredited investors at a price of $4.50 each with total net proceeds to the Company of approximately $5.5 million. In addition, the Company issued warrants for 325,715 shares at an exercise price of $5.66 per share and 325,715 warrants at $6.79 per share to the purchasers for no additional consideration. These warrants are callable when the Company's stock price exceeds 150 percent of the warrant price for twenty consecutive trading days. The Company issued additional warrants to purchase up to 26,057 shares of common stock at an exercise price of $4.50 per share to an investment-banking firm as partial compensation for services rendered in the private placement. ITEM 7. Financial Statements, Pro Forma Financial Information And Exhibits (c) Exhibits Exhibits (Referenced to Item 601 of Regulation S-K) Description of Exhibit - --------------- ---------------------- 4.1 Registration Rights Agreement dated June 27, 2001 by and among Visionics Corporation and the Investors named therein. 4.2 Warrant dated June 29, 2001 between the Company and Special Situations Fund III, L.P. for the purchase of 125,000 shares of the Company's common stock at an exercise price of $5.66 per share, and schedule of substantially identical documents executed by the Company and not filed pursuant to Instruction 2 to Item 601 of Regulation S-K. 10.1 Purchase Agreement dated June 27, 2001 among the Company and the Investors named therein. 99.1 Press Release issued by the Company on July 2, 2001. 2 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 hereunto duly authorized. VISIONICS CORPORATION Dated: July 2, 2001 By: /s/ Robert F. Gallagher ------------------------------------ Robert F. Gallagher Chief Financial Officer EX-4 2 visionics012306_ex4-1.txt EXHIBIT 4.1 REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.1 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is made and entered into as of this 27th day of June, 2001 by and among Visionics Corporation, formerly known as Digital Biometrics, Inc., a Delaware corporation (the "Company"), and the "Investors" named in that certain Purchase Agreement of even date herewith by and between the Company and the Investors (the "Purchase Agreement"). The parties hereby agree as follows: 1. Certain Definitions. As used in this Agreement, the following terms shall have the following meanings: "Affiliate" means, with respect to any person, any other person which directly or indirectly controls, is controlled by, or is under common control with, such person. "Common Stock" shall mean the Company's common stock, par value $.01 per share. "Investors" shall mean the purchasers identified in the Purchase Agreement and any Affiliate or permitted transferee of any Investor who is a subsequent holder of any Warrants or Registrable Securities. "Person" means any individual, firm, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, limited liability company, government (or an agency or political subdivision thereof) or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity. "Prospectus" shall mean the prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus. "Register," "registered" and "registration" refer to a registration made by preparing and filing a Registration Statement or similar document in compliance with the 1933 Act (as defined below), and the declaration or ordering of effectiveness of such Registration Statement or document. "Registrable Securities" shall mean the shares of Common Stock issued and issuable to the Investors pursuant to the Purchase Agreement and issuable upon the exercise of the Warrants, and any other securities issued or issuable with respect to or in exchange for Registrable Securities. "Registration Statement" shall mean any registration statement of the Company filed under the 1933 Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement. "SEC" means the U.S. Securities and Exchange Commission. "1933 Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "1934 Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Warrants" mean the warrants to purchase shares of Common Stock issued to the Investors pursuant to the Purchase Agreement, the forms of which are attached to the Purchase Agreement as Exhibit A and Exhibit B, respectively. 2. Registration. (a) Registration Statements. Promptly following the closing of the purchase and sale of Common Stock and Warrants contemplated by the Purchase Agreement (the "Closing Date") (but no later than thirty (30) days after the Closing Date), the Company shall prepare and file with the SEC one Registration Statement on Form S-3 (or, if Form S-3 is not then available to the Company, on such form of registration statement as is then available to effect a registration for resale of the Registrable Securities, subject to the Investors' consent), covering the resale of the Registrable Securities in an amount equal to the number of shares of Common Stock issued to the Investors on the Closing Date plus the number of shares of Common Stock necessary to permit the exercise in full of the Warrants. Such Registration Statement also shall cover, to the extent allowable under the 1933 Act and the rules promulgated thereunder (including Rule 416), such indeterminate number of additional shares of Common Stock resulting from stock splits, stock dividends or similar transactions with respect to the Registrable Securities. The Company shall use its commercially reasonable efforts to obtain from each person who now has piggyback registration rights a waiver of those rights with respect to the Registration Statement. No securities held by a third party shall be included in such Registration Statement without the consent of each Investor. The Registration Statement (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof) shall be provided in accordance with Section 3(c) hereof to the Investors and their counsel prior to its filing or other submission. If a Registration Statement covering the Registrable Securities is not filed with the SEC within thirty (30) days of the date hereof (the "Registration -2- Date"), except as excused pursuant to Section 2(d) below, for each 30-day period (or pro rata for any portion thereof) following the Registration Date during which no Registration Statement is filed with respect to the Registrable Securities, the Company will pay to each Investor, as liquidated damages and not as a penalty, an amount equal to 1.5% of the aggregate amount paid to the Company by such Investor on the Closing Date for shares of Common Stock still held by such Investor. The amounts payable as liquidated damages pursuant to this paragraph shall be payable in lawful money of the United States, and amounts payable as liquidated damages shall be paid monthly within two (2) business days of the last day of each month following the Registration Date until the Registration Statement is filed with the SEC. Amounts payable as liquidated damages hereunder shall cease when an Investor no longer holds Warrants or Registrable Securities, as applicable. (b) Expenses. The Company will pay all expenses associated with each registration, including the Investors' reasonable expenses in connection with the registration but excluding discounts, commissions, fees of underwriters, selling brokers, dealer managers or similar securities industry professionals. (c) Effectiveness. The Company shall use its best efforts to have each Registration Statement declared effective as soon as practicable. If (A) a Registration Statement covering Registrable Securities is not declared effective by the SEC within ninety (90) days after the Closing Date (one hundred twenty (120) days if the Registration Statement is subject to full review by the SEC staff (which shall not include a "plain English" review), (B) after a Registration Statement has been declared effective by the SEC, sales cannot be made pursuant to such Registration Statement for any reason (including without limitation by reason of a stop order, or the Company's failure to update the Registration Statement), but except as excused pursuant to Section 2(d) below, or (C) the Common Stock generally or the Registrable Securities specifically are not listed or included for quotation on the Nasdaq National Market System, the Nasdaq Small Cap Market, the New York Stock Exchange or the American Stock Exchange, then the Company will make pro rata payments to each Investor, as liquidated damages and not as a penalty, in an amount equal to 1.5% of the aggregate amount paid by such Investor on the Closing Date to the Company for shares of Common Stock still held by such Investor for any 30-day period or pro rata for any portion thereof following the date by which such a Registration Statement should have been effective as described in (A) or (B) or (C) above (the "Blackout Period"). Such payments shall be in partial compensation to the Investors and shall not constitute the Investors' exclusive remedy for such events. The Blackout Period shall terminate upon (x) the effectiveness of the applicable Registration Statement in the case of (A) and (B) above; (y) listing or inclusion of the Common Stock on the Nasdaq National Market System, the Nasdaq Small Cap Market, the New York Stock Exchange or the American Stock Exchange in the case of (C) above; and (z) in the case of the events described in (A) or (B) above, the earlier termination of the Registration Period (as defined in Section 3(a) below). The amounts payable as liquidated damages pursuant to this paragraph shall be payable in lawful money of the United States, and amounts payable as liquidated damages shall be paid monthly within two (2) business days of the last day of each month following the commencement of the Blackout Period until the -3- termination of the Blackout Period. Amounts payable as liquidated damages hereunder shall cease when an Investor no longer holds Warrants or Registrable Securities, as applicable. (d) Allowed Delay. For not more than twenty (20) consecutive trading days or for a total of not more than thirty (30) trading days in any twelve (12) month period, the Company may delay the disclosure of material non-public information concerning the Company, by electing not to file the Registration Statement by the Registration Date or terminating or suspending effectiveness of any registration contemplated by this Section containing such information, the disclosure of which at the time is not, in the good faith opinion of the Company, in the best interests of the Company (an "Allowed Delay"); provided, that the Company shall promptly (i) notify the Investors in writing of the existence of (but in no event, without the prior written consent of an Investor, shall the Company disclose to such Investor any of the facts or circumstances regarding) material non-public information giving rise to an Allowed Delay, and (ii) if the Registration Statement has already been filed and declared effective, advise the Investors in writing to cease all sales under the Registration Statement until the end of the Allowed Delay. (e) Underwritten Offering. If any offering pursuant to a Registration Statement pursuant to Section 2(a) hereof involves an underwritten offering, the Company shall have the right to select an investment banker and manager to administer the offering, which investment banker or manager shall be reasonably satisfactory to the Investors. 3. Company Obligations. The Company will use its best efforts to effect the registration of the Registrable Securities in accordance with the terms hereof, and pursuant thereto the Company will, as expeditiously as possible: (a) use its best efforts to cause such Registration Statement to become effective and to remain continuously effective for a period that will terminate upon the earlier of (i) the date on which all Registrable Securities, covered by such Registration Statement, as amended from time to time, have been sold, and (ii) the date on which all Registrable Securities may be sold pursuant to Rule 144(k) (the "Registration Period"); (b) prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement and the Prospectus as may be necessary to keep the Registration Statement effective for the period specified in Section 3(a) and to comply with the provisions of the 1933 Act and the 1934 Act with respect to the distribution of all Registrable Securities; (c) provide copies to and permit counsel designated by the Investors to review each Registration Statement and all amendments and supplements thereto no fewer than seven (7) days prior to their filing with the SEC and not file any document to which such counsel reasonably objects; -4- (d) furnish to the Investors and their legal counsel (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company (but not later than 2 business days after the filing date, receipt date or sending date, as the case may be), at least 5 copies of any Registration Statement and any amendment thereto, each preliminary prospectus and Prospectus and each amendment or supplement thereto, and each letter written by or on behalf of the Company to the SEC or the staff of the SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other than any portion of any thereof which contains information for which the Company has sought confidential treatment), and (ii) such number of copies of a Prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as each Investor may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Investor; (e) in the event the Company selects an underwriter for the offering, the Company shall enter into and perform its reasonable obligations under an underwriting agreement, in usual and customary form, including, without limitation, customary indemnification and contribution obligations, with the underwriter of such offering; (f) if required by the underwriter, or if any Investor is described in the Registration Statement as an underwriter, the Company shall furnish, on the effective date of the Registration Statement, on the date that Registrable Securities are delivered to an underwriter, if any, for sale in connection with the Registration Statement and at periodic intervals thereafter from time to time on request, (i) an opinion, dated as of such date, from independent legal counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the underwriter and the Investors and (ii) a letter, dated such date, from the Company's independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriter and the Investors; (g) make effort to prevent the issuance of any stop order or other suspension of effectiveness and, if such order is issued, obtain the withdrawal of any such order at the earliest possible moment; (h) prior to any public offering of Registrable Securities, use its reasonable best efforts to register or qualify or cooperate with the Investors and their counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions requested by the Investor and do any and all other reasonable acts or things necessary or advisable to enable the distribution in such jurisdictions of the Registrable Securities covered by the Registration Statement; -5- (i) cause all Registrable Securities covered by a Registration Statement to be listed on each securities exchange, interdealer quotation system or other market on which similar securities issued by the Company are then listed; (j) immediately notify the Investors, at any time