-----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, LoRnMSzfc/RcVw46HVfpgn1UMyz/ZmerwXqMo0VIT4HFiB26OhVdbOi8zoSLQkx7 TGo0QAhOGwVdrJXdNiPRrg== 0000909518-05-000997.txt : 20051223 0000909518-05-000997.hdr.sgml : 20051223 20051223170630 ACCESSION NUMBER: 0000909518-05-000997 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20051223 DATE AS OF CHANGE: 20051223 GROUP MEMBERS: ASTON CAPITAL PARTNERS GP LLC GROUP MEMBERS: ASTON CAPITAL PARTNERS L.P. GROUP MEMBERS: DONI L. FORDYCE GROUP MEMBERS: JAMES A. DEPALMA GROUP MEMBERS: JOSEPH S. PARESI GROUP MEMBERS: L-1 INVESTMENT PARTNERS LLC FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LAPENTA ROBERT V CENTRAL INDEX KEY: 0001217902 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 600 THIRD AVENUE CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126971111 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: VIISAGE TECHNOLOGY INC CENTRAL INDEX KEY: 0001018332 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 043320515 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-49557 FILM NUMBER: 051285872 BUSINESS ADDRESS: STREET 1: 296 CONCORD ROAD STREET 2: THIRD FLOOR CITY: BILLERICA STATE: MA ZIP: 01821 BUSINESS PHONE: 9789322466 MAIL ADDRESS: STREET 1: 296 CONCORD ROAD STREET 2: THIRD FLOOR CITY: BILLERICA STATE: MA ZIP: 01821 SC 13D 1 mv12-23_13d.txt ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D (Rule 13d-101) Under the Securities Exchange Act of 1934 VIISAGE TECHNOLOGY, INC. (Name of Issuer) COMMON STOCK, $0.001 PAR VALUE 92675K 20 5 (Title of class of securities) (CUSIP number) ASTON CAPITAL PARTNERS L.P C/O L-1 INVESTMENT PARTNERS LLC 177 BROAD ST., STAMFORD, CT 06901 with copies to: MARITA MAKINEN, ESQ. WEIL, GOTSHAL & MANGES LLP 767 FIFTH AVENUE NEW YORK, NY 10153 (212) 310-8000 (Name, address and telephone number of person authorized to receive notices and communications) DECEMBER 16, 2005 (Date of event which requires filing of this statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [_]. Note: Schedules filed in paper format shall include a signed original and five copies of the Schedule, including all exhibits. The information required on the remainder of this cover page shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act. (Continued on following pages) ================================================================================ - ------------------- -------------------------------------------------- ----------------------------------------------------------- 1 NAME OF REPORTING PERSON: Aston Capital Partners L.P. - ------------------- -------------------------------------------------- ----------------------------------------------------------- S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: - ------------------- -------------------------------------------------- ----------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ] (b) [X](1) - ------------------- -------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------- ------------------------------- ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS: OO - ------------------- -------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [ ] - ------------------- -------------------------------------------------- ----------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - ------------------------------ ------- -------------------------------------------- ---------------------------------------------- NUMBER OF 7 SOLE VOTING POWER: 0 SHARES ------- -------------------------------------------- ---------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER: 8,233,447 OWNED BY ------- -------------------------------------------- ---------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER: 0 REPORTING ------- -------------------------------------------- ---------------------------------------------- PERSON WITH 10 SHARED DISPOSITIVE POWER: 8,233,447 - ------------------- --------------------------------------------------------------- ---------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 8,233,447(2) - ------------------- -------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [ ] - ------------------- -------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 27.60% - ------------------- -------------------------------------------------- ----------------------------------------------------------- 14 TYPE OF REPORTING PERSON: PN - ------------------- -------------------------------------------------- ----------------------------------------------------------- - ----------------------- (1) The Reporting Person expressly disclaims (a) the existence of any group and (b) beneficial ownership with respect to any shares other than the shares owned of record by such reporting person. (2) Assuming exercise of all currently exercisable warrants to purchase Viisage Common Stock beneficially owned by such reporting person, but without assuming the exercise of any warrants held by other holders. 2 - ------------------- -------------------------------------------------- ----------------------------------------------------------- 1 NAME OF REPORTING PERSON: Aston Capital Partners GP LLC S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: - ------------------- -------------------------------------------------------------------- ----------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ] (b) [X](3) - ------------------- -------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------- ------------------------------- ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS: OO - ------------------- -------------------------------------------------------------------- ----------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT [ ] TO ITEM 2(d) OR 2(e): - ------------------- -------------------------------------------------- ----------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - ------------------------------ ------- -------------------------------------------- ---------------------------------------------- NUMBER OF 7 SOLE VOTING POWER: 0 SHARES ------- -------------------------------------------- ---------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER: 8,233,447 OWNED BY ------- -------------------------------------------- ---------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER: 0 REPORTING ------- -------------------------------------------- ---------------------------------------------- PERSON WITH 10 SHARED DISPOSITIVE POWER: 8,233,447 - ------------------- --------------------------------------------------------------- ---------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 8,233,447(4) - ------------------- -------------------------------------------------------------------- ----------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [ ] - ------------------- -------------------------------------------------------------------- ----------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 27.60% - ------------------- -------------------------------------------------- ----------------------------------------------------------- 14 TYPE OF REPORTING PERSON: OO - ------------------- -------------------------------------------------- ----------------------------------------------------------- - ----------------------- (3) The Reporting Person expressly disclaims (a) the existence of any group and (b) beneficial ownership with respect to any shares other than the shares owned of record by such reporting person. (4) Assuming exercise of all currently exercisable warrants to purchase Viisage Common Stock beneficially owned by such reporting person, but without assuming the exercise of any warrants held by other holders. 3 - ------------------- -------------------------------------------------- ----------------------------------------------------------- 1 NAME OF REPORTING PERSON: L-1 Investment Partners LLC S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: - ------------------- -------------------------------------------------------------------- ----------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ] (b) [X](5) - ------------------- -------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------- ------------------------------- ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS: OO - ------------------- -------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [ ] - ------------------- -------------------------------------------------- ----------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - ------------------------------ ------- -------------------------------------------- ---------------------------------------------- NUMBER OF 7 SOLE VOTING POWER: 0 SHARES ------- -------------------------------------------- ---------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER: 8,513,447 OWNED BY ------- -------------------------------------------- ---------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER: 0 REPORTING ------- -------------------------------------------- ---------------------------------------------- PERSON WITH 10 SHARED DISPOSITIVE POWER: 8,513,447 - ------------------- --------------------------------------------------------------- ---------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 8,513,447(6) - ------------------- -------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [ ] - ------------------- -------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 28.54% - ------------------- -------------------------------------------------- ----------------------------------------------------------- 14 TYPE OF REPORTING PERSON: OO - ------------------- -------------------------------------------------- ----------------------------------------------------------- - ----------------------- (5) The Reporting Person expressly disclaims (a) the existence of any group and (b) beneficial ownership with respect to any shares other than the shares owned of record by such reporting person. (6) Assuming exercise of all currently exercisable warrants to purchase Viisage Common Stock beneficially owned by such reporting person, but without assuming the exercise of any warrants held by other holders. 4 - ------------------- -------------------------------------------------- ----------------------------------------------------------- 1 NAME OF REPORTING PERSON: Robert V. LaPenta S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: - ------------------- -------------------------------------------------------------------- ----------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ] (b) [X](7) - ------------------- -------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------- ------------------------------- ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS: OO - ------------------- -------------------------------------------------------------------- ----------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT [ ] TO ITEM 2(d) OR 2(e): - ------------------- -------------------------------------------------- ----------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - ------------------------------ ------- -------------------------------------------- ---------------------------------------------- NUMBER OF 7 SOLE VOTING POWER: 96,000 SHARES ------- -------------------------------------------- ---------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER: 8,513,447 OWNED BY ------- -------------------------------------------- ---------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER: 96,000 REPORTING ------- -------------------------------------------- ---------------------------------------------- PERSON WITH 10 SHARED DISPOSITIVE POWER: 8,513,447 - ------------------- --------------------------------------------------------------- ---------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 8,609,447(8) - ------------------- -------------------------------------------------------------------- ----------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [ ] - ------------------- -------------------------------------------------------------------- ----------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 28.86% - ------------------- -------------------------------------------------- ----------------------------------------------------------- 14 TYPE OF REPORTING PERSON: IN - ------------------- -------------------------------------------------- ----------------------------------------------------------- - ----------------------- (7) The Reporting Person expressly disclaims (a) the existence of any group and (b) beneficial ownership with respect to any shares other than the shares owned of record by such reporting person. (8) Assuming exercise of all currently exercisable warrants to purchase Viisage Common Stock beneficially owned by such reporting person. 5 - ------------------- -------------------------------------------------- ----------------------------------------------------------- 1 NAME OF REPORTING PERSON: James A. DePalma S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: - ------------------- -------------------------------------------------------------------- ----------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ] (b) [X](9) - ------------------- -------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------- ------------------------------- ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS: OO - ------------------- -------------------------------------------------------------------- ----------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT [ ] TO ITEM 2(d) OR 2(e): - ------------------- -------------------------------------------------- ----------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - ------------------------------ ------- -------------------------------------------- ---------------------------------------------- NUMBER OF 7 SOLE VOTING POWER: 3,944 SHARES ------- -------------------------------------------- ---------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER: 8,513,447 OWNED BY ------- -------------------------------------------- ---------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER: 3,944 REPORTING ------- -------------------------------------------- ---------------------------------------------- PERSON WITH 10 SHARED DISPOSITIVE POWER: 8,513,447 - ------------------- --------------------------------------------------------------- ---------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 8,517,391(10) - ------------------- -------------------------------------------------------------------- ----------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN [ ] SHARES: - ------------------- -------------------------------------------------------------------- ----------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 28.56% - ------------------- -------------------------------------------------- ----------------------------------------------------------- 14 TYPE OF REPORTING PERSON: IN - ------------------- -------------------------------------------------- ----------------------------------------------------------- - ----------------------- (9) The Reporting Person expressly disclaims (a) the existence of any group and (b) beneficial ownership with respect to any shares other than the shares owned of record by such reporting person. (10) Assuming exercise of all currently exercisable warrants to purchase Viisage Common Stock beneficially owned by such reporting person. 6 - ------------------- -------------------------------------------------- ----------------------------------------------------------- 1 NAME OF REPORTING PERSON: Joseph S. Paresi S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: - ------------------- -------------------------------------------------------------------- ----------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ] (b) [X](11) - ------------------- -------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------- ------------------------------- ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS: OO - ------------------- -------------------------------------------------------------------- ----------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT [ ] TO ITEM 2(d) OR 2(e): - ------------------- -------------------------------------------------- ----------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - ------------------------------ ------- -------------------------------------------- ---------------------------------------------- NUMBER OF 7 SOLE VOTING POWER: 4,000 SHARES ------- -------------------------------------------- ---------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER: 8,513,447 OWNED BY ------- -------------------------------------------- ---------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER: 4,000 REPORTING ------- -------------------------------------------- ---------------------------------------------- PERSON WITH 10 SHARED DISPOSITIVE POWER: 8,513,447 - ------------------- --------------------------------------------------------------- ---------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 8,517,447(12) - ------------------- -------------------------------------------------------------------- ----------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [ ] - ------------------- -------------------------------------------------------------------- ----------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 28.56% - ------------------- -------------------------------------------------- ----------------------------------------------------------- 14 TYPE OF REPORTING PERSON: IN - ------------------- -------------------------------------------------- ----------------------------------------------------------- - --------------------- (11) The Reporting Person expressly disclaims (a) the existence of any group and (b) beneficial ownership with respect to any shares other than the shares owned of record by such reporting person. (12) Assuming exercise of all currently exercisable warrants to purchase Viisage Common Stock beneficially owned by such reporting person. 7 - ------------------- -------------------------------------------------- ----------------------------------------------------------- 1 NAME OF REPORTING PERSON: Doni L. Fordyce S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: - ------------------- -------------------------------------------------------------------- ----------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ] (b) [X](13) - ------------------- -------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------- ------------------------------- ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS: OO - ------------------- -------------------------------------------------------------------- ----------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT [ ] TO ITEM 2(d) OR 2(e): - ------------------- -------------------------------------------------- ----------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - ------------------------------ ------- -------------------------------------------- ---------------------------------------------- NUMBER OF 7 SOLE VOTING POWER: 0 SHARES ------- -------------------------------------------- ---------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER: 8,513,447 OWNED BY ------- -------------------------------------------- ---------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER: 0 REPORTING ------- -------------------------------------------- ---------------------------------------------- PERSON WITH 10 SHARED DISPOSITIVE POWER: 8,513,447 - ------------------- --------------------------------------------------------------- ---------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 8,513,447(14) - ------------------- -------------------------------------------------------------------- ----------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [ ] - ------------------- -------------------------------------------------------------------- ----------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 28.54% - ------------------- -------------------------------------------------- ----------------------------------------------------------- 14 TYPE OF REPORTING PERSON: IN - ------------------- -------------------------------------------------- -----------------------------------------------------------
- ----------------------- (13) The Reporting Person expressly disclaims (a) the existence of any group and (b) beneficial ownership with respect to any shares other than the shares owned of record by such reporting person. (14) Assuming exercise of all currently exercisable warrants to purchase Viisage Common Stock beneficially owned by such reporting person. 8 Item 1. Security and Issuer. This statement on Schedule 13D (the "Schedule 13D") relates to shares of common stock, $0.001 par value per share ("Viisage Common Stock") of Viisage Technology, Inc., a Delaware corporation ("Viisage"). The principal executive offices of Viisage are located at 296 Concord Road Billerica, MA 01821. Item 2. Identity and Background This Schedule 13D is filed by the following persons: Aston Capital Partners L.P. ("Aston"); Aston Capital Partners GP LLC ("Aston GP"); L-1 Investment Partners LLC ("L-1"); Mr. Robert V. LaPenta ("LaPenta"); Mr. James A. DePalma ("DePalma"); Mr. Joseph S. Paresi ("Paresi"); Ms. Doni L. Fordyce ("Fordyce"). Each of Aston LP, Aston GP, L-1, LaPenta, DePalma, Paresi and Fordyce are referred to herein as a "Reporting Person" and collectively as "Reporting Persons". Aston is a Delaware private investment limited partnership, whose purpose is to invest primarily in companies that focus on utilizing biometric enabling technologies to provide identification/authentication security solutions as well as related law enforcement security technologies and related industries. Aston's principal executive offices are located at 177 Broad St., Stamford, CT 06901. Aston GP is a Delaware limited liability company which serves as the general partner of Aston. Aston GP has the power to vote, direct the voting of, dispose of and direct the disposition of shares beneficially owned by Aston. Aston GP's principal executive offices are located at 177 Broad St., Stamford, CT 06901. L-1 is a Delaware limited liability company which serves as the Investment Manager under the Aston limited partnership agreement. Aston GP is permitted to delegate to the Investment Manager its powers to vote, direct the voting of, dispose of and direct the disposition of shares beneficially owned by Aston. L-1's principal executive offices