when a Prospectus relating to the Registrable Securities is required to be delivered under the 1933 Act, upon discovery that, or upon the happening of any event as a result of which, the Prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and at the request of any such holder, promptly prepare and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such Prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; and (k) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act, take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder. 4. Due Diligence Review; Information. The Company shall make available, during normal business hours, for inspection and review by the Investors, advisors to and representatives of the Investors (who may or may not be affiliated with the Investors and who are reasonably acceptable to the Company) (each, an "Inspector"), any underwriter participating in any disposition of Common Stock on behalf of the Investors pursuant to a Registration Statement or amendments or supplements thereto or any blue sky, NASD or other filing, all financial and other records, all SEC Documents (as defined in the Purchase Agreement) and other filings with the SEC, and all other corporate documents and properties of the Company as may be reasonably necessary for the purpose of such review (collectively, the "Records"), and cause the Company's officers, directors and employees, within a reasonable time period, to supply all such information reasonably requested by the Investors or any such representative, advisor or underwriter in connection with such Registration Statement (including, without limitation, in response to all questions and other inquiries reasonably made or submitted by any of them), prior to and from time to time after the filing and effectiveness of the Registration Statement for the sole purpose of enabling the Investors and such representatives, advisors and underwriters and their respective accountants and attorneys to conduct initial and ongoing due diligence with respect to the Company and the accuracy of such Registration Statement. Records that the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors (and the Inspectors shall confirm their agreement in writing in advance to the Company if the Company shall so request) unless (x) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction after exhaustion of all -6- appeals therefrom, or is otherwise required by applicable law, or (y) the information in such Records was known to the Inspectors on a non-confidential basis prior to its disclosure by the Company, or has been made generally available to the public. Each seller of Registrable Securities agrees that it shall, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at the Company's expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential; The Company shall not disclose material nonpublic information to the Investors, or to advisors to or representatives of the Investors, unless prior to disclosure of such information the Company identifies such information as being material nonpublic information and provides the Investors, such advisors and representatives with the opportunity to accept or refuse to accept such material nonpublic information for review. -7- 5. Obligations of the Investors. (a) Each Investor shall furnish in writing to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request. At least fifteen (15) business days prior to the first anticipated filing date of any Registration Statement, the Company shall notify each Investor of the information the Company requires from such Investor. An Investor shall provide such information to the Company at least five (5) business days prior to the first anticipated filing date of such Registration Statement. (b) Each Investor, by its acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of a Registration Statement hereunder, unless such Investor has notified the Company in writing of its election to exclude all of its Registrable Securities from such Registration Statement. (c) In the event the Company, at the request of the Investors, determines to engage the services of an underwriter, such Investor agrees to enter into and perform its obligations under an underwriting agreement, in usual and customary form, including, without limitation, customary indemnification and contribution obligations, with the managing underwriter of such offering and take such other actions as are reasonably required in order to expedite or facilitate the dispositions of the Registrable Securities. (d) Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event rendering a Registration Statement no longer effective, such Investor will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities, until the Investor's receipt of the copies of the supplemented or amended prospectus filed with the SEC and declared effective and, if so directed by the Company, the Investor shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in the Investor's possession of the Prospectus covering the Registrable Securities current at the time of receipt of such notice. (e) No Investor may participate in any third party underwritten registration hereunder unless it (i) agrees to sell the Registrable Securities on the basis provided in any underwriting arrangements in usual and customary form entered into by the Company, (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, and (iii) agrees to pay its pro rata share of all underwriting discounts and commissions. Notwithstanding the foregoing, no Investor shall be required to make any representations to such underwriter, other than those with respect to itself and the Registrable Securities owned by it, including its right -8- to sell the Registrable Securities, and any indemnification in favor of the underwriter by the Investors shall be several and not joint and limited in the case of any Investor, to the proceeds received by such Investor from the sale of its Registrable Securities. The scope of any such indemnification in favor of an underwriter shall be limited to the same extent as the indemnity provided in Section 6(b) hereof. 6. Indemnification. (a) Indemnification by the Company. The Company will indemnify and hold harmless each Investor and their respective officers, directors, members, employees and agents, successors and assigns, and each other person, if any, who controls such Investor within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which such seller, officer, director, member, or controlling person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof; (ii) any blue sky application or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company filed in any state or other jurisdiction in order to qualify any or all of the Registrable Securities under the securities laws thereof (any such application, document or information herein called a "Blue Sky Application"); (iii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; or (iv) any violation by the Company or its agents of any rule or regulation promulgated under the 1933 Act applicable to the Company or its agents and relating to action or inaction required of the Company in connection with such registration; and will reimburse such Investor, and each such officer, director or member and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Investor or any such controlling person in writing specifically for use in such Registration Statement or Prospectus. (b) Indemnification by the Investors. In connection with any registration pursuant to the terms of this Agreement, each Investor will furnish to the Company in writing such information as the Company reasonably requests concerning the holders of Registrable Securities or the proposed manner of distribution for use in connection with any Registration Statement or Prospectus and agrees, severally but not jointly, to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors, officers, employees, stockholders and each person who controls the Company (within the meaning of the 1933 Act) against any losses, claims, damages, liabilities and expense (including reasonable attorney fees) resulting from any untrue statement of a material fact or any omission of a material fact required to be stated in -9- the Registration Statement or Prospectus or preliminary prospectus or amendment or supplement thereto or necessary to make the statements therein not misleading, to the extent, but only to the extent that such untrue statement or omission is contained in any information furnished in writing by such Investor to the Company specifically for inclusion in such Registration Statement or Prospectus or amendment or supplement thereto and that such information was substantially relied upon by the Company in preparation of the Registration Statement or Prospectus or any amendment or supplement thereto. In no event shall the liability of an Investor be greater in amount than the dollar amount of the proceeds (net of all expense paid by such Investor and the amount of any damages such holder has otherwise been required to pay by reason of such untrue statement or omission) received by such Investor upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation. (c) Conduct of Indemnification Proceedings. Any Person entitled to indemnification hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any Person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (a) the indemnifying party has agreed to pay such fees or expenses, or (b) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such Person or (c) in the reasonable judgment of any such Person, based upon written advice of its counsel, a conflict of interest exists between such Person and the indemnifying party with respect to such claims (in which case, if the person notifies the indemnifying party in writing that such Person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such Person); and provided, further, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations hereunder, except to the extent that such failure to give notice shall materially adversely affect the indemnifying party in the defense of any such claim or litigation. It is understood that the indemnifying party shall not, in connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any time for all such indemnified parties. No indemnifying party will, except with the consent of the indemnified party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release of such indemnified party from all liability in respect of such claim or litigation. (d) Contribution. If for any reason the indemnification provided for in the preceding paragraphs (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless, other than as expressly specified therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is -10- appropriate to reflect the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. No person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act shall be entitled to contribution from any person not guilty of such fraudulent misrepresentation. In no event shall the contribution obligation of a holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such holder and the amount of any damages such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation. 7. Miscellaneous. (a) Amendments and Waivers. Subject to the provisions of Section 9.11 of the Purchase Agreement, this Agreement may be amended only by a writing signed by the Company and Investors (or their permitted assigns) holding Registrable Securities representing at least a majority of the Registrable Securities which majority must include Special Situation Funds. The Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of each Investor. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made as set forth in Section 9.4 of the Purchase Agreement. (c) Assignments and Transfers by Investors. The provisions of this Agreement shall be binding upon and inure to the benefit of the Investors and their respective successors and assigns. An Investor may transfer or assign, in whole or from time to time in part, to one or more persons its rights hereunder in connection with the transfer of shares of Registrable Securities by such Investor to such person, provided that such Investor complies with the provisions of all applicable laws thereto and provides written notice of assignment to the Company promptly after such assignment is effected. (d) Assignments and Transfers by the Company. This Agreement may not be assigned by the Company without the prior written consent of each Investor, except that without the prior written consent of the Investors, but after notice duly given, the Company shall assign its rights and delegate its duties hereunder to any successor-in-interest corporation, and such successor-in-interest shall assume such rights and duties, in the event of a merger or consolidation of the Company with or into another corporation or the sale of all or substantially all of the Company's assets. (e) Benefits of the Agreement. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective -11- successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. (f) Counterparts; Faxes. 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. This Agreement may also be executed via facsimile, which shall be deemed an original. (g) 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. (h) Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provisions hereof prohibited or unenforceable in any respect. (i) Further Assurances. The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained. (j) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (k) Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to principles of conflicts of law. -12- IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written. The Company: VISIONICS CORPORATION By: /s/ Robert F. Gallagher ----------------------------------- Name: Robert F. Gallagher Title: Chief Financial Officer The Investors: SPECIAL SITUATIONS FUND III, L.P. By: /s/ David Greenhouse ----------------------------------- Name: David Greenhouse Title: Managing Director SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P. By: /s/ David Greenhouse ----------------------------------- Name: David Greenhouse Title: Managing Director SPECIAL SITUATIONS TECHNOLOGY FUND, L.P. By: /s/ David Greenhouse ----------------------------------- Name: David Greenhouse Title: Managing Director -13- SPECIAL SITUATIONS CAYMAN FUND, L.P. By: /s/ David Greenhouse ----------------------------------- Name: David Greenhouse Title: Managing Director PYRAMID PARTNERS, L.P. By: /s/ Richard W. Perkins ----------------------------------- Name: Richard W. Perkins Title: President INDUSTRICORP & CO., INC., FBO TWIN CITY CARPENTERS PENSION PLAN By: /s/ Ralph Jarvis ----------------------------------- Name: Ralph Jarvis Title: Secretary USB PIPER JAFFRAY AS CUSTODIAN FBO DAVID H. POTTER IRA By: /s/ Daniel S. Perkins ----------------------------------- Name: Daniel S. Perkins Title: Vice President USB PIPER JAFFRAY AS CUSTODIAN FBO JAMES G. PETERS IRA By: /s/ Daniel S. Perkins ----------------------------------- Name: Daniel S. Perkins Title: Vice President -14- DANIEL S. AND PATRICE M. PERKINS By: /s/ Daniel S. Perkins, Patrice M. Perkins ----------------------------------------- RICHARD W. PERKINS TRUSTEE U/A DATED 6/14/78 FBO RICHARD W. PERKINS By: /s/ Richard W. Perkins ----------------------------------------- Name: Richard W. Perkins Title: Trustee -15- EX-4 3 visionics012306_ex4-2.txt EXHIBIT 4.2 WARRANT Exhibit 4.2 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR EXEMPTION FROM REGISTRATION UNDER THE FOREGOING LAWS. SUBJECT TO THE PROVISIONS OF SECTION 10 HEREOF, VOID AFTER 5:00 P.M. EASTERN TIME ON JUNE 28, 2006 ("EXPIRATION DATE"). VISIONICS CORPORATION WARRANT TO PURCHASE 125,000 SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE ("COMMON STOCK") For VALUE RECEIVED, SPECIAL SITUATIONS FUND III, L.P. ("Warrantholder"), is entitled to purchase, subject to the provisions of this Warrant, from Visionics Corporation, a Delaware corporation ("Company"), at any time not later than 5:00 P.M., Eastern time, on the Expiration Date, at an exercise price per share equal to $5.66 (the exercise price in effect being herein called the "Warrant Price"), 125,000 shares ("Warrant Shares") of Common Stock. The number of Warrant Shares purchasable upon exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as described herein. Section 1. Registration. The Company shall maintain books for the transfer and registration of the Warrant. Upon the initial issuance of the Warrant, the Company shall issue and register the Warrant in the name of the Warrantholder. Section 2. Transfers. As provided herein, this Warrant may be transferred only pursuant to a registration statement filed under the Securities Act of 1933, as amended ("Securities Act") or an exemption from such registration. Subject to such restrictions, the Company shall transfer this Warrant from time to time upon the books to be maintained by the Company for that purpose, upon surrender thereof for transfer properly endorsed or accompanied by appropriate instructions for transfer and such other documents as may be reasonably required by the Company to establish that such transfer is being made in accordance with the terms hereof, and a new Warrant shall be issued to the transferee and the surrendered Warrant shall be canceled by the Company. Section 3. Exercise of Warrant. Subject to the provisions hereof, the Warrantholder may exercise this Warrant in whole or in part at any time upon surrender of the Warrant, together with delivery of the duly executed Warrant exercise form attached hereto as Appendix A (the "Exercise Agreement") and payment by cash, certified check or wire transfer of funds (or by cashless exercise as provided below) for the Warrant Price for that number of Warrant Shares then being purchased, to the Company during normal business hours on any business day at the Company's principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof). The Warrant Shares so purchased shall be deemed to be issued to the holder hereof or such holder's designee, as the record owner of such shares, as of the close of business on the date on which this Warrant shall have been surrendered (or evidence of loss, theft or destruction thereof and security or indemnity satisfactory to the Company shall have been provided to the Company), the Warrant Price shall have been paid and the completed Exercise Agreement shall have been delivered. Certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in the Exercise Agreement, shall be delivered to the holder hereof within a reasonable time, not exceeding seven (7) business days, after this Warrant shall have been so exercised. The certificates so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of such holder or such other name as shall be designated by such holder. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. Each exercise hereof shall constitute the representation and warranty of the Warrantholder to the Company that the representations and warranties contained in Article 5 of the Purchase Agreement (as defined below) are true and correct in all material respects with respect to the Warrantholder as of the time of such exercise. Section 4. Compliance with the Securities Act of 1933. The Company may cause the legend set forth on the first page of this Warrant to be set forth on each Warrant or similar legend on any security issued or issuable upon exercise of this Warrant, unless counsel for the Company is of the opinion as to any such security that such legend is unnecessary. Section 5. Payment of Taxes. The Company will pay any documentary stamp taxes attributable to the initial issuance of Warrant Shares issuable upon the exercise of the Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered holder of this Warrant, and in such case, the Company shall not be required to issue or deliver any certificate for Warrant Shares or any Warrant until the person requesting the same has paid to the Company the amount of such tax or has established to the Company's reasonable satisfaction that such tax has been paid. The holder shall be responsible for income taxes due under federal, state or other law, if any such tax is due. Section 6. Mutilated or Missing Warrants. In case this Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and -2- substitution of and upon cancellation of the mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and for the purchase of a like number of Warrant Shares, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of the Warrant, and with respect to a lost, stolen or destroyed Warrant, reasonable indemnity or bond with respect thereto, if requested by the Company. Section 7. Reservation of Common Stock. The Company hereby represents and warrants that there have been reserved, and the Company shall at all applicable times keep reserved until issued (if necessary) as contemplated by this Section 7, out of the authorized and unissued Common Stock, sufficient shares to provide for the exercise of the rights of purchase represented by the Warrant. The Company agrees that all Warrant Shares issued upon exercise of the Warrant shall be, at the time of delivery of the certificates for such Warrant Shares, duly authorized, validly issued, fully paid and non-assessable shares of Common Stock of the Company. Section 8. Adjustments. Subject and pursuant to the provisions of this Section 8, the Warrant Price and number of Warrant Shares subject to this Warrant shall be subject to adjustment from time to time as set forth hereinafter. (a) If the Company shall at any time or from time to time while the Warrant is outstanding, pay a dividend or make a distribution on its Common Stock in shares of Common Stock, subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares or issue by reclassification of its outstanding shares of Common Stock any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then the number of Warrant Shares purchasable upon exercise of the Warrant and the Warrant Price in effect immediately prior to the date upon which such change shall become effective, shall be adjusted by the Company so that the Warrantholder thereafter exercising the Warrant shall be entitled to receive the number of shares of Common Stock or other capital stock which the Warrantholder would have received if the Warrant had been exercised immediately prior to such event upon payment of a Warrant Price that has been adjusted to reflect a fair allocation of the economics of such event to the Warrantholder. Such adjustments shall be made successively whenever any event listed above shall occur. (b) If any capital reorganization, reclassification of the capital stock of the Company, consolidation or merger of the Company with another corporation in which the Company is not the survivor, or sale, transfer or other disposition of all or substantially all of the Company's assets to another corporation shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall be made whereby each Warrantholder shall thereafter have the right -3- to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of the Warrant, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of Warrant Shares equal to the number of Warrant Shares immediately theretofore issuable upon exercise of the Warrant, had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of each Warrantholder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Warrant Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or properties thereafter deliverable upon the exercise thereof. The Company shall not effect any such consolidation, merger, sale, transfer or other disposition unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to the holder of the Warrant such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to purchase, and the other obligations under this Warrant. The provisions of this paragraph (b) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, transfers or other dispositions. (c) In case the Company shall fix a payment date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends or distributions referred to in Section 8(a)), or subscription rights or warrants, the Warrant Price to be in effect after such payment date shall be determined by multiplying the Warrant Price in effect immediately prior to such payment date by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the Market Price per share of Common Stock (as defined below), less the fair market value (as determined by the Company's Board of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such Market Price per share of Common Stock. "Market Price" as of a particular date (the "Valuation Date") shall mean the following: (a) if the Common Stock is then listed on a national stock exchange, the closing sale price of one share of Common Stock on such exchange on the last trading day prior to the Valuation Date; (b) if the Common Stock is then quoted on Nasdaq, the closing sale price of one share of Common Stock on Nasdaq on the last trading day prior to the Valuation Date or, if no such closing sale price is available, the average of the high bid and the low sales price quoted on Nasdaq on the last trading day prior to the Valuation Date; or (c) if the Common Stock is not then listed on a national stock -4- exchange or quoted on Nasdaq, the Fair Market Value of one share of Common Stock as of the Valuation Date, shall be determined in good faith by the Board of Directors of the Company and the Warrantholder. The Board of Directors of the Company shall respond promptly, in writing, to an inquiry by the Warrantholder prior to the exercise hereunder as to the Market Value of a share of Common Stock as determined by the Board of Directors of the Company. In the event that the Board of Directors of the Company and the Warrantholder are unable to agree upon the Market Value in respect of subpart (c) hereof, the Company and the Warrantholder shall jointly select an appraisor, who is experienced in such matters. The decision of such appraiser shall be final and conclusive, and the cost of such appraiser shall be borne evenly by the Company and the Warrantholder. Such adjustment shall be made successively whenever such a payment date is fixed. (d) For the term of this Warrant, in addition to the provisions contained above, the Warrant Price shall be subject to adjustment as provided below. An adjustment to the Warrant Price shall become effective immediately after the payment date in the case of each dividend or distribution and immediately after the effective date of each other event which requires an adjustment. (e) In the event that, as a result of an adjustment made pursuant to Section 8(a), the holder of this Warrant shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, the number of such other shares so receivable upon exercise of this Warrant shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Warrant. (f) Except as provided in subsection (g) hereof, if and whenever the Company shall issue or sell, or is, in accordance with any of subsections (f)(l) through (f)(7) hereof, deemed to have issued or sold, any shares of Common Stock for a consideration per share less than the Warrant Price in effect immediately prior to the time of such issue or sale, then and in each such case (a "Trigger Issuance") the then-existing Warrant Price, shall be reduced, as of the close of business on the effective date of the Trigger Issuance, to a price determined as follows: Adjusted Warrant Price = (A x B) + D ----------- A+C where "A" equals the number of shares of Common Stock outstanding (including any Additional Shares of Common Stock (as defined below) immediately preceding such Trigger Issuance); "B" equals the Warrant Price in effect immediately preceding such Trigger Issuance; -5- "C" equals the number of Additional Shares of Common Stock (as adjusted for stock splits, stock combinations, recapitalizations, and dividends and the like) issued or deemed issued hereunder as a result of all Trigger Issuances; and "D" equals the aggregate consideration, if any, received or deemed to be received by the Company upon such Trigger Issuance. For purposes of this subsection (f), "Additional Shares of Common Stock" shall mean all shares of Common Stock issued by the Company or deemed to be issued pursuant to this subsection (f), other than Excluded Issuances (as defined in subsection (g) hereof). For purposes of this subsection (f), the following subsections (f)(l) to (f)(7) shall also be applicable (subject, in each such case, to the provisions of subsection (g) hereof) and to each other subsection contained in this subsection (f): (f)(1) Issuance of Rights or Options. In case at any time the Company shall in any manner grant (directly and not by assumption in a merger or otherwise) any warrants or other rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock (such warrants, rights or options being called "Options" and such convertible or exchangeable stock or securities being called "Convertible Securities") whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities (determined by dividing (i) the sum (which sum shall constitute the applicable consideration (the "Consideration")) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting of such Options, plus (y) the aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus (z), in the case of such Options which relate to Convertible Securities, the aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options) shall be less than the Warrant Price in effect immediately prior to the time of the granting of such Options, then the total number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total amount of such Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued for such price per share as of the date of granting of such Options or the issuance of such Convertible -6- Securities and thereafter shall be deemed to be outstanding for purposes of adjusting the Warrant Price. Except as otherwise provided in subsection 8(f)(3), no adjustment of the Warrant Price shall be made upon the actual issue of such Common Stock or of such Convertible Securities upon exercise of such Options or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities. (f)(2) Issuance of Convertible Securities. In case the Company shall in any manner issue (directly and not by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (i) the sum (which sum shall constitute the applicable Consideration) of (x) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus (y) the aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (ii) the total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Warrant Price in effect immediately