are located at 177 Broad St., Stamford, CT 06901. Mr. Robert V. LaPenta, Mr. James A. DePalma , Mr. Joseph S. Paresi and Ms. Doni L. Fordyce are the managing members of Aston GP and L-1. As managing members of Aston GP and L-1, each of the individuals named above may be 9 deemed to have shared power to vote, direct the voting of, dispose of and direct the disposition of shares beneficially owned by Aston. The business address of each of the individuals named above is 177 Broad St., Stamford, CT 06901. Annex A attached to this Schedule 13D contains the following information concerning each managing member and general partner of Aston, Aston GP and L-1 (such entities not having directors or executive officers): (a) the name and residence or business address; (b) the principal occupation or employment and (c) the name, principal business and address of any corporation or other organization in which such employment is conducted. Annex A is incorporated herein by reference. To the knowledge of the Reporting Persons, each of the persons named on Annex A (the "Annex A Persons") is a United States citizen. During the last five years, neither of the Reporting Persons nor any of the Annex A Persons (to the knowledge of the Reporting Persons) has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and, as a result of such proceeding, is or was subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to federal or state securities laws or finding any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration As more fully described in Item 6 below, on December 16, 2005, Aston purchased from Viisage 7,619,047 shares of Viisage Common Stock, a warrant to purchase 1,280,000 shares of Viisage Common Stock (the "A-Warrant") and a warrant to purchase 320,000 shares of Viisage Common Stock (the "B-Warrant"; the A-Warrant and B-Warrant collectively are referred to herein as the "Warrants"). Aston obtained funds for the purchase of the shares of Viisage Common Stock and Warrants described above from capital contributions provided by its limited partners and Aston GP. As more fully described in Item 6 below, on December 16, 2005, L-1 was issued a warrant to purchase 440,000 shares of Viisage Common Stock (the "IBT Warrant") in consideration of its strategic advice, due diligence and other services relating to the acquisition of 100% of the outstanding shares of capital stock of Integrated Biometric Technology LLC by Viisage, which acquisition was conditioned on the completion of the Aston investment in Viisage described above. None of the Reporting Persons intends to borrow any funds in connection with the investment in Viisage Common Stock and Warrants described above. Item 4. Purpose of the Transaction. Aston consummated the transactions contemplated by the Investment Agreement (as described in Item 6) in order to acquire an interest in Viisage for investment purposes with the objective of building Viisage into an industry 10 leader through collaborative development and execution of growth strategies through acquisitions. Aston intends to review continuously its position in Viisage. Depending upon further evaluations of the business prospects of Viisage and upon other developments, including, but not limited to, general economic and business conditions and stock market conditions, Aston may retain or from time to time increase their holdings or dispose of all or a portion of their holdings subject to any applicable legal and contractual restrictions on its ability to do so in privately negotiated transactions, open market purchases, exercise of warrants or otherwise. Aston also intends to have active participation in the management of Viisage through representation on the Board of Directors. Following the consummation of the transactions contemplated by the Investment Agreement, Mr. Robert LaPenta was appointed as Chairman of the Board of Directors of Viisage, and Mr. George Tenet was appointed as a director. Pursuant to the Investment Agreement, Aston has the right to appoint one additional member to the Board of Directors of Viisage. In addition the Board of Directors of Viisage established a strategic committee consisting of five members, including Mr. LaPenta, as chair, two other directors appointed by Mr. LaPenta (only one of whom may be a director designated by Aston), Mr. Dennis K. Berube and the CEO of Viisage. The strategic committee will evaluate and make recommendations to the Viisage Board of Directors regarding mergers and acquisitions and other strategic initiatives, as well as to recommend the allocation of 85% of the proceeds received by Viisage following the consummation of the transactions contemplated by the Investment Agreement. Without the consent of Mr. LaPenta, such allocation of proceeds may only be used by the Board of Directors of Viisage for the financing of mergers and acquisitions. Except as set forth in this Item 4 (including the matters described in Item 6 below which are incorporated in this Item 4 by reference), none of the Reporting Persons have any present plans or proposals that relate to or that would result in any of the actions specified in clauses (a) through (j) of Item 4 of Schedule 13D of the Securities Exchange Act of 1934, as amended. Item 5. Interest in Securities of the Issuer. The information contained in Item 3 and Item 4 and Rows (7) through (13) of the cover pages of this Statement on Schedule 13D for each the Reporting Persons are incorporated herein by reference.(15) (a) Upon consummation of the transactions contemplated by the Investment Agreement described in Item 6, Aston became the record holder of 7,619,047 shares of Viisage Common Stock, the A-Warrant and the B-Warrant. Assuming exercise of the portion of the A-Warrant which is currently exercisable (the B-Warrant is not currently exercisable), Aston is the beneficial owner of 8,233,447 shares of Viisage Common Stock constituting approximately 27.60% of - ----------------------- (15) Any reference made in this Schedule 13D to the number and/or price of shares of Viisage Common Stock gives effect to the 1 for 2.5 reverse stock split of Viisage Common Stock effective as of December 16, 2005. 11 the total issued and outstanding shares of Viisage Common Stock based on 29,827,460 shares of Viisage Common Stock outstanding as of December 16, 2005 (based on calculations made in accordance with Rule 13d-3 of the Exchange Act). Assuming exercise of the currently exercisable portion of the A-Warrant owned of record by Aston, Aston GP, in its capacity as the general partner of Aston, may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 8,233,447 shares of Viisage Common Stock, constituting approximately 27.60% of the total issued and outstanding shares of Viisage Common Stock based on 29,827,460 shares of Viisage Common Stock outstanding as of December 16, 2005 (based on calculations made in accordance with Rule 13d-3 of the Exchange Act). Assuming exercise of the currently exercisable portion of the A-Warrant owned of record by Aston, L-1, in its capacity as Investment Manager under the Aston limited partnership agreement, may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 8,513,447 shares of Viisage Common Stock, including the currently exercisable portion of the IBT Warrant beneficially owned by it on its own account, constituting approximately 28.54% of the total issued and outstanding shares of Viisage Common Stock based on 29,827,460 shares of Viisage Common Stock outstanding as of December 16, 2005 (based on calculations made in accordance with Rule 13d-3 of the Exchange Act). Assuming exercise of the currently exercisable portion of the A-Warrant owned of record by Aston and the currently exercisable portion of the IBT Warrant owned of record by L-1, Mr. LaPenta, in his capacity as a managing member of Aston GP and L-1, may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 8,609,447 shares of Viisage Common Stock, including 96,000 shares of Viisage common Stock beneficially owned by him on his own account, constituting approximately 28.86% of the total issued and outstanding shares of Viisage Common Stock based on 29,827,460 shares of Viisage Common Stock outstanding as of December 16, 2005 (based on calculations made in accordance with Rule 13d-3 of the Exchange Act). Assuming exercise of the currently exercisable portion of the A-Warrant owned of record by Aston and the currently exercisable portion of the IBT Warrant owned of record by L-1, Mr. DePalma, in his capacity as a managing member of Aston GP and L-1, may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 8,517,391 shares of Viisage Common Stock, including 3,944 shares of Viisage common Stock beneficially owned by him on his own account, constituting approximately 28.56% of the total issued and outstanding shares of Viisage Common Stock based on 29,827,460 shares of Viisage Common Stock outstanding as of December 16, 2005 (based on calculations made in accordance with Rule 13d-3 of the Exchange Act). Assuming exercise of the currently exercisable portion of the A-Warrant owned of record by Aston and the currently exercisable portion of the IBT Warrant owned of record by L-1, Mr. Paresi, in his capacity as a managing 12 member of Aston GP and L-1, may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 8,517,447 shares of Viisage Common Stock, including 4000 shares of Viisage common Stock beneficially owned by him on his own account, constituting approximately 28.56% of the total issued and outstanding shares of Viisage Common Stock based on 29,827,460 shares of Viisage Common Stock outstanding as of December 16, 2005 (based on calculations made in accordance with Rule 13d-3 of the Exchange Act). Assuming exercise of the currently exercisable portion of the A-Warrant owned of record by Aston and the currently exercisable portion of the IBT Warrant owned of record by L-1, Ms. Fordyce, in her capacity as a managing member of Aston GP and L-1, may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 8,513,447 shares of Viisage Common Stock, constituting approximately 28.54% of the total issued and outstanding shares of Viisage Common Stock based on 29,827,460 shares of Viisage Common Stock outstanding as of December 16, 2005 (based on calculations made in accordance with Rule 13d-3 of the Exchange Act). (b) Except as disclosed in this Item 5, none of the Reporting Persons and, to the best of their knowledge, none of the general partners or managing members of Aston, Aston GP and L-1 (with the exception of Mr. LaPenta and Mr. DePalma), beneficially owns any shares of Viisage Common Stock. (c) The information set forth in Item 6 below is incorporated herein by reference. Other than the transactions described in Item 6 below, none of the Reporting Persons has effected any transactions in respect of Viisage Common Stock within the past 60 days, with the exception of Mr. DePalma who, on December 15, 2005 sold 5,400 of shares Viisage Common Stock and on December 16, 2005 sold 20,600 shares of Viisage Common Stock at an average price per share of $16.475(16) in public market transactions. These shares of Viisage Common Stock sold by Mr. DePalma were acquired in early 2005 at various market prices in public market transactions. (d) The right to receive dividends on, and proceeds from the sale of the shares of Viisage Common Stock which may be beneficially owned by the persons described in (a) and (b) above, is governed by the limited liability company agreements and limited partnership agreement of each such entity, as applicable, and such dividends or proceeds may be distributed with respect to numerous member interests and general and limited partnership interests. (e) Not applicable. - ----------------------- (16) Adjusted to reflect the 1 for 2.5 reverse stock split effectuated on December 16, 2005. The price per share on the date of the sale was $6.59 on a pre-reverse split basis. 13 References to, and descriptions of, the Investment Agreement as set forth above are qualified in their entirety by reference to such agreement, which is filed as an exhibit hereto and is hereby incorporated herein in its entirety. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to the Securities of the Issuer. On October 5, 2005, L-1 and Viisage entered into an Investment Agreement (the "Investment Agreement") providing for (i) the issuance and sale to L-1 of 7,619,047 shares of Viisage Common Stock (the "Shares") at $13.125 per share (ii) the issuance of the A-Warrant to purchase an aggregate of 1,280,000 shares of Viisage common stock at an exercise price of $13.75 per share, exercisable on a pro rata basis when and if acquisitions by Viisage involving the payment of aggregate consideration of $125 million are consummated and (iii) the issuance of the B-Warrant to purchase an aggregate of 320,000 shares of Viisage common stock at an exercise price of $13.75 per share, of which 213,333 shares are exercisable when and if Viisage's gross revenues for any four-quarter period are equal to or greater than $200 million; and 106,667 shares are exercisable when and if Viisage's gross revenues for any four-quarter period are equal to or greater than $300 million. All Warrants will be accelerated and become immediately exercisable in connection with a change of control of Viisage (as defined in the Warrants). On November 4, 2005, L-1 entered into a Membership Interest Purchase Agreement (the "Membership Purchase Agreement") with Integrated Biometric Technology, Inc. ("IBT Parent"), its wholly-owned subsidiary, Integrated Biometric Technology LLC ("IBT"), and the stockholders of IBT Parent to acquire 60% of the outstanding membership interests of IBT for $35 million in cash and to acquire the remaining 40% on or before January 30, 2006 for an additional $25 million. If IBT achieves revenues of $75 million for the year ended December 31, 2006, L-1 would be obligated to pay an additional $10 million in cash to IBT. L-1 assigned its rights under the Membership Purchase Agreement to Aston. On November 15, 2005, Viisage entered into an Assignment and Assumption Agreement (the "Assignment Agreement") with Aston under which Viisage agreed to pay $35 million to Aston for its previously purchased 60% interest in IBT, subject to the consummation of the L-1 investment in Viisage and customary closing conditions. Also on November 15, 2005, Viisage entered into an Agreement and Plan of Merger (the "Merger Agreement") with IBT Parent, IBT and the stockholders of IBT Parent under which Viisage agreed to acquire the 40% interest in IBT not previously purchased by L-1. Pursuant to an Assignment and Assumption Agreement dated December 16, 2005, between L-1 as Assignor and Aston as Assignee, L-1 assigned to Aston and Aston accepted and assumed all of L-1's rights and obligations under the Investment Agreement. The consummation of the transactions contemplated by the Investment Agreement was approved by Viisage's stockholders at a special meeting of stockholders held on December 16, 2005 and the closing was held shortly thereafter. The transactions contemplated by the Membership Purchase Agreement, 14 the Assignment Agreement and the Merger Agreement were consummated on December 16, 2005 and are referred to herein as the "IBT Acquisition". Upon the consummation of the IBT Acquisition, Viisage issued to L-1 the IBT Warrant. The IBT Warrant is currently exercisable to purchase 280,000 shares of Viisage Common Stock at an exercise price of $13.75 per share for a term of three years. The remaining portion of the IBT Warrant will vest if during any of 2006, 2007 or 2008, the IBT business generates earnings before interest, taxes, depreciation and amortization (EBITDA) of $6 million or more. The IBT Warrant would become immediately exercisable in connection with a change of control transaction. Furthermore, upon consummation of the IBT Acquisition the A-Warrant held by Aston became exercisable to purchase 614,400 shares of Viisage Common Stock Pursuant to the Investment Agreement, Aston has agreed not to, without prior approval of Viisage, directly or indirectly, sell, offer or agree to sell, contract to sell, grant any option for the sale of, make any short sale, pledge, or enter into any hedging transaction that could result in a transfer of, or otherwise dispose of the shares of Viisage Common Stock acquired pursuant to the Investment Agreement, the Warrants or the shares of Viisage Common Stock issuable upon exercise of the Warrants, in each case for a period of one year following the consummation of the transactions contemplated by the Investment Agreement. In addition, pursuant to a Registration Rights Agreement dated December 16, 2005 between Viisage, Aston and L-1 (the" Registration Rights Agreement"), Viisage has granted registration rights to Aston and L-1 for the shares of Viisage Common Stock and the shares of Viisage Common Stock issuable upon the exercise of the Warrants. Under the terms of the Registration Rights Agreement, at any time after the first anniversary of the consummation of the transaction contemplated by the Investment Agreement, Viisage will, upon receipt of written requests from Aston and/or L-1 file up to two registration statements with the SEC covering the resale of the shares of Viisage Common Stock and the shares of Viisage Common Stock issuable upon exercise of the Warrants. The foregoing description of the Investment Agreement and/or the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by the terms of the Investment Agreement, which is incorporated herein by reference. 15 Item 7. Material to be Filed as Exhibits. EXHIBIT NO. DESCRIPTION 10.1 Investment Agreement, dated as of October 5, 2005 between L-1 Investment Partners LLC and Viisage Technology, Inc. 10.2 A-Warrant dated December 16, 2005 10.3 B- Warrant dated December 16, 2005 10.4 IBT Warrant dated December 16, 2005 10.5 Registration Rights Agreement dated December 16, 2005 between Viisage Technology, Inc., L-1 Investment Partners LLC and Aston Capital Partners L.P. 10.6 Joint Filing Agreement dated December 23, 2005 among the Reporting Persons regarding filing of this Schedule 13D. 16 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: December 22, 2005 ASTON CAPITAL PARTNERS L.P. By: Aston Capital Partners GP LLC, its general partner Name: /s/ James DePalma Title: Partner 17 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: December 22, 2005 ASTON CAPITAL PARTNERS GP LLC By: /s/ James DePalma -------------------------------- Name: James DePalma Title: Partner 18 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: December 22, 2005 L-1 INVESTMENT PARTNERS LLC By: /s/ James DePalma --------------------------------- Name: James DePalma Title: Partner 19 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: December 22, 2005 ROBERT V. LAPENTA /s/ Robert V. Lapenta -------------------------------- 20 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: December 22, 2005 JAMES A. DEPALMA /s/ James A. DePalma ----------------------------- 21 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: December 22, 2005 JOSEPH S. PARESI /s/ Joseph S. Paresi ----------------------------- 22 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: December 22, 2005 DONI L. FORDYCE /s/ Doni L. Fordyce ----------------------------- 23 ANNEX A TO SCHEDULE 13D Set forth below is the name, business address, principal occupation or employment and principal business in which such employment is conducted of each director and executive officer of Aston, Aston GP and L-1. The name of each person who is a director of Aston is marked with an asterisk. Unless otherwise indicated, the business address of each person listed below is 177 Broad St., Stamford, CT 06901. NAME AND BUSINESS ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT - ------------------------- ---------------------------------- Mr. Robert V. LaPenta Chairman and CEO of L-1 Investment Partners LLC Mr. James A. DePalma Partner, L-1 Investment Partners LLC Mr. Joseph S. Paresi Partner, L-1 Investment Partners LLC Ms. Doni L. Fordyce Partner, L-1 Investment Partners LLC Each person listed above is a citizen of the United States of America. EX-10 2 mv12-23ex10_1.txt 10.1 Exhibit 10.1 INVESTMENT AGREEMENT THIS INVESTMENT AGREEMENT is made as of October 5, 2005, by and among Viisage Technology, Inc. (the "COMPANY"), a corporation organized under the laws of the State of Delaware, with its principal offices at 296 Concord Road, Third Floor, Billerica, Massachusetts 01821, and L-1 Investment Partners LLC, a limited liability company organized under the laws of the State of Delaware, with its principal offices at 177 Broad Street, Stamford, Connecticut 06901(the "PURCHASER"). IN CONSIDERATION of the mutual covenants contained in this Agreement, the Company and the Purchaser agree as follows: ARTICLE I PURCHASE AND SALE OF SECURITIES; USE OF PROCEEDS 1.1 Agreement to Issue, Sell and Purchase the Securities. (a) At the Closing (as defined in Section 1.2), the Company will sell to the Purchaser, and the Purchaser will purchase from the Company, upon the terms and conditions hereinafter set forth, Nineteen Million Forty-Seven Thousand Six Hundred and Nineteen (19,047,619) shares (the "SHARES") of the Company's common stock, par value $0.001 per share (the "COMMON STOCK") at a price per share of Five Dollars and Twenty-Five Cents ($5.25) for an aggregate purchase price of One Hundred Million Dollars ($100,000,000). (b) At the Closing, the Company will issue to the Purchaser, upon the terms and conditions hereinafter set forth, (i) a warrant to purchase an aggregate of Three Million Two Hundred Thousand (3,200,000) shares of Common Stock at an exercise price of Five Dollars and Fifty Cents ($5.50) per share, such warrant to be in the form of Exhibit A attached hereto (the "FIRST WARRANT"); and (ii) a warrant to purchase an aggregate of Eight Hundred Thousand (800,000) shares of Common Stock at an exercise price of Five Dollars and Fifty Cents ($5.50) per share, such warrant to be in the form of Exhibit B hereto (the "SECOND WARRANT" and collectively with the First Warrant, the "WARRANTS"). The shares of Common Stock issuable upon exercise of the Warrants are sometimes referred to herein as the "WARRANT SHARES", and the Shares and the Warrants are sometimes collectively referred to herein as the "SECURITIES". (c) The number of shares reflected in Sections 1.1(a) and (b) above shall be adjusted to give effect to the reverse stock split contemplated by Section 5.1(h). 