prior to the time of such issue or sale, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to have been issued for such price per share as of the date of the issue or sale of such Convertible Securities and thereafter shall be deemed to be outstanding for purposes of adjusting the Warrant Price, provided that (a) except as otherwise provided in subsection 8(f)(3), no adjustment of the Warrant Price shall be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities and (b) no further adjustment of the Warrant Price shall be made by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Warrant Price have been made pursuant to other provisions of this subsection 8(f)(2). (f)(3) Change in Option Price or Conversion Rate. Upon the happening of any of the following events, namely, if the purchase price provided for in any Option referred to in subsection 8(f)(l) hereof, the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in subsections 8(f)(l) or 8(f)(2), or the rate at which Convertible Securities referred to in subsections 8(f)(l) or 8(f)(2) are convertible into or exchangeable for Common Stock shall change at any time (including, but not limited to, changes under or by reason of provisions designed to protect against dilution), the Warrant Price in effect at the time of such event shall forthwith be readjusted to the Warrant Price which would have been in effect at such time had such -7- Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold; and on the termination of any such Option or any such right to convert or exchange such Convertible Securities (including without limitation upon the redemption or purchase for Consideration of all such Convertible Securities by the Company), the Warrant Price then in effect hereunder shall forthwith be changed to the Warrant Price which would have been in effect at the time of such termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such termination, never been issued. (f)(4) Stock Dividends. Subject to the provisions hereof, in case the Company shall declare a dividend or make any other distribution upon any stock of the Company (other than the Common Stock) payable in Common Stock, Options or Convertible Securities, then any Common Stock, Options or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. (f)(5) Consideration for Stock. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for cash, the Consideration received therefor shall be deemed to be the net amount received by the Company therefor, after deduction therefrom of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for a Consideration other than cash, the amount of the Consideration other than cash received by the Company shall be deemed to be the fair value of such Consideration as determined in good faith by the Board of Directors of the Company, after deduction of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. In case any Options shall be issued in connection with the issue and sale of other securities of the Company, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued for such consideration as determined in good faith by the Board of Directors of the Company. (f)(6) Record Date. In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (ii) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such -8- dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (f)(7) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries, and the disposition of any such shares shall be considered an issue or sale of Common Stock for the purpose of this subsection (f). (g) Anything herein to the contrary notwithstanding, the Company shall not be required to make any adjustment of the Warrant Price in the case of the issuance of any of (A) capital stock, Options or Convertible Securities issued to directors, officers, employees or consultants of the Company in connection with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company pursuant to an equity compensation program approved by the Board of Directors of the Company or the compensation committee of the Board of Directors of the Company, (B) sales of shares of Common Stock upon the conversion or exercise of Options or Convertible Securities issued prior to the date hereof or (C) capital stock issued as full or partial consideration for a merger or acquisition, or a strategic allegiance or alliance in which the Company with respect to such strategic allegiance or alliance issues shares of its equity securities having an aggregate Fair Market Value (as defined below) of less than $10 million, approved by the Board of Directors of the Company. The "Fair Market Value" of a security as of a particular date (the "Valuation Date") shall mean the following: (a) if the security is then listed on a national stock exchange, the closing sale price of one security on such exchange on the last trading day prior to the Valuation Date; (b) if the security is then quoted on Nasdaq, the closing sale price of one security on Nasdaq on the last trading day prior to the Valuation Date or, if no such closing sale price is available, the average of the high bid and the low sales price quoted on Nasdaq on the last trading day prior to the Valuation Date; or (c) if the security is not then listed on a national stock exchange or quoted on Nasdaq, the Fair Market Value of one security as of the Valuation Date, shall be determined in good faith by the Board of Directors of the Company and Special Situation Funds ("SSF"). In the event that the Board of Directors of the Company and SSF are unable to agree upon the Fair Market Value in respect of subpart (c) hereof, the Company and SSF shall jointly select an appraisor, who is experienced in such matters. The decision of such appraiser shall be final and conclusive, and the cost of such appraiser shall be borne evenly by the Company and the Investors (pro rata in respect of their ownership of Securities at such time) as such terms are defined in that certain Purchase Agreement among the Company and the Investors dated the date hereof. An "Excluded Issuance" shall mean each of items (A), (B) and (C) above. Section 9. Fractional Interest. The Company shall not be required to issue fractions of Warrant Shares upon the exercise of the Warrant. If any fractional share of Common Stock would, except for the provisions of the first sentence of this Section 9, be delivered upon such exercise, the Company, in lieu of delivering such fractional share, -9- shall pay to the exercising holder of this Warrant an amount in cash equal to the current Fair Market Value of such fractional share of Common Stock. Section 10. Extension of Expiration Date. If the Company fails to cause any Registration Statement covering Registrable Securities (capitalized terms are as defined in the Registration Rights Agreement dated of even date herewith) (the "Registration Rights Agreement") to be declared effective prior to the applicable dates set forth therein, or if any of the events specified in clause (B) or (C) of Section 2(c) of the Registration Rights Agreement occurs and the Blackout Period (whether alone, or in combination with any other Blackout Period) continues for more than 60 days in any 12 month period, or for more than a total of 90 days, then the Expiration Date of this Warrant shall be extended one day for each day beyond the 60-day or 90-day limits, as the case may be, that the Blackout Period continues. Section 11. Benefits. Nothing in this Warrant shall be construed to give any person, firm or corporation (other than the Company and the Warrantholder) any legal or equitable right, remedy or claim, it being agreed that this Warrant shall be for the sole and exclusive benefit of the Company and the Warrantholder. Section 12. Notices to Warrantholder. Upon the happening of any event requiring an adjustment of the Warrant Price, the Company shall promptly give written notice thereof to the Warrantholder at the address appearing in the records of the Company, stating the adjusted Warrant Price and the adjusted number of Warrant Shares resulting from such event and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Failure to give such notice to the Warrantholder or any defect therein shall not affect the legality or validity of the subject adjustment. Section 13. Identity of Transfer Agent. The Transfer Agent for the Common Stock is Wells Fargo Shareowner Services. Upon the appointment of any subsequent transfer agent for the Common Stock or other shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrant, the Company will mail to the Warrantholder a statement setting forth the name and address of such transfer agent. Section 14. Notices. Any notice pursuant hereto to be given or made by the Warrantholder to or on the Company shall be sufficiently given or made if sent by certified mail, return receipt requested, postage prepaid, addressed as follows: -10- Visionics Corporation 5600 Rowland Road Minnetonka, Minnesota 55353 Attn: Robert Gallagher Fax: (952) 932-7181 or such other address as the Company may specify in writing by notice to the Warrantholder complying as to delivery with the terms of this Section 14. Any notice pursuant hereto to be given or made by the Company to or on the Warrantholder shall be sufficiently given or made if personally delivered or if sent by an internationally recognized courier services by overnight service, to the address set forth on the books of the Company or, as to each of the Company and the Warrantholder, at such other address as shall be designated by such party by written notice to the other party complying as to delivery with the terms of this Section 14. All such notices, requests, demands, directions and other communications shall, when sent by courier be effective one (1) day after delivery to such courier as provided and addressed as aforesaid. Section 15. Registration Rights. The initial holder of this Warrant is entitled to the benefit of certain registration rights in respect of the Warrant Shares and Additional Warrant Shares as provided in the Registration Rights Agreement, and any subsequent holder hereof may be entitled to such rights. Section 16. Successors. All the covenants and provisions hereof by or for the benefit of the Warrantholder shall bind and inure to the benefit of its respective successors and assigns hereunder. Section 17. Governing Law. This Warrant shall be deemed to be a contract made under the laws of the State of New York, without giving effect to its conflict of law principles, and for all purposes shall be construed in accordance with the laws of said State; provided, however, that, insofar as the Company is incorporated under the laws of the State of Delaware, the General Corporation Law of the State of Delaware (or any successor statute) shall govern those matters that apply to the internal governance of the Company. Section 18. Cashless Exercise. Net Issue Election. Notwithstanding any other provision contained herein to the contrary, the Warrantholder may elect to receive, without the payment by the Warrantholder of the aggregate Warrant Price in respect of the shares of Common Stock to be acquired, shares of Common Stock equal to the value of this Warrant or any portion hereof by the surrender of this Warrant (or such portion of this Warrant being so exercised) together with the Net Issue Election Notice annexed hereto as Appendix B duly executed, at the office of the Company. Thereupon, the Company shall issue to the -11- Warrantholder such number of fully paid, validly issued and nonassessable shares of Common Stock as is computed using the following formula: X = Y(A - B) -------- A where X = the number of shares of Common Stock which the Warrantholder has then requested be issued to the Warrantholder Y = the total number of shares of Common Stock covered by this Warrant which the Warrantholder has surrendered at such time for cash-less exercise A = the "Fair Market Value" of one share of Common Stock as at the time the net issue election is made B = the Warrant Price in effect under this Warrant at the time the net issue election is made. Section 19. Call Provision. Notwithstanding any other provision contained herein to the contrary, in the event that the closing bid price of a share of Common Stock as traded on the Nasdaq National Market (or such other exchange as the Common Stock may then be listed) exceeds 150% of the Warrant Price for twenty (20) consecutive trading sessions and all of the Warrant Shares issuable hereunder are registered pursuant to an effective Registration Statement (as defined in the Registration Rights Agreement), the Company, upon ten (10) business days prior written notice (the "Notice Period"), following such twenty (20) day period, to the Warrantholder, may demand that the Warrantholder exercise its rights with regard to all Warrant Shares and the Warrantholder must exercise its rights prior to the expiration of the Notice Period or if such exercise is not made or if only a partial exercise is made, any and all rights to further exercise rights to acquire Warrant Shares hereunder shall cease upon the expiration of the Notice Period. Section 20. Amendments and Waivers. Subject to the provisions of Section 9.11 of that certain Purchase Agreement, dated as of June 27, 2001, among the Company and the Investors parties thereto, this Warrant may be amended only by a writing signed by the Company and the Warrantholder. [SIGNATURES BEGIN ON THE NEXT PAGE] -12- IN WITNESS WHEREOF, Visionics Corporation has caused this Warrant to be duly executed, as of the day and year first above written. VISIONICS CORPORATION By:________________________ Name: Title: -13- APPENDIX A Visionics Corporation WARRANT EXERCISE FORM To: Visionics Corporation The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant ("Warrant") for, and to purchase thereunder by the payment of the Warrant Price and surrender of the Warrant, _______________ shares of Common Stock ("Warrant Shares") provided for therein, and requests that certificates for the Warrant Shares be issued as follows: ________________________________ Name ________________________________ Address ________________________________ ________________________________ Federal Tax ID or Social Security No. and delivered by [ ] certified mail to the above address, or [ ] electronically (provide DWAC Instructions: ___________________), or [ ] other (specify: _________________). and, if the number of Warrant Shares shall not be all the Warrant Shares purchasable upon exercise of the Warrant, that a new Warrant for the balance of the Warrant Shares purchasable upon exercise of this Warrant be registered in the name of the undersigned Warrantholder or the undersigned's Assignee as below indicated and delivered to the address stated below. By exercising the rights represented by this Warrant, the undersigned hereby certifies that, as of the date of exercise of this Warrant, the representations and warranties contained in Section 5 of the Purchase Agreement are true and correct in all material respects with respect to the undersigned. Dated:___________________, ____ Signature: Note: The signature must correspond with _________________________________ the name of the registered holder as written on the first page of the Warrant in every particular, without alteration _________________________________ or enlargement or any change whatever, Name (please