1.2 Closing and Delivery of the Securities. (a) Closing. The purchase and sale of the Securities (the "CLOSING") shall occur at the offices of Choate, Hall & Stewart LLP, Two International Place, Boston, Massachusetts 02110 at 2:00 p.m. on the third business day following the date of the receipt of the Requisite Stockholder Vote (as defined in Section 5.1(g) below), or, if all other conditions contained in Article V have not been satisfied or waived on such date, the tenth Business Day after the date on which all of the conditions contained in Article V have been satisfied or waived (other than such conditions which shall be satisfied on the Closing Date), or at such other place, time, or date as may be mutually agreed to in writing by Purchaser and the Company. The day on which the Closing occurs is sometimes referred to herein as the "CLOSING DATE". (b) Proceedings at Closing. All actions to be taken and all documents to be executed and delivered by the Company in connection with the consummation of the transactions contemplated at the Closing shall be reasonably satisfactory in form and substance to Purchaser and its counsel, and all actions to be taken and all documents to be executed and delivered by Purchaser in connection with the consummation of the transactions contemplated at the Closing shall be reasonably satisfactory in form and substance to the Company and its counsel. All actions to be taken and all documents to be executed and delivered by all parties hereto at the Closing shall be deemed to have been taken and executed and delivered simultaneously, and no action shall be deemed taken nor any document executed or delivered until all have been taken, executed, and delivered. (c) Delivery of the Securities. At the Closing, the Company shall deliver to the Purchaser one or more stock certificates and the Warrants registered in the name of the Purchaser, representing the Securities set forth in Section 1.1 above and bearing the legend specified in Section 3.7 hereof referring to the fact that the Securities were sold in reliance upon the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended (the "SECURITIES ACT"). 1.3 Use of Proceeds. Eighty Five Million Dollars ($85,000,000) of the proceeds from the sale of the Securities (the "M&A PROCEEDS") shall be used by the Company to finance mergers and acquisitions, including the payment of transaction costs and expenses associated with such transactions, and the balance may be used by the Company without restriction. The Strategic Committee of the board of directors of the Company (the "BOARD OF DIRECTORS" or the "BOARD") shall administer this restriction on the use of the M&A Proceeds and in no event shall the Board authorize the use of any portion of the M&A Proceeds for purposes other than the financing of mergers and acquisitions without the approval of the Chair of the Strategic Committee. Notwithstanding the foregoing, the Company may invest and reinvest the M&A Proceeds pending their use to finance mergers and acquisitions in (i) savings or interest bearing accounts which are readily marketable obligations of, or fully and unconditionally guaranteed (as to both principal and interest) by, the United States of America or an agency thereof; (ii) negotiable certificates of deposit evidencing direct obligations of any federally insured commercial bank or trust company organized and operating in the United States of America or Canada having capital and surplus and undivided profits of at least $100,000,000 and whose long term unsecured debt obligations have the highest or second highest rating available from Moody's Investors Service, Inc., Standard & Poor's or Fitch Investors Service; or (iii) shares of so-called "money market funds" registered under the Investment Company Act of 1940, as amended, organized and operating in the United States of America, having total net assets of $1,000,000,000 or more. Any interest or other income received on such investment or reinvestment of the M&A Proceeds shall be the property of the Company and may be used by the Company without restriction. 2 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to the Purchaser as follows: 2.1 Organization and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and the Company is qualified to do business as a foreign corporation in each jurisdiction in which qualification is required, except where failure to so qualify would not have a Material Adverse Effect (as defined herein) on the Company. The subsidiaries of the Company (the "SUBSIDIARIES") consist of Biometrica Systems, Inc., Viisage Technology AG, Trans Digital Technologies Corporation, Imaging Automation, Inc. and VIDS Acquisition Corp. Each Subsidiary is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation and is qualified to do business as a foreign entity in each jurisdiction in which qualification is required, except where failure to so qualify would not have a Material Adverse Effect. 2.2 Authorized Capital Stock. As of the date hereof, the Company's authorized capital stock consists of (i) 75,000,000 shares of Common Stock, of which 48,140,838 shares were issued and outstanding as of October 5, 2005, and (ii) 2,000,000 shares of preferred stock, par value $0.001 per share (the "PREFERRED STOCK"), none of which are issued and outstanding. The Company has not issued any shares since January 1, 2005 other than pursuant to employee or director equity incentive plans or purchase plans approved by the Board and upon the exercise of options and warrants outstanding on such date. The issued and outstanding shares of the Company's Common Stock have been duly authorized and validly issued, are fully paid and nonassessable, have been issued in compliance with all federal and state securities laws and were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities. Except as set forth in Schedule 2.2 or as contemplated by this Agreement, the Company does not have outstanding any options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of its capital stock and there are no agreements or commitments obligating the Company to repurchase, redeem, or otherwise acquire capital stock or other securities of the Company. Except as set forth in Schedule 2.2 or as contemplated by this Agreement, there are no agreements to which the Company is a party or by which it is bound with respect to the voting (including without limitation voting trusts or proxies), registration under the Securities Act, or sale or transfer (including without limitation agreements relating to pre-emptive rights, rights of first refusal, co-sale rights or "drag-along" rights) of any securities of the Company. With respect to each Subsidiary, (i) the Company owns 100% of the Subsidiary's capital stock, (ii) all the issued and outstanding shares of the Subsidiary's capital stock have been duly authorized and validly issued, are fully paid and nonassessable, have been issued in compliance with applicable federal and state securities laws, and were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities, (iii) there are no outstanding options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of any Subsidiary's capital stock, and (iv) there are no agreements or commitments obligating any Subsidiary of the Company to repurchase, redeem, or otherwise acquire capital stock or other securities of the Company or its Subsidiaries. 3 2.3 Issuance, Sale and Delivery of the Securities. The Shares, the Warrants and Warrant Shares have been duly authorized and, when issued, delivered and paid for in accordance with the terms hereof, the Warrants, the Shares and the Warrant Shares, respectively, will be duly authorized, validly issued, fully paid and nonassessable. No further approval or authorization of the Board of Directors of the Company will be required for the issuance and sale of the Securities to be sold by the Company as contemplated herein. 2.4 Due Execution, Delivery and Performance of the Transaction Documents. The Company has full legal right, corporate power and authority to enter into this Agreement, the First Warrant, the Second Warrant, the Registration Rights Agreement (as defined in Section 5.1(e) below) and the Lau Technologies Lock-Up Agreement (as defined in Section 5.1(f) below) (all such agreements and documents are collectively referred to herein as the "TRANSACTION DOCUMENTS") and perform the transactions contemplated by the Transaction Documents. The Transaction Documents have been duly authorized, executed and delivered by the Company. Subject to the approval of the Company's stockholders, the making and performance of the Transaction Documents by the Company and the consummation of the transactions therein contemplated will not (i) violate any provision of the organizational documents of the Company, (ii) result in the creation of any lien, charge, security interest or encumbrance upon any assets of the Company pursuant to the terms or provisions of, or will not conflict with, result in the breach or violation of, or constitute, either by itself or upon notice or the passage of time or both, a default under any agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which the Company or any Subsidiary is a party or by which the Company or its properties, or any Subsidiary or such Subsidiary's properties, may be bound or affected, or (iii) violate any statute or any authorization, judgment, decree, order, rule or regulation of any court or any regulatory body, administrative agency or other governmental body applicable to the Company or any Subsidiary or any of their respective properties, in the case of clause (ii) which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body is required for the execution and delivery of the Transaction Documents or the consummation of the transactions contemplated thereby, other than such as have been made or obtained and except for compliance with the Blue Sky laws and federal securities laws applicable to the offering of the Securities. Upon their execution and delivery, and assuming the valid execution thereof by the Purchaser and the other parties thereto, the Transaction Documents will constitute the valid and binding obligations of the Company, enforceable in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). For purposes of this Agreement, the term "MATERIAL ADVERSE EFFECT" shall mean: (a) a material adverse effect on the financial condition, properties, business or results of operations of the Company and the Subsidiaries, taken as a whole, or (b) a material adverse effect on the ability of the Company to perform its material obligations under this Agreement; provided, however, that a Material Adverse Effect shall not include any event, change, effect, development, condition or occurrence arising out of or relating to (i) general economic or political conditions in the United States of America, (ii) conditions generally applicable to the industry in which the Company operates (except, in the case of clauses (i) and (ii) above, if the event, change, effect, development, condition 4 or occurrence disproportionately impacts the business, assets or financial condition of the Company and the Subsidiaries, taken as a whole), and (iii) the public announcement of this Agreement or the consummation of the transactions contemplated hereby. A reduction in market price of the Company's Common Stock on the Nasdaq National Market shall not, in and of itself, constitute a Material Adverse Effect. 2.5 Board Approval. The Board of Directors of the Company has, as of the date of this Agreement, at a meeting duly called and held, duly adopted resolutions to (i) approve the Transaction Documents and the consummation of the transactions contemplated thereby (including the issuance of the Securities), (ii) direct that this Agreement be submitted to a vote of the Company's stockholders, and (iii) recommend that the Company's stockholders approve this Agreement. 2.6 Valid Offering. Assuming the accuracy of the representations and warranties of Purchaser set forth in Article III, the offer, sale, and issuance of the Securities will be exempt from the registration requirements of the Securities Act and will have been registered or qualified (or are exempt from registration and qualification) under the registration or qualification requirements of all applicable state securities Laws. Neither the Company nor any Person acting on its behalf will knowingly take any action that would cause the loss of any such exemption. 2.7 No Defaults. The Company is not in violation or default of any provision of its certificate of incorporation or bylaws, or other organizational documents, or, except as to defaults, violations and breaches which, individually or in the aggregate, would not reasonably be expected to be material to the financial condition, properties, business or results of operation of the Company and its Subsidiaries, taken as a whole, in breach of or default with respect to any provision of any agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which it is a party or by which it or any of its properties are bound; and, except as set forth in Schedule 2.7, there does not exist any state of fact which, with notice or lapse of time or both, would constitute an event of default on the part of the Company as defined in such documents, except such defaults which individually or in the aggregate would not reasonably be expected to be material to the financial condition, properties, business or result of operation of Company and its Subsidiaries, taken as a whole. 2.8 Properties. Each of the Company and its Subsidiaries has good and marketable title to all the properties and assets reflected as owned by it in the consolidated financial statements included in Company's most recently filed Form 10-Q other than those which have been disposed of since the date of such financial statements, free and clear of all liens, mortgages, pledges, charges or encumbrances of any kind except (i) those, if any, reflected in such consolidated financial statements (including the notes thereto), or (ii) those which are not material in amount and do not adversely affect the use made and proposed to be made of such property by the Company. All leased properties of the Company and its Subsidiaries are held under valid and binding leases, with such exceptions as are not materially significant in relation to the business of the Company and its Subsidiaries. The Company or a Subsidiary owns or leases all such properties as are necessary in all material respects to the Company's operations as now conducted. 5 2.9 No Material Change. Except as set forth in Schedule 2.9, since July 3, 2005, (i) neither the Company nor any Subsidiary has incurred, other than in the ordinary course of business, any material liabilities or obligations which would be required under generally accepted accounting principles in the United States ("GAAP") to be set forth on the Company's balance sheet; (ii) neither the Company nor any Subsidiary has sustained any material loss or interference with its respective businesses or properties from fire, flood, windstorm, accident or other calamity not covered by insurance; (iii) the Company has not paid or declared any dividends or other distributions with respect to its capital stock; (iv) neither the Company nor any Subsidiary is in default in the payment of principal or interest on any outstanding debt obligations; (v) there has not been any change in the capital stock of the Company other than the sale of the Securities hereunder and the issuance of shares or options pursuant to employee or director equity incentive plans or purchase plans approved by the Company's Board of Directors or upon the exercise of options and warrants outstanding on such date, or indebtedness material to the Company (other than in the ordinary course of business), (vi) the Company has not entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any such existing contract or agreement, (vii) the Company has not granted any increase in the base compensation of any of its directors, officers and employees outside the ordinary course of business, (viii) the Company has not entered into, adopted, amended, modified or terminated any bonus, profit sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its directors, officers and employees (or taken any such action with respect to any other Company Plan), outside the ordinary course of business which, individually or in the aggregate, would have had or would reasonably be expected to have a Material Adverse Effect, and (ix) there have been no events or occurrences which, individually or in the aggregate, have had or would reasonably be expected to have a Material Adverse Effect. 2.10 Material Contracts. Schedule 2.10 sets forth the following types of written contracts, agreements, indentures, notes, bonds, loans, instruments, leases, commitments, or other arrangements or commitments (collectively, "CONTRACTS") to which the Company or any of its Subsidiaries is a party to or by which it is bound (collectively, the "MATERIAL CONTRACTS"): (i) Contracts with any current or former officer or director of the Company; (ii) Contracts with any labor union or association representing any employee of the Company or any of its Subsidiaries; (iii) Contracts for the exclusive license or sale of any material assets of the Company or any of its Subsidiaries other than in the ordinary course of business or for the grant to any Person of any preferential rights to purchase or license any of their assets; (iv) joint venture Contracts; (v) Contracts containing covenants of the Company or any of its Subsidiaries not to compete in any line of business or with any Person in any geographical area; (vi) Contracts relating to the acquisition by the Company or any of its Subsidiaries of any operating business or the capital stock of any other Person; (vii) Contracts relating to material indebtedness; (viii) Contracts granting any registration or similar rights in respect of securities of the Company or any of its Subsidiaries; (ix) Contracts that represented more than $500,000 of revenue for the fiscal year ended December 31, 2004; or (x) any other Contracts that involve the expenditure of more than $500,000 in the aggregate or $250,000 annually. There have been made available to Purchaser true and complete copies of all of the Material Contracts. All of the Material Contracts are in full force and effect and are the legal, valid, and binding obligations of the Company and/or its Subsidiaries, enforceable against them in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity (regardless 6 of whether enforcement is sought in a proceeding at law or in equity). To the Company's knowledge, after due inquiry of each program manager or other employee responsible for any Material Contract, neither the Company nor any of its Subsidiaries is in default in any material respect under any Material Contract, nor is any other party to any such Material Contract in default thereunder in any material respect. The Company has not received any written notice of termination under any Material Contract. 2.11 Intellectual Property. (a) Schedule 2.11(a) sets forth an accurate and complete list of all patents, registered marks, pending applications for registrations of any marks, registered copyrights and pending applications for registration of any Copyrights owned or filed by the Company or any of its Subsidiaries. Schedule 2.11(a) lists the jurisdictions in which each such Intellectual Property Right has been issued or registered or in which any application for such issuance and registration has been filed. (b) Except as set forth on Schedule 2.11(b), to the knowledge of the Company, the Company and/or one of its Subsidiaries is the sole and exclusive owner of, or has valid and continuing rights to use, sell or license, all of the Company Intellectual Property and Company Technology. To the knowledge of the Company, the use, practice or other commercial exploitation of the Company Intellectual Property by the Company or any of its Subsidiaries and the manufacturing, licensing, marketing, importation, offer for sale, sale or use of the Company Technology, and the operation of the Company's and its Subsidiaries' businesses do not infringe, constitute an unauthorized use of or misappropriate any United States Intellectual Property Rights of any third Person. Neither the Company nor any of its Subsidiaries is a party to or the subject of any pending or, to the knowledge of the officers of the Company, threatened suit, action, investigation or proceeding which involves a claim against the Company or any of its Subsidiaries, of infringement, unauthorized use, or violation of any Intellectual Property Rights of any Person, or challenging the ownership, use, validity or enforceability of any Company Intellectual Property or contesting the right of the Company or any of its Subsidiaries to use, sell, exercise, license, transfer or dispose of any Company Intellectual Property or Company Technology, or any products, processes or materials covered thereby in any manner. (c) To the knowledge of the Company, no Person (including employees and former employees of the Company or any of its Subsidiaries) is infringing, violating, misappropriating or otherwise misusing any Company Intellectual Property, and, except as set forth in Schedule 2.11(c), neither the Company nor any of its Subsidiaries has made any such claims against any Person (including employees and former employees of the Company or any of its Subsidiaries) in the previous three (3) years. (d) No Trade Secret or any other non-public, proprietary information material to the businesses of the Company or any of its Subsidiaries as presently conducted has been authorized to be disclosed or, to the knowledge of the Company, has been actually disclosed by the Company or any of its Subsidiaries to any employee or any third Person other than (i) pursuant to a confidentiality or non-disclosure agreement restricting the disclosure and use of the Company Intellectual Property or Company Technology, or (ii) to such employees or third persons who otherwise have a duty of confidentiality to the Company or its Subsidiaries. The Company and its Subsidiaries have taken all 7 commercially reasonable steps to protect and preserve the confidentiality of all Trade Secrets and any other confidential information of the Company or its Subsidiaries. (e) Schedule 2.11(e) sets forth a correct