print) unless the Warrant has been assigned. _________________________________ _________________________________ Address _________________________________ Federal Identification or Social Security No. Assignee: _________________________________ _________________________________ _________________________________ -14- APPENDIX "B" Net Issue Election Notice To: Visionics Corporation Date:_________________________ The undersigned hereby elects under Section 18 of this Warrant to surrender the right to purchase ____________ shares of Common Stock pursuant to this Warrant and hereby requests the issuance of _____________ shares of Common Stock. The certificate(s) for the shares issuable upon such net issue election shall be issued in the name of the undersigned or as otherwise indicated below. ----------------------------------------- Signature ----------------------------------------- Name for Registration ----------------------------------------- Mailing Address EX-4 4 visionics012306_ex4-2a.txt EXHIBIT 4.2A SCHEDULE OF ADDITIONAL WARRANTS EXHIBIT 4.2(a) Schedule of additional Warrants to purchase common stock of the Company executed by the Company which are substantially identical and which are not being filed as exhibits pursuant to Instruction 2 to Item 601 of Regulation S-K: Number of Shares Name of Warrant Holder Covered by Warrant Exercise Price - ---------------------- ------------------ -------------- Special Situations Fund III, L.P. 125,000 $6.79 Special Situations Private Equity Fund, L.P. 66,667 $5.66 Special Situations Private Equity Fund, L.P. 66,667 $6.79 Special Situations Technology Fund, L.P. 44,445 $5.66 Special Situations Technology Fund, L.P. 44,445 $6.79 Special Situations Cayman Fund, L.P. 41,667 $5.66 Special Situations Cayman Fund, L.P. 41,667 $6.79 Pyramid Partners, L.P. 12,500 $5.66 Pyramid Partners, L.P. 12,500 $6.79 Industricorp & Co., Inc. 12,500 $5.66 Industricorp & Co., Inc. 12,500 $6.79 Daniel and Patrice Perkins Jt. 5,562 $5.66 Daniel and Patrice Perkins Jt. 5,562 $6.79 Richard W. Perkins 6,250 $5.66 Richard W. Perkins 6,250 $6.79 James G. Peters IRA 5,562 $5.66 James G. Peters IRA 5,562 $6.79 David H. Potter IRA 5,562 $5.66 David H. Potter IRA 5,562 $6.79 EX-10 5 visionics012306_ex10-1.txt EXHIBIT 10.1 PURCHASE AGREEMENT Exhibit 10.1 PURCHASE AGREEMENT THIS PURCHASE AGREEMENT ("Agreement") is made as of the 27th day of June, 2001 by and among Visionics Corporation, formerly known as Digital Biometrics, Inc., a Delaware corporation (the "Company"), and the Investors set forth on the signature page affixed hereto (each an "Investor" and collectively the "Investors"). RECITALS A. The Company and the Investors are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Regulation D ("Regulation D"), as promulgated by the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended; B. The Investors wish to purchase, and the Company wishes to sell and issue to the Investors, upon the terms and conditions stated in this Agreement, that number of shares of the common stock of the Company, par value $.01 per share (the "Common Stock") and that number of warrants to purchase Common Stock in the forms attached hereto as EXHIBIT A (the "A Warrants"), and as EXHIBIT B (the "B Warrants" and together with the A Warrants the "Warrants"), as are set forth on the signature page attached hereto and executed by each such Investor; provided that the Company shall not in the aggregate sell in excess of $13,000,000 of shares of Common Stock and Warrants hereunder; and C. Under this Agreement, Special Situation Funds ("SSF") shall invest not less than $5,000,000 in the Common Stock and the Warrants; and D. Contemporaneous with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement, in the form attached hereto as EXHIBIT C (the "Registration Rights Agreement"), pursuant to which the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended and the rules and regulations promulgated thereunder (the "1933 Act"), and applicable state securities laws. In consideration of the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Definitions. In addition to those terms defined above and elsewhere in this Agreement, for the purposes of this Agreement, the following terms shall have the meanings here set forth: "Affiliate" means, with respect to any Person, any other Person which directly or indirectly Controls, is controlled by, or is under common control with, such Person. "Agreements" means this Agreement, the Registration Rights Agreement and the Warrants. "Average Price" means $5.66, being the average of the ten (10) closing trade prices of the Common Stock for the ten (10) consecutive trading sessions ending June 13, 2001. "Closing" means the consummation of the transactions contemplated by this Agreement, and "Closing Date" means the date of such Closing. "Control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Company's Knowledge" means the actual knowledge of the executive officers of the Company after due inquiry. "Material Adverse Effect" means a material adverse effect on the condition, business, assets, or results of operations of the Company and its subsidiaries as a whole. "Person" means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein. "SEC Filings" has the meaning set forth in Section 4.6. "Securities" means the Shares, the Warrants and the Warrant Shares (defined below). "Shares" means the shares of Common Stock being purchased by the Investors hereunder. "Warrant Shares" means the shares of Common Stock issuable upon exercise of or otherwise pursuant to the Warrants. "1934 Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. 2. Purchase and Sale of the Shares and Warrants. Subject to the terms and conditions of this Agreement, each of the Investors hereby severally, and not jointly, -2- agrees to purchase, and the Company hereby agrees to sell and issue to each such Investor, the number of Shares and Warrants to purchase the number of shares of Common Stock set forth on such Investor's signature page attached hereto, provided that the Company shall not in the aggregate sell in excess of $13,000,000 of shares of Common Stock and Warrants hereunder. The number of Shares to be purchased by each Investor shall be determined by dividing such Investor's aggregate purchase price (as such aggregate purchase price is set forth on such Investor's signature page attached hereto) (the "Purchase Price") by an amount equal to Four Dollars and Fifty Cents ($4.50) (the "Per Share Purchase Price"). The Per Share Purchase Price is a fixed price; it does not adjust depending upon the timing of the Closing. The number of shares of Common Stock purchasable by the Investors upon exercise of the A Warrants and the B Warrants shall be as set forth on such Investor's signature page attached hereto. The Warrants shall afford to the Investors the right to purchase one share of Common Stock upon the exercise of the Warrants for every four Shares acquired on the Closing Date. The exercise price of the A Warrants payable by an Investor shall be the Average Price and the exercise price of the B Warrants payable by an Investor shall be 120% of the Average Price. 3. Closing. Promptly upon the execution and delivery of this Agreement and the Registration Rights Agreement and the delivery of such other documents as may be required hereunder or as may be reasonably requested by the Investors or their counsel, the Company shall deliver to Investors' counsel, in trust, a certificate or certificates, registered in such name or names as the Investors may designate, representing all of the Shares and all of the Warrants, with instructions that such certificates are to be held for release to the Investors only upon payment of the Purchase Price to the Company. Upon receipt by counsel to the Investors of the certificates, each Investor shall promptly cause a wire transfer in same day funds to be sent to the account of the Company as instructed in writing by the Company, in an amount representing such Investor's Purchase Price. On the date the Company receives such funds, the certificates evidencing the Shares and the Warrants shall be released to the Investors (and such date shall be deemed the "Closing Date"). The purchase and sale of the Securities shall take place at the offices of Lowenstein Sandler P.C., 1330 Avenue of the Americas, 21st Floor, New York, New York, or at such other location and on such other date as the Company and the Investors shall mutually agree. 4. Representations and Warranties of the Company. The Company hereby represents and warrants to the Investors that: 4. 1 Organization, Good Standing and Qualification. Each of the Company and its subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted and own its properties. Each of the Company and its subsidiaries is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property makes such qualification or licensing necessary unless the failure to so qualify would not have a -3- Material Adverse Effect. The Company's subsidiaries are reflected on Schedule 4.1 hereto. 4.2 Authorization. The Company has full power and authority and has taken all requisite action on the part of the Company, its officers, directors and stockholders necessary for (i) the authorization, execution and delivery of the Agreements, (ii) authorization of the performance of all obligations of the Company hereunder or thereunder, and (iii) the authorization, issuance (or reservation for issuance) and delivery of the Securities. The Agreements constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors' rights generally. 4.3 Capitalization. Set forth on Schedule 4.3 hereto is (a) the authorized capital stock of the Company on the date hereof; (b) the number of shares of capital stock issued and outstanding; (c) the number of shares of capital stock issuable pursuant to the Company's stock plans; and (d) the number of shares of capital stock issuable and reserved for issuance pursuant to securities (other than the Shares and the Warrants) exercisable for, or convertible into or exchangeable for any shares of capital stock of the Company. All of the issued and outstanding shares of the Company's capital stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. Except as set forth on Schedule 4.3, no Person is entitled to preemptive or similar statutory or contractual rights with respect to any securities of the Company. Except as set forth on Schedule 4.3, there are no outstanding warrants, options, convertible securities or other rights, agreements or arrangements of any character under which the Company or any of its subsidiaries is or may be obligated to issue any equity securities of any kind. Except as set forth on Schedule 4.3, there are no voting agreements, buy-sell agreements, option or right of first purchase agreements or other agreements of any kind among any of the securityholders of the Company relating to the securities of the Company held by them. Except as set forth on Schedule 4.3, the Company has not granted any Person the right to require the Company to register any securities of the Company under the 1933 Act, whether on a demand basis or in connection with the registration of securities of the Company for its own account or for the account of any other Person. 4.4 Valid Issuance. The Company has reserved a sufficient number of shares of Common Stock for the issuance of the Shares pursuant to this Agreement and the issuance of the Warrant Shares upon exercise of the Warrants. The Shares and Warrants are duly authorized, and such Securities, along with the Warrant Shares when issued in accordance herewith and with the terms of the Warrants, will be duly authorized, validly issued, fully paid, non-assessable and free and clear of all encumbrances and restrictions, except for restrictions on transfer imposed by applicable securities laws. -4- 4.5 Consents. The execution, delivery and performance by the Company of the Agreements and the offer, issuance and sale of the Securities require no consent of, action by or in respect of, or filing with, any Person, governmental body, agency, or official other than filings that have been made pursuant to applicable state securities laws and post-sale filings pursuant to applicable state and federal securities laws which the Company undertakes to file within the applicable time periods. 4.6 Delivery of SEC Filings; Business. The Company has provided the Investors with copies of the Company's most recent Annual Report on Form 10-K for the fiscal year ended September 30, 2000, and all other reports filed by the Company pursuant to the 1934 Act since the filing of the Annual Report on Form 10-K and prior to the date hereof (collectively, the "SEC Filings"). The Company hereby represents and warrants that the SEC Filings are the only filings required of the Company pursuant to the 1934 Act for such period. The Company is engaged only in the business described in the SEC Filings and the SEC Filings contain a complete and accurate description of the business of the Company. 4.7 Use of Proceeds. The proceeds of the sale of the Common Stock and the Warrants hereunder shall be used by the Company for working capital and general corporate purposes. 4.8 No Material Adverse Change. Since the filing of the Company's most recent Annual Report on Form 10-K or as otherwise identified and described in the SEC Filings, or as set forth on Schedule 4.8 hereto, there has not been: (i) any change in the consolidated assets, liabilities, financial condition or operating results of the Company from that reflected in the financial statements included in the Company's most recent Quarterly Report on Form 10-Q, except the incurrence of operating losses consistent with the historic results of the Company or changes in the ordinary course of business which have not had, in the aggregate, a Material Adverse Effect; (ii) any declaration or payment of any dividend, or any authorization or payment of any distribution, on any of the capital stock of the Company, or any redemption or repurchase of any securities of the Company; (iii) any material damage, destruction or loss, whether or not covered by insurance to any assets or properties of the Company; (iv) any waiver, not in the ordinary course of business by the Company of a valuable right or of a material debt owed to it; (v) any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company, except in the ordinary course of business and which is not material to the assets, properties, financial -5- condition, operating results or business of the Company taken as a whole (as such business is presently conducted and as it is proposed to be conducted); (vi) any change or amendment to the Company's Certificate of Incorporation or by-laws, or material change to any material contract or arrangement by which the Company or any of its assets or properties is bound or subject; (vii) any material labor difficulties or labor union organizing activities with respect to employees of the Company; (viii) any transaction entered into by the Company other than in the ordinary course of business; (ix) the loss of the services of any key employee, or material change in the composition or duties of the Company's senior management; (x) the loss or threatened loss of any customer which could be material to the Company's business; or (xi) any other event or condition of any character that might have a Material Adverse Effect. 