and complete list of all Software that is (i) owned exclusively by the Company or any of its Subsidiaries; or (ii) licensed to the Company or its Subsidiaries (other than software that is available on reasonable terms through commercial distributors or in consumer retail stores), in each case that is material to the operation of their businesses. (f) Except as set forth in Schedule 2.11(f), to the knowledge of the Company, no Publicly Available Software (including, without limitation, all derivative works thereof) (i) was used in connection with the development or modification of any Software owned by the Company or any of its Subsidiaries, (ii) forms part of the Technology owned by the Company or any Subsidiary, or (iii) is, in whole or in part, embodied or incorporated into proprietary products owned by the Company or its Subsidiaries and distributed or sold to third parties. (g) For purposes of this Agreement: (i) "COMPANY INTELLECTUAL PROPERTY" means all Intellectual Property Rights owned by or licensed to the Company or any of its Subsidiaries. (ii) "COMPANY TECHNOLOGY" means all Technology owned by or licensed to the Company or any of its Subsidiaries. (iii) "INTELLECTUAL PROPERTY RIGHTS" shall mean all of the rights arising from or in respect of the following, whether protected, created or arising under the Laws of the United States or any foreign jurisdiction: (A) patents, patent applications, any reissues, reexaminations, divisionals, continuations, continuations-in-part and extensions thereof (collectively, "PATENTS"); (B) trademarks, service marks, trade names (whether registered or unregistered), service names, industrial designs, brand names, brand marks, trade dress rights, Internet domain names, identifying symbols, logos, emblems, signs or insignia, and including all goodwill associated with the foregoing (collectively, "MARKS"), (C) copyrights, whether registered or unregistered (including copyrights in computer software programs), mask work rights and registrations and applications therefor (collectively, "COPYRIGHTS"); (D) confidential and proprietary information, or non-public processes, designs, specifications, technology, know-how, techniques, formulas, inventions, concepts, trade secrets, discoveries, ideas and technical data and information, in each case excluding any rights in respect of any of the foregoing that comprise or are protected by Copyrights or Patents (collectively, "TRADE SECRETS"); and (E) all applications, 8 registrations and permits related to any of the foregoing clauses (A) through (D). (iv) "PUBLICLY AVAILABLE SOFTWARE" means any Software that is distributed as "open source" or "free" Software (including any Software licensed pursuant to a GNU public license) or other Software that requires as a condition of distribution that other Software incorporated into, derived from or distributed with such Software (a) be disclosed or distributed in source code form, (b) be licensed for the purpose of making derivative works or (c) be redistributable at no charge. (v) "SOFTWARE" means computer programs, including any and all software implementations of algorithms, models and methodologies whether in source code, object code or other form, databases and compilations, including any and all data and collections of data, descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing and all documentation, including user manuals and training materials related to any of the foregoing. (vi) "TECHNOLOGY" means, collectively, all designs, formulas, algorithms, procedures, techniques, ideas, know-how, Software (whether in source code, object code or human readable form), databases and data collections, Internet websites and web content, tools, inventions (whether patentable or unpatentable and whether or not reduced to practice), invention disclosures, developments, creations, improvements, works of authorship, other similar materials and all recordings, graphs, drawings, reports, analyses, other writings and any other embodiment of the above, in any form or media, whether or not specifically listed herein, and all related technology, documentation and other materials used in, incorporated in, embodied in or displayed by any of the foregoing, or used or useful in the design, development, reproduction, maintenance or modification of any of the foregoing. 2.12 Compliance. The Company and each of its Subsidiaries has complied in all material respects with each Law binding on it or on any of its assets or properties and is not currently in violation of any such Law, and there have been no written notices or orders of noncompliance issued to the Company of any of its Subsidiaries under or in respect of any such Law, the noncompliance with which would reasonably be expected to result in Material Adverse Effect. "LAW" means any judgment, order, or statute, law (including common law), ordinance, rule, permit or regulation applicable to the Company or its Subsidiaries or their respective businesses, properties or assets. 9 2.13 Litigation. Except as set forth in Schedule 2.13, there is no action, suit, proceeding, claim, arbitration or investigation pending, or, to the Company's knowledge, threatened, before any agency, court, tribunal or governmental entity, foreign or domestic, against the Company or any of its Subsidiaries which would reasonably be expected to result in a Material Adverse Effect, or which in any manner challenges or seeks to prevent, enjoin, alter or delay any of the transactions contemplated by the Transaction Documents. Neither the Company nor any of its Subsidiaries has received any notice or assertion of such an action, suit, proceeding, claim, arbitration or investigation. There is no order of any governmental entity binding on the Company, any of its Subsidiaries, or any of their respective assets or properties. 2.14 Labor. Neither the Company nor any of its Subsidiaries is a party to any labor or collective bargaining agreement, and no employees of the Company or any of its Subsidiaries are represented by any labor organization. Within the preceding three years, there have been no representation or certification proceedings, or petitions seeking a representation proceeding, pending or, to the Company's Knowledge, threatened to be brought or filed with the National Labor Relations Board or any other labor relations tribunal or authority. Within the preceding three years, to the Company's Knowledge, there have been no organizing activities involving the Company or any of its Subsidiaries in respect of any group of employees of Company or any of its Subsidiaries. There are no strikes, work stoppages, slowdowns, lockouts, material arbitrations, or material grievances or other material labor disputes pending or, to the Company's Knowledge, threatened against or involving the Company or any of its Subsidiaries. 2.15 Taxes. (a) The Company has timely filed all Tax Returns required to filed by or on behalf of the Company or any Subsidiary (taking in consideration appropriate extensions for filing) and has fully paid or adequately accrued all Taxes payable by the Company and the Subsidiaries. All such Tax Returns are correct and complete in all respects. No tax deficiency has been or might be asserted or threatened against the Company or any of its Subsidiaries which would reasonably be expected to have a Material Adverse Effect. (b) No audit or other administrative or court proceedings are pending with any governmental authority with respect to Taxes of the Company or any of its Subsidiaries, and no written notice thereof has been received. No claim has been made by a taxing authority in a jurisdiction where the Company or any Subsidiary does not file Tax Returns such that it is or may be subject to taxation by that jurisdiction. (c) The Company and the Subsidiaries have disclosed on their federal income Tax Returns all positions taken therein that could give rise to substantial understatement of federal income tax within the meaning of Section 6662 of the Internal Revenue Code of 1986, as amended (the "Code"). (d) The Company and the Subsidiaries have never participated in any reportable or listed transaction as defined under Section 6011 of the Code. (e) For purposes of this Agreement: (x) "Taxes" shall mean (A) all federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments, including all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, 10 excise, severance, stamp, occupation, property and estimated taxes, customs duties, fees, assessments and charges of any kind whatsoever, (B) all interest, penalties, fines, additions to tax or additional amounts imposed by any governmental authority in connection with any item described in clause (A), and (C) any transferee liability in respect of any items described in clauses (A) and/or (B) payable by reason of contract, assumption, transferee liability, operation of law, Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor thereof of any analogous or similar provision under law) or otherwise, and (y) "Tax Returns" shall mean any return, report, claim for refund, estimate, information return or statement or other similar document relating to or required to be filed with any governmental authority with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof. 2.16 Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other than income taxes) which are required to be paid in connection with the sale and transfer of the Securities to be sold to the Purchaser hereunder will be, or will have been, fully paid or provided for by the Company and all laws imposing such taxes will be or will have been fully complied with. 2.17 Employee Benefits (a) The Company Plans (as defined below) have been maintained, in all material respects, in accordance with their terms and with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the Internal Revenue Code of 1986, as amended (the "CODE") and any other applicable Laws. The "COMPANY PLANS" means (i) all "employee benefit plans" (as defined in Section 3(3) of ERISA), (ii) all other employee benefit plans, policies, agreements or arrangements, and (iii) all payroll practices, including employment, consulting or other compensation agreements, or bonus or other incentive compensation, stock purchase, equity or equity-based compensation, deferred compensation, change in control, severance, sick leave, vacation, loans, salary continuation, health, life insurance and educational assistance plan, policies, agreements or arrangements with respect to which the Company or any of its Subsidiaries has any obligation or liability, contingent or otherwise, for current or former employees, consultants or directors of the Company or any of its Subsidiaries. (b) Neither the Company, any of the Subsidiaries nor any "party in interest" or "disqualified person" with respect to the Company Plans has engaged in a non-exempt "prohibited transaction" within the meaning of Section 4975 of the Code or Section 406 of ERISA for which the Company or any Subsidiary could incur a material liability. No fiduciary has any liability for breach of fiduciary duty or any other failure to act or comply in connection with the administration or investment of the assets of any Company Plan for which the Company or any Subsidiary