4.9 SEC Filings; Material Contracts. (a) The SEC Filings complied as to form in all material respects with the requirements of the 1934 Act and did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. (b) During the preceding two years, each registration statement and any amendment thereto filed by the Company pursuant to the 1933 Act and the rules and regulations thereunder, as of the date such statement or amendment became effective, complied as to form in all material respects with the 1933 Act and did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading; and each prospectus filed pursuant to Rule 424(b) under the 1933 Act, as of its issue date and as of the closing of any sale of securities pursuant thereto, did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. (c) Except as set forth on Schedule 4.3 hereto, there are no agreements or instruments currently in force and effect that constitute a warrant, option, convertible security or other right, agreement or arrangement of any character -6- under which the Company is or may be obligated to issue any material amounts of any equity security of any kind, or to transfer any material amounts of any equity security of any kind. 4.10 No Conflict, Breach, Violation or Default. The execution, delivery and performance of the Agreements by the Company and the issuance and sale of the Securities will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under (i) the Company's Certificate of Incorporation or the Company's Bylaws, both as in effect on the date hereof (copies of which have been provided to the Investors before the date hereof), or (ii)(a) any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any of its properties, or (b) except as set forth on Schedule 4.10, any agreement or instrument to which the Company is a party or by which the Company is bound or to which any of the properties of the Company is subject. 4.11 Tax Matters. The Company has timely prepared and filed all tax returns required to have been filed by the Company with all appropriate governmental agencies and timely paid all taxes owed by it. The charges, accruals and reserves on the books of the Company in respect of taxes for all fiscal periods are adequate in all material respects, and there are no material unpaid assessments against the Company nor, to the knowledge of the Company, any basis for the assessment of any additional taxes, penalties or interest for any fiscal period or audits by any federal, state or local taxing authority except for any assessment which is not material to the Company. All taxes and other assessments and levies of a material amount that the Company is required to withhold or to collect for payment have been duly withheld and collected and paid to the proper governmental entity or third party when due. There are no tax liens or claims pending or threatened against the Company or any of its respective assets or property which individually or in the aggregate could have a Material Adverse Effect. Except as described in the SEC Filings, there are no outstanding tax sharing agreements or other such arrangements between the Company and any other corporation or entity. 4.12 Title to Properties. Except as disclosed in the SEC Filings or Schedule 4.12, the Company has good and marketable title to all real properties and all other properties and assets owned by it, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or currently planned to be made thereof by them; and except as disclosed in the SEC Filings, the Company holds any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or currently planned to be made thereof by them. 4.13 Certificates, Authorities and Permits. The Company possesses adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by it and has not received any notice of proceedings relating to the revocation or modification of any such -7- certificate, authority or permit that, if determined adversely to the Company, would individually or in the aggregate have a Material Adverse Effect. 4.14 No Labor Disputes. No material labor dispute with the employees of the Company exists or, to the knowledge of the Company, is currently threatened. 4.15 Intellectual Property. The Company has sufficient title or adequate rights or licenses to the inventions, know-how, patents, copyrights, trademarks, trade names, confidential information, domain names and other intellectual property (collectively, "Intellectual Property Rights"), free and clear of any material liens, security interests, charges, encumbrances, equities and other adverse claims, necessary to conduct the business now operated by it, or presently employed by it, and presently contemplated to be operated by it, and the Company has not received any notice of infringement of or conflict with asserted rights of others with respect to any Intellectual Property Rights. To the knowledge of the Company, the Company's patents and other Intellectual Property Rights and the present activities of the Company do not infringe any patent, copyright, trademark, trade name or other proprietary rights of any third party. 4.16 Environmental Matters. The Company is not in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "Environmental Laws"), does not own or operate any real property contaminated with any substance that is subject to any Environmental Laws, is not liable for any off-site disposal or contamination pursuant to any Environmental Laws, and is not subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim would individually or in the aggregate have a Material Adverse Effect; and the Company is not aware of any pending investigation that might lead to such a claim. 4.17 Litigation. Except as disclosed in the SEC Filings or on Schedule 4.17 hereto, there are no pending actions, suits or proceedings against or affecting the Company, its subsidiaries or any of its or their properties that, if determined adversely to the Company or such subsidiary, would individually or in the aggregate have a Material Adverse Effect or would materially and adversely affect the ability of the Company to perform its obligations under this Agreement, or which are otherwise material in the context of the sale of the Securities; and to the Company's knowledge, no such actions, suits or proceedings are threatened or contemplated. 4.18 Financial Statements. The financial statements included in each SEC Filing present fairly and accurately in all material respects the consolidated financial position of the Company as of the dates shown and its consolidated results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with United States generally accepted accounting principles applied on a consistent basis. Except as set forth in the financial statements -8- of the Company included in the SEC Filings filed prior to the date hereof, the Company has no liabilities, contingent or otherwise, except those which individually or in the aggregate would not have a Material Adverse Effect. 4.19 Insurance Coverage. The Company maintains in full force and effect insurance coverage that is customary for comparably situated companies for the business being conducted and properties owned or leased by the Company, and the Company reasonably believes such insurance coverage to be adequate against all liabilities, claims and risks against which it is customary for comparably situated companies to insure. 4.20 Compliance with Nasdaq Continued Listing Requirements. The Company is in compliance with all applicable Nasdaq National Market continued listing requirements. There are no proceedings pending or to the Company's knowledge threatened against the Company relating to the continued listing of the Company's Common Stock on the Nasdaq National Market and the Company has not received any notice of, nor to the knowledge of the Company is there any basis for, the delisting of the Common Stock from the Nasdaq National Market. 4.21 Brokers and Finders. The Investors shall have no liability or responsibility for the payment of any commission or finder's fee to any third party in connection with or resulting from this Agreement or the transactions contemplated by this Agreement by reason of any agreement of or action taken by the Company. The Company is obligated to pay a fee to Morgan Keegan in connection with transactions contemplated hereunder. 4.22 No Directed Selling Efforts or General Solicitation. Neither the Company nor any Person acting on its behalf has conducted any general solicitation or general advertising (as those terms are used in Regulation D) in connection with the offer or sale of any of the Securities. 4.23 No Integrated Offering. Neither the Company nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would adversely affect reliance by the Company on Section 4(2) for the exemption from registration for the transactions contemplated hereby or would require registration of the Securities under the 1933 Act. 4.24 Questionable Payments. Neither the Company nor any of its subsidiaries nor, to the Company's Knowledge, any of their respective current or former shareholders, directors, officers, employees, agents or other Persons acting on behalf of the Company or any subsidiary, has on behalf of the Company or any subsidiary or in connection with their respective businesses: (a) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payments to any governmental officials or employees from corporate funds; (c) established or maintained any unlawful -9- or unrecorded fund of corporate monies or other assets; (d) made any false or fictitious entries on the books and records of the Company; or (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any nature. 5. Representations, Warranties and Covenants of the Investor. Each of the Investors hereby severally, and not jointly, represents, warrants and covenants to the Company that: 5.1 Organization and Existence. The Investor is a validly existing corporation, limited partnership or limited liability company and has all requisite corporate, partnership or limited liability company power and authority to invest in the Securities pursuant to this Agreement. 5.2 Authorization. The execution, delivery and performance by the Investor of the Agreements have been duly authorized and the Agreements will each constitute the valid and legally binding obligation of the Investor, enforceable against the Investor in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors' rights generally. 5.3 Purchase Entirely for Own Account. The Securities to be received by the Investor hereunder will be acquired for the Investor's own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof, and the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. The Investor is not a registered broker dealer or an entity engaged in the business of being a broker dealer. 5.4 Investment Experience. The Investor acknowledges that it can bear the economic risk and complete loss of its investment in the Securities and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment contemplated hereby. 5.5 Disclosure of Information. The Investor has had an opportunity to receive documents related to the Company and to ask questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the offering of the Securities. The Investor acknowledges receipt of copies of the SEC Filings. Neither such inquiries nor any other due diligence investigation conducted by the Investor shall modify, amend or affect the Investor's right to rely on the Company's representations and warranties contained in this Agreement. 5.6 Restricted Securities. The Investor understands that the Securities are characterized as "restricted securities" under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the 1933 Act only in certain limited circumstances. -10- 5.7 Legends. It is understood that, until registration for resale pursuant to the Registration Rights Agreement, certificates evidencing the Securities may bear one or all of the following legends: (a) "The shares represented by this certificate may not be transferred without (i) an opinion of counsel satisfactory to the corporation that such transfer may lawfully be made without registration under the Securities Act of 1933 or qualification under applicable state securities laws; or (ii) such registration or qualification." (b) If required by the authorities of any state in connection with the issuance of sale of the Securities, the legend required by such state authority. Upon registration for resale pursuant to the Registration Rights Agreement or upon Rule 144(k) becoming available, the Company shall promptly cause certificates evidencing the Shares previously issued hereunder to be replaced with certificates which do not bear such restrictive legends, and all Warrant Shares subsequently issued shall not bear such restrictive legends. When the Company is required to cause unlegended certificates to replace previously issued legended certificates, if unlegended certificates are not delivered to an Investor within twenty (20) business days of submission by that Investor of legended stock certificate(s) to the Company's transfer agent, the Company shall be liable to the Investor for a late fee equal to 1% of the aggregate purchase price of the Shares evidenced by such certificate(s) for each thirty (30) day period (or portion thereof) beyond such twenty (20) business days that the unlegended certificates have not been so delivered. 5.8 Accredited Investor. The Investor is an accredited investor as defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act. 5.9 No General Solicitation. The Investor did not learn of the investment in the Securities as a result of any public advertising or general solicitation. 5.10 No Short Positions or Hedges. Each Investor represents and warrants that such Investor (a) does not currently hold any short, hedge, derivative or other similar or comparable position with regard to the securities of the Company nor (b) has taken any short, hedge, derivative or other similar or comparable position with regard to the securities of the Company in the ninety (90) day period immediately preceding the Closing Date. In addition, each Investor covenants that as a condition of the Company selling the Securities to such Investor hereunder that such Investor shall not until the expiration of the 365 day period next following the Closing Date, directly or indirectly, in the United States or anywhere else in the World, short, hedge, enter into a derivative security or position or take any other similar or comparable position with regard to the securities of the Company other than solely with regard to additional shares of the Common Stock of the Company purchased by such Investor in the open market after the Closing Date. -11- 6. Registration Rights Agreement. The parties acknowledge and agree that part of the inducement for the Investor to enter into this Agreement is the Company's execution and delivery of the Registration Rights Agreement. The parties acknowledge and agree that simultaneously with the execution hereof, the Registration Rights Agreement is being duly executed and delivered by the parties thereto. 7. Covenants and Agreements of the Company. 7.1 Anti-Dilution Rights. (a) The Company shall give the Investors written notice (the "Issuance Notice") of any proposed future issuance by the Company of shares of Common Stock or shares of securities convertible into shares of Common Stock (collectively "Additional Securities") prior to the proposed issuance date thereof. The Issuance Notice shall specify the price at which the Additional Securities are to be issued, and the other material terms of the issuance thereof. Subject to Section 7.1(d) below, each Investor shall be entitled to purchase up to such Investor's Pro Rata Portion (as hereinafter defined) of the Additional Securities proposed to be issued at the price specified in the Issuance Notice. "Pro Rata Portion" means the number of shares of Additional Securities necessary to prevent any dilution in such Investor's percentage holdings of equity securities of the Company after giving effect to any such proposed issuance of Additional Securities (determined on a fully diluted basis). (b) Each Investor may exercise its rights under this Section 7.1 by delivering written notice of its election to purchase such Additional Securities at the price specified in the Issuance Notice (which notice shall specify the number (or amount) of Additional Securities to be purchased by such Investor, up to such Investor's Pro Rata Portion) to the Company within fifteen (15) days next following receipt of the Issuance Notice. If at the termination of such fifteen (15) day period any of the Investors shall not have exercised its right to purchase any of its Pro Rata Portion of such Additional Securities, any or all of such Investors who failed to exercise their rights hereunder will be deemed to have waived any and all of their respective rights under this Section 7.1 with respect to the purchase of such Additional Securities. (c) The Company shall have 90 days from the date of the Issuance Notice to consummate the proposed issuance of any or all of such Additional Securities that the Investors have not elected to purchase at the price and upon terms that are not materially less favorable to the Company than those specified in the Issuance Notice. At the consummation of such issuance, the Company shall issue certificates representing the Additional Securities to be purchased by Investors, if any, registered in the name of the applicable Investor, against payment by such Investor of the purchase price for such Additional Securities. Such shares of Additional Securities will be duly authorized, validly issued and unassessable shares issued to each such Investor free and clear of any and all encumbrances and restrictions, except for restrictions on transfer imposed by applicable securities laws. If the Company proposes to issue any class of Additional -12- Securities after such 90-day period, it shall again comply with the procedures set forth in this Section 7.1. (d) Notwithstanding the foregoing, none of the Investors shall be entitled to purchase Additional Securities as contemplated by this Section 7.1 in connection with issuances of Additional Securities: (i) issued to directors, officers, employees or consultants of the Company in connection with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company pursuant to an equity compensation program approved by the Board of Directors of the Company or the compensation committee of the Board of Directors of the Company, (ii) in regard to sales of shares of Common Stock upon the conversion or exercise of options or convertible securities either (A) issued prior to the date hereof or (B) issued in accordance with the terms of this Agreement, (iii) issued as full or partial consideration for a merger or acquisition, or a strategic allegiance or alliance or other similar non-financing transaction, approved by the Board of Directors of the Company, (iv) issued in connection with a subdivision of the outstanding shares of Common Stock into a larger number of shares of Common Stock, or (v) issued to the public in a public offering pursuant to an effective registration statement filed under the 1933 Act. The Company shall not be under any obligation to consummate any proposed issuance of Additional Securities, nor shall there be any liability on the part of the Company to any of the Investors if the Company has not consummated any proposed issuance of Additional Securities pursuant to this Section 7.1 for whatever reason, regardless of whether it shall have delivered an Issuance Notice in respect of such proposed issuance. (e) The rights of each Investor contained in this Section 7.1 shall terminate at such time as such Investor ceases to own at least 33% of the Securities purchased hereunder. 7.2 Opinion of Counsel. On or prior to the Closing Date, the Company will deliver to the Investors the opinion of legal counsel to the Company, in form and substance reasonably acceptable to the Investors, addressing those legal matters set forth in Schedule 7.2 hereto. 7.3 Reservation of Common Stock Pursuant to Exercise of Warrants. The Company hereby agrees at all times to reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of providing for the exercise of the Warrants, such number of shares of Common Stock as shall from time to time equal the number of shares sufficient to permit the exercise of the Warrants in accordance with the terms of the Warrants. 7.4 Reports. For so long as an Investor purchasing at least $5,000,000 of Securities hereunder beneficially owns at least sixty-six (66%) percent of the Securities issued to it hereunder, the Company will furnish to such Investor the following reports, each of which shall be provided to such Investor by overnight delivery or e-mail transmission (within one week of filing with the SEC, in the case of SEC filings): -13- (a) Quarterly Reports. The Company's quarterly report on Form 10-Q or, in the absence of such report, consolidated balance sheets of the Company as at the end of such period and the related consolidated statements of operations, stockholders' equity and cash flows for such period and for the portion of the Company's fiscal year ended on the last day of such quarter, all in reasonable detail and certified by a principal financial officer of the Company to have been prepared in accordance with generally accepted accounting principles in the United States, subject to year-end and audit adjustments. (b) Annual Reports. The Company's Form 10-K or, in the absence of a Form 10-K, consolidated balance sheets of the Company as of the end of such year and the related consolidated statements of earnings, stockholders' equity and cash flows for such year, all in reasonable detail and accompanied by the report on such consolidated financial statements of an independent certified public accountant selected by the Company and reasonably satisfactory to such Investor. (c) Securities Filings. Copies of (i) all notices, proxy statements, financial statements, reports and documents as the Company shall send or make available generally to its stockholders or to financial analysts, promptly after providing same to the stockholders and (ii) all periodic and special reports, documents and registration statements (other than on Form S-8) which the Company furnishes to or files, or any officer or director of the Company (in such person's capacity as such) furnishes to or files with the SEC. (d) Other Information. Such other information relating to the Company as from time to time may reasonably be requested by such Investor provided the Company produces such information in its ordinary course of business, and further provided that the Company, solely in its own discretion, determines that such information is not confidential in nature and disclosure to such Investor would not be harmful to the Company. 7.5 Press Releases. Any press release or other publicity concerning this Agreement or the transactions contemplated by this Agreement shall be submitted to SSF for comment at least two (2) business days prior to issuance, unless the release is required to be issued within a shorter period of time by law or pursuant to the rules of a national securities exchange. 7.6 No Conflicting Agreements. The Company will not take any action, enter into any agreement or make any commitment that would conflict or interfere in any material respect with the obligations to the Investors under the Agreements. 7.7 Insurance. So long as the Investors beneficially own any Securities, the Company shall not materially reduce its existing insurance coverages. -14- 7.8 Compliance with Laws. So long as the Investors beneficially own any Securities, the Company will use reasonable efforts to comply with all applicable laws, rules, regulations, orders and decrees of all governmental authorities, except to the extent non-compliance (in one instance or in the aggregate) would not have a Material Adverse Effect. 7.9 Listing of Underlying Shares and Related Matters. The Company hereby agrees, promptly following the Closing of the transactions contemplated by this Agreement, to take such action to cause the Shares and the Warrant Shares to be listed on the Nasdaq National Market as promptly as possible but no later than the effective date of the registration contemplated by the Registration Rights Agreement. The Company further agrees that if the Company applies to have its Common Stock or other securities traded on any other principal stock exchange or market, it will include in such application the Warrant Shares and will take such other action as is necessary to cause such Common Stock to be so listed. For so long as the Investors beneficially own any of the Securities, the Company will take all action necessary to continue the listing and trading of its Common Stock on the Nasdaq National Market and will comply in all respects with the Company's reporting, filing and other obligations under the bylaws or rules of such exchange, as applicable, to ensure the continued eligibility for trading of the Shares and the Warrant Shares thereon. 7.10 Designated Director. (a) Upon the purchase by SSF and/or one or more of its affiliated entities, provided that and for so long as SSF and/or one or more of its affiliated entities hold at least sixty-six (66%) percent of the Shares issued to it hereunder and provided that the market capitalization of the Company is less than or equal to $250 million, SSF shall have the right, but not the obligation, to nominate as a member to the management slate for election to the Board of Directors of the Company by the stockholders of the Company one (1) individual (the "SSF Director") and each of the Investors hereby agrees to vote all of the shares of capital stock of the Company held by such Investor and entitled to vote thereon in favor of the SSF Director at each election of directors. The Company shall use its reasonable commercial efforts to ensure that such person is duly elected to the Board of Directors of the Company. (b) The Company agrees that each non-executive member of the Board of Directors of the Company shall be entitled to the same perquisites, including stock options, reimbursement of expenses and other similar rights in connection with such person's membership on the Board of Directors of the Company, as each other non-executive member of the Board of Directors of the Company. (c) Subject to the provisions of the Company's Certificate of Incorporation, as amended or amended and restated from time to time, each Investor shall take all action necessary to remove forthwith the SSF Director when (and only when) such removal is requested for any reason, with or without cause, by SSF. In the case of the death, resignation or removal as herein provided of the SSF Director, each -15- Investor shall vote all shares of the capital stock of the Company owned by that Investor to elect another individual designated by SSF. 8. Survival and Indemnification. 8.1 Survival. All representations, warranties, covenants and agreements contained in this Agreement shall be deemed to be representations, warranties, covenants and agreements as of the date hereof and shall survive the execution and delivery of this Agreement for a period of twelve months from the date of this Agreement; provided, however, that the provisions contained in Section 7 hereof shall survive in accordance therewith. 8.2 Indemnification. (a) The Company agrees to indemnify and hold harmless, on an after-tax and after insurance recovery basis, each holder of Securities and its Affiliates and their respective directors, officers, employees and agents (each, an "Investor Indemnified Person") from and against any and all losses, claims, damages, liabilities and expenses (including without limitation reasonable attorney fees and disbursements and other expenses incurred in connection with investigating, preparing or defending any action, claim or proceeding, pending or threatened and the costs of enforcement hereof) (collectively, "Losses") to which such Person may become subject as a result of any breach of representation, warranty, covenant or agreement made by or to be performed on the part of the Company under the Agreements and will reimburse any such Person for all such amounts as they are incurred by such Person; provided, however, that if an Investor Indemnified Person is reimbursed under this Section 8.2 for any expenses, such reimbursement of expenses shall be refunded to the extent it is finally judicially determined that the Losses in question resulted primarily from the wilful misconduct or gross negligence of such Investor Indemnified Person. (b) Each Investor, severally and not jointly, agrees to indemnify and hold harmless, on an after-tax and after insurance recovery basis, the Company and its Affiliates and their respective directors, officers, employees and agents (each, a "Company Indemnified Person") from and against any and all Losses to which such Person may become subject as a result of any breach of representation, warranty, covenant or agreement made by or to be performed on the part of such Investor under the Agreements and will reimburse any such Person for all such amounts as they are incurred by such Person; provided, however, that if a Company Indemnified Person is reimbursed under this Section 8.2 for any expenses, such reimbursement of expenses shall be refunded to the extent it is finally judicially determined that the Losses in question resulted primarily from the wilful misconduct or gross negligence of such Company Indemnified Person. 8.3 Conduct of Indemnification Proceedings. Promptly after receipt by any Investor Indemnified Person or Company Indemnified Person (an "Indemnified Person") of notice of any demand, claim or circumstances which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to Section 8.2, such Indemnified -16- Person shall promptly notify the party responsible for providing such indemnification (the "Indemnifying Person") in writing and the Indemnifying Person shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Person, and shall assume the payment of all fees and expenses; provided, HOWEVER, that the failure of any Indemnified Person so to notify the Indemnifying Person shall not relieve the Indemnifying Person of its obligations hereunder except to the extent that the Indemnifying Person is materially prejudiced by such failure to notify. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless: (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the retention of such counsel; or (ii) in the reasonable judgment of such Indemnified Person, based upon written advice of its counsel, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Person shall indemnify and hold harmless such Indemnified Person from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. Without the prior written consent of the Indemnified Person, the Indemnifying Person shall not effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Person from all liability arising out of such proceeding. 9. Miscellaneous. 9.1 Successors and Assigns. This Agreement may not be assigned by a party hereto without the prior written consent of the other party hereto, except that without the prior written consent of the Company, but after notice duly given, an Investor may assign its rights and delegate its duties hereunder in whole or in part to an Affiliate, and without the prior written consent of the Investors, but after notice duly given and in compliance with this Agreement, the Company may assign its rights and delegate its duties hereunder to any successor-in-interest corporation in the event of a merger or consolidation of the Company with or into another corporation, or any merger or consolidation of another corporation with or into the Company that results directly or indirectly in an aggregate change in the ownership or control of more than 50% of the voting rights of the equity securities of the Company, or the sale of all or substantially all of the Company's assets. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. The provisions of this Section 9.1 shall not interfere in any respect with a transfer by an Investor of any Securities in compliance with all applicable securities laws. -17- 9.2 Counterparts; Faxes. 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. This Agreement may also be executed via facsimile, which shall be deemed an original. 9.3 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. 9.4 Notices. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given only upon delivery to each party to be notified by (i) personal delivery, (ii) telex or telecopier, upon receipt of confirmation of complete transmittal, or (iii) an internationally recognized overnight air courier, addressed to the party to be notified at the address as follows, or at such other address as such party may designate by ten days' advance written notice to the other party: If to the Company: Visionics Corporation 5600 Rowland Road Minnetonka, Minnesota 55353 Attn: Robert Gallagher Fax: (952) 932-7181 If to the Investors, to the addresses set forth on the signature pages hereto. 9.5 Expenses. The parties hereto shall pay their own costs and expenses in connection herewith, except that the Company shall pay the fees and expenses of counsel to SSF, but not in excess of $25,000 and such amount shall be paid at Closing from the gross proceeds of the offering. 9.6 Amendments and Waivers. Subject to the provisions of Section 9.11 below, any term of this Agreement may be amended and 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 Company and the Investors. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Securities purchased under this Agreement at the time outstanding, each future holder of all such securities, and the Company. 9.7 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to -18- the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provisions hereof prohibited or unenforceable in any respect. 9.8 Entire Agreement. This Agreement, including the Exhibits and Schedules hereto, and the Registration Rights Agreement and the Warrants constitute the entire agreement among the parties hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof. 9.9 Further Assurances. The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained. 9.10 Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to principles of conflicts of laws. 9. 11 SSF Powers. The Investors agree that SSF shall have the right to (a) deal with the Company and bind the other Investors in all regards with respect to any issues or matters associated with the registration of the Securities under the 1933 Act pursuant to the Registration Rights Agreement or the listing of the Securities on the Nasdaq National Market and (b) agree to any amendment or modification to the provisions of this Agreement, the Registration Rights Agreement or the Warrants and to bind the other Investors in all regards with respect thereto, with regard to the matters referred to in subsection (a) of this Section 9.11. [SIGNATURES BEGIN ON THE NEXT PAGE] -19- IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written. The Company: VISIONICS CORPORATION By: /s/ Robert F. Gallagher ------------------------------ Name: Robert F. Gallagher Title: Chief Financial Officer -20- The Investor: SPECIAL SITUATIONS FUND III, L.P. By: /s/ David Greenhouse ----------------------------- Name: David Greenhouse Title: Managing Director Aggregate Purchase Price: $2,250,000 Number of Shares of Common Stock: 500,000 Number of A Warrants: 125,000 (25% of number of Shares purchased) Exercise price of A Warrants: $5.66 Number of B Warrants: 125,000 (25% of number of Shares purchased) Exercise price of B Warrants: $6.79 Address for Notice: 153 E. 53rd Street 55th Floor New York, NY 10022 with a copy to: Lowenstein Sandler PC 65 Livingston Avenue Roseland, NJ 07068 Attn: George J. Mazin, Esq. Telephone: 973.597.2418 Facsimile: 973.597.2419 -21- The Investor: SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P. By: /s/ David Greenhouse ----------------------------- Name: David Greenhouse Title: Managing Director Aggregate Purchase Price: $1,200,000 Number of Shares of Common Stock: 266,667 Number of A Warrants: 66,667 (25% of number of Shares purchased) Exercise price of A Warrants: $5.66 Number of B Warrants: 66,667 (25% of number of Shares purchased) Exercise price of B Warrants: $6.79 Address for Notice: 153 E. 53rd Street 55th Floor New York, NY 10022 with a copy to: Lowenstein Sandler PC 65 Livingston Avenue Roseland, NJ 07068 Attn: George J. Mazin, Esq. Telephone: 973.597.2418 Facsimile: 973.597.2419 -22- The Investor: SPECIAL SITUATIONS TECHNOLOGY FUND, L.P. By: /s/ David Greenhouse ------------------------- Name: David Greenhouse Title: Managing Director Aggregate Purchase Price: $800,000 Number of Shares of Common Stock: 177,778 Number of A Warrants: 44,445 (25% of number of Shares purchased) Exercise price of A Warrants: $5.66 Number of B Warrants: 44,445 (25% of number of Shares purchased) Exercise price of B Warrants: $6.79 Address for Notice: 153 E. 53rd Street 55th Floor New York, NY 10022 with a copy to: Lowenstein Sandler PC 65 Livingston Avenue Roseland, NJ 07068 Attn: George J. Mazin, Esq. Telephone: 973.597.2418 Facsimile: 973.597.2419 -23- The Investor: SPECIAL SITUATIONS CAYMAN FUND, L.P. By: /s/ David Greenhouse ----------------------- Name: David Greenhouse Title: anaging Director Aggregate Purchase Price: $750,000 Number of Shares of Common Stock: 166,667 Number of A Warrants: 41,667 (25% of number of Shares purchased) Exercise price of A Warrants: $5.66 Number of B Warrants: 41,667 (25% of number of Shares purchased) Exercise price of B Warrants: $6.79 Address for Notice: 153 E. 53rd Street 55th Floor New York, NY 10022 with a copy to: Lowenstein Sandler PC 65 Livingston Avenue Roseland, NJ 07068 Attn: George J. Mazin, Esq. Telephone: 973.597.2418 Facsimile: 973.597.2419 -24- The Investor: PYRAMID PARTNERS, L.P. By: /s/ Richard W. Perkins ------------------------- Name: Richard W. Perkins Title: President Aggregate Purchase Price: $225,000 Number of Shares of Common Stock: 50,000 Number of A Warrants: 12,500 (25% of number of Shares purchased) Exercise price of A Warrants: $5.66 Number of B Warrants: 12,500 (25% of number of Shares purchased) Exercise price of B Warrants: $6.79 Address for Notice: Pyramid Partners, L.P. c/o Perkins Capital Management, Inc. 730 East Lake Street Wayzata, MN 55391 -25- The Investor: INDUSTRICORP & CO., INC., FBO TWIN CITY CARPENTERS PENSION PLAN By: /s/ Ralph Jarvis ------------------------------ Name: Ralph Jarvis Title: Secretary Aggregate Purchase Price: $225,000 Number of Shares of Common Stock: 50,000 Number of A Warrants: 12,500 (25% of number of Shares purchased) Exercise price of A Warrants: $5.66 Number of B Warrants: 12,500 (25% of number of Shares purchased) Exercise price of B Warrants: $6.79 Address for Notice: Industricorp & Co., Inc. c/o Perkins Capital Management, Inc. 730 East Lake Street Wayzata, MN 55391 -26- The Investor: USB PIPER JAFFRAY AS CUSTODIAN FBO DAVID H. POTTER IRA By: /s/ Daniel S. Perkins ------------------------------ Name: Daniel S. Perkins Title: Vice President Aggregate Purchase Price: $100,125 Number of Shares of Common Stock: 22,250 Number of A Warrants: 5,562 (25% of number of Shares purchased) Exercise price of A Warrants: $5.66 Number of B Warrants: 5,562 (25% of number of Shares purchased) Exercise price of B Warrants: $6.79 Address for Notice: USB Piper Jaffray as Custodian FBO David H. Potter IRA c/o Perkins Capital Management, Inc. 730 East Lake Street Wayzata, MN 55391 -27- The Investor: USB PIPER JAFFRAY AS CUSTODIAN FBO JAMES G. PETERS IRA By: /s/ Daniel S. Perkins ------------------------------ Name: Daniel S. Perkins Title: Vice President Aggregate Purchase Price: $100,125 Number of Shares of Common Stock: 22,250 Number of A Warrants: 5,562 (25% of number of Shares purchased) Exercise price of A Warrants: $5.66 Number of B Warrants: 5,562 (25% of number of Shares purchased) Exercise price of B Warrants: $6.79 Address for Notice: USB Piper Jaffray as Custodian FBO James G. Peters IRA c/o Perkins Capital Management, Inc. 730 East Lake Street Wayzata, MN 55391 -28- The Investor: DANIEL S. AND PATRICE M. PERKINS By: /s/ Daniel S. Perkins, Patrice M. Perkins ----------------------------------------- Aggregate Purchase Price: $100,125 Number of Shares of Common Stock: 22,250 Number of A Warrants: 5,562 (25% of number of Shares purchased) Exercise price of A Warrants: $5.66 Number of B Warrants: 5,562 (25% of number of Shares purchased) Exercise price of B Warrants: $6.79 Address for Notice: Daniel S. and Patrice M. Perkins c/o Perkins Capital Management, Inc. 730 East Lake Street Wayzata, MN 55391 -29- The Investor: RICHARD W. PERKINS TRUSTEE U/A DATED 6/14/78 FBO RICHARD W. PERKINS By: /s/ Richard W. Perkins ------------------------------------- Name: Richard W. Perkins Title: Trustee Aggregate Purchase Price: $112,500 Number of Shares of Common Stock: 25,000 Number of A Warrants: 6,250 (25% of number of Shares purchased) Exercise price of A Warrants: $5.66 Number of B Warrants: 6,250 (25% of number of Shares purchased) Exercise price of B Warrants: $6.79 Address for Notice: Richard W. Perkins Trustee U/A dated 6/14/78 FBO Richard W. Perkins c/o Perkins Capital Management, Inc. 730 East Lake Street Wayzata, MN 55391 -30- EX-99 6 visionics012306_ex99-1.txt EXHIBIT 99.1 PRESS RELEASE Press Release EXHIBIT 99.1 VISIONICS RECEIVES AN INVESTMENT OF $5.9 MILLION MINNETONKA, MINNESOTA AND JERSEY CITY, NEW JERSEY - July 2, 2001 - Visionics Corporation (Nasdaq: VSNX), the worldwide leader in identification technologies and systems, announced today that it has completed a $5.9 million private placement of common stock and common stock warrants. The investment was led by Special Situations Funds with additional participation from the Company's current largest institutional holder, Perkins Capital Management. The investment-banking firm of Morgan Keegan & Company, Inc. acted as the placement agent. "We are pleased to welcome Special Situations Funds as institutional investors in our company," said Dr. Joseph J. Atick, President and CEO of Visionics Corporation. "Visionics is known throughout the industry as innovators and leaders. This investment will help us cement this leadership and strengthen the value of our business lines. It will allow us to create the foundation, through the completion of the Biometric Network Platform, for the scalable delivery of biometrics on any point of action and on any device. Furthermore, we intend to accelerate our marketing efforts, which will help propel our future growth and maximize shareholder value," he added. Under terms of the financing, Visionics sold approximately 1.3 million shares at $4.50 per share. In addition, the Company issued warrants for approximately 326,000 shares at $5.66 per share and 326,000 shares at $6.79 per share. These warrants are callable when the Company's stock price exceeds 150 percent of the warrant price for twenty consecutive trading days. Fully exercised, these warrants would raise an additional $4.1 million for the Company. Visionics intends to immediately register the shares and the shares underlying the warrants by filing a Form S-3 with the Securities and Exchange Commission. ABOUT VISIONICS CORPORATION Visionics Corporation (Nasdaq:VSNX) is the worldwide leader in identification technologies and systems. Through its respective business lines - FaceIt(R), live scan, IBIS and BNP - the company delivers enabling technology, platforms, products and systems for biometric identification, with a specific focus on face recognition and forensic quality fingerprint identification. The award-winning FaceIt(R) technology enables a broad range of products and applications built by partners (OEMs, VARs and system integrators). These include enhanced CCTV systems, identity fraud applications and authentication systems for information security, access control, travel, banking and e-commerce. The TENPRINTER and FingerPrinter CMS live scan systems are the most widely used by government agencies, law enforcement, airports, banks and other commercial institutions in the US. The IBIS is a revolutionary mobile identification system that combines expertise in biometric capture and connectivity, and is capable of capturing both forensic quality fingerprints and photographs for transmission to law enforcement and other legacy databases. Finally, the BNP is a revolutionary platform for building scalable biometric solutions. These lines of business as a whole are reflective of Visionics' leadership position in the biometric industry and commitment to the innovation of identification technologies. More information on Visionics can be accessed via the Company web site at http://www.visionics.com or by calling Frances Zelazny, Director of Corporate Communications at +1 201-332-9213. THE SECURITIES ISSUED PURSUANT TO THE PRIVATE PLACEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR AN APPLICABLE EXEMPTION FROM REGISTRATION REQUIREMENTS. THIS NEWS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED ON THE BASIS OF SUCH FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS ARE MADE BASED ON MANAGEMENT'S BELIEFS, AS WELL AS ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO, MANAGEMENT PURSUANT TO THE "SAFE-HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FOR A MORE COMPLETE DESCRIPTION OF THESE AND OTHER RISK FACTORS WHICH MAY AFFECT THE FUTURE PERFORMANCE OF VISIONICS CORPORATION, SEE "RISK FACTORS" IN DIGITAL BIOMETRICS' ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDED SEPTEMBER 30, 2000 AND ITS QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED DECEMBER 31, 2000, FORM 8-K DATED FEBRUARY 15, 2001 AND THE RELATED FORM 8-K/A, ALL OF WHICH HAVE BEEN FILED WITH THE SEC. -----END PRIVACY-ENHANCED MESSAGE-----