could incur a material liability. (c) The Company Plans intended to qualify under Section 401 or other tax-favored treatment under Subchapter B of Chapter 1 of Subtitle A of the Code are so qualified, and any trusts intended to be exempt from federal income taxation under the Code are so exempt. Nothing has occurred with respect to the operation of the Company Plans that could cause the loss of such qualification 11 or exemption, or the imposition of any material liability, penalty or tax under ERISA or the Code. (d) Neither the Company, any of the Subsidiaries, nor any trade or business (whether or not incorporated) which is or has ever been under common control, or which is or has ever been treated as a single employer, with any of them under Section 414(b), (c), (m) or (o) of the Code ("ERISA AFFILIATE") or to which the Company, any of the Subsidiaries and any ERISA Affiliate has ever contributed or ever been obligated to contribute to an "employee benefit plan" subject to Title IV of ERISA or a "multiemployer plan," as defined in Section 3(37) of ERISA. (e) Except as set forth on Schedule 2.17(e), none of the Company Plans provide for post-employment life or health insurance benefits or coverage for any participant or any beneficiary of a participant, except as may be required under the Consolidate Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") ("RETIREE Benefits"). (f) All amendments and actions required to bring the Company Plans into conformity in all material respects with all of the applicable provisions of the Code, ERISA and other applicable Laws have been made or taken except to the extent that such amendments or actions are not required by law to be made or taken until a date after the Closing Date. (g) All contributions (including all employer contributions and employee salary reduction contributions) required to have been made under any of the Company Plans or by law (without regard to any waivers granted under Section 412 of the Code), have been timely made, and all contributions for any period ending on or before the Closing Date which are not yet due will have been paid or accrued on the balance sheet on or prior to the Closing Date. (h) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated in this Agreement will (i) result in any payment becoming due to any employee (current, former or retired) of the Company or any of its Subsidiaries ("EMPLOYEES"), (ii) increase any benefits otherwise payable under any Company Plan, or (iii) result in the acceleration of the time of payment or vesting of any such benefits under any such plan. 2.18 Investment Company. The Company is not an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for an investment company, within the meaning of the Investment Company Act of 1940, as amended. 2.19 Insurance. The Company maintains insurance of the types and in the amounts that the Company reasonably believes is adequate for its business, including, but not limited to, insurance covering all real and personal property owned or leased by the Company and it Subsidiaries against theft, damage, destruction, acts of vandalism and all other risks customarily insured against by similarly situated companies, all of which insurance is in full force and effect. Except as set forth on Schedule 2.19, there are no pending claims against any such insurance policy as to which the insurers have denied liability. 2.20 Real Property. Neither the Company nor any of its Subsidiaries owns any real property in fee. 12 2.21 Material Customers and Suppliers. Since July 1, 2005, no material customer or supplier of the Company or its Subsidiaries, including but not limited to the United States Department of State and any other state or federal agency, has given the Company or its Subsidiaries any written notice terminating, suspending, or reducing in any material respect, or specifying an intention to terminate, suspend, or reduce in any material respect in the future, or otherwise reflecting a material adverse change in, the business relationship between such customer or supplier and the Company or its Subsidiaries, and there has not been any materially adverse change in the business relationship of the Company or its Subsidiaries with any such customer or supplier. 2.22 Corrupt Practices. Neither the Company nor any Subsidiary nor, to the knowledge of the Company, any agent or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or made by any person acting on its behalf and of which the Company is aware in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended. 2.23 SEC Filings; Financial Statements. (a) The Company has filed all forms, reports and documents required to be filed with the SEC since January 1, 2004, which are available to the Purchaser on the website maintained by the SEC at http://www.sec.gov (the "SEC WEBSITE"). All such required forms, reports and documents (including those that the Company may file subsequent to the date hereof) are referred to herein collectively as the "COMPANY SEC REPORTS". In addition, all exhibits to the Company SEC Reports are available on the SEC Website. All documents required to be filed as exhibits to the Company SEC Reports have been so filed, and all material contracts so filed as exhibits are in full force and effect, except those which have expired in accordance with their terms or whose failure to be so could not reasonably be expected to have a Material Adverse Effect on the Company, and neither the Company nor any of its Subsidiaries is in default thereunder, except where any such default has not resulted in or would not reasonably be expected to result in a Material Adverse Effect on the Company. As of their respective filing dates, the Company SEC Reports (i) complied in all material respects with the requirements of the Securities Act or the Securities and Exchange Act of 1934, as amended (the "EXCHANGE ACT"), as the case may be, and the rules and regulations of the SEC thereunder applicable to such Company SEC Reports, and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. None of the Company's Subsidiaries is required to file any forms, reports or other documents with the SEC. (b) Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the Company SEC Reports (the "COMPANY FINANCIALS"), including any Company SEC Reports filed after the date hereof until the Closing, (i) complied or will comply as to form in all 13 material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto as of their respective dates, (ii) was or will be prepared in accordance with GAAP applied on a consistent basis throughout the periods involved and consistent with each other (except as may be indicated in the notes thereto or, in the case of unaudited interim financial statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act) and (iii) fairly presented or will fairly present the consolidated financial position of the Company and its Subsidiaries as at the respective dates thereof and the consolidated results of operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are reasonably expected to be subject to normal and recurring year-end adjustments which were not or will not be material in amount. There has been no material change in the Company's accounting policies except as described in the notes to the Company Financials. The balance sheet of the Company contained in the Company SEC Report for the quarter ended July 3, 2005, is hereinafter referred to as the "COMPANY BALANCE SHEET". Neither the Company nor any of its Subsidiaries had any obligations or liabilities (absolute, accrued, contingent or otherwise) of any nature required to be disclosed on a balance sheet or in the related notes to the consolidated financial statements prepared in accordance with GAAP which are, individually or in the aggregate, material to the business, results of operations or financial condition of the Company and its Subsidiaries taken as a whole, except liabilities (i) provided for in the Company Balance Sheet, (ii) incurred since the date of the Company Balance Sheet in the ordinary course of business consistent with past practice, or (iii) which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. (c) The Company has heretofore made available to the Purchaser complete and correct copies of any amendments or modifications, which have not yet been filed with the SEC but which are required to be filed, to agreements, documents or other instruments which previously had been filed by the Company with the SEC pursuant to the Securities Act or the Exchange Act. 2.24 Internal Accounting Controls. Except as set forth in Schedule 2.24, the Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as set forth in Schedule 2.24, the Company has disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 under the Exchange Act) that are designed to ensure that material information relating to the Company is made known to the Company's principal executive officer and the Company's principal financial officer or persons performing similar functions. The Company is otherwise in compliance in all material respects with all applicable provisions of the Sarbanes-Oxley Act of 2002 (the "ACT"). Each of the principal executive officer and the principal financial officer of the Company (or each former principal executive officer and former principal financial officer of the Company, as applicable) has made all certifications required under Sections 302 and 906 of the Act and the related rules and regulations promulgated thereunder. 14 2.25 Corporate Records. The Company has delivered or made available to Purchaser true and complete copies of the Certificate of Incorporation and bylaws (in each case as amended to the date of this Agreement) of the Company and the Certificate of Incorporation and bylaws (or other comparable organizational or governance documents) of each of its Subsidiaries. The minute books of the Company and each of its Subsidiaries previously made available to Purchaser contain complete and accurate minutes of all meetings of the board of directors of the Company and its Subsidiaries (and all committees thereof) ratified as of the date hereof and accurately reflect all other corporate action of the stockholders and board of directors of the Company and its Subsidiaries (and all committees thereof) to the date hereof, including all amendments and corrections. 2.26 Nasdaq Compliance and Listing. The Company's Common Stock is registered pursuant to Section 12(g) of the Exchange Act and is listed on the Nasdaq National Market, and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock from the Nasdaq National Market. The Company shall comply with all requirements of the National Association of Securities Dealers, Inc. with respect to the issuance of the Securities and the listing thereof on the Nasdaq National Market. 2.27 Proxy Statement. The information supplied by the Company for inclusion in the proxy statement (as amended or supplemented, the "PROXY STATEMENT") to be sent to the stockholders of the Company in connection with the meeting of the Company's stockholders to consider the approval of the transactions contemplated by this Agreement (the "COMPANY STOCKHOLDERS' MEETING") shall not, on the date the Proxy Statement is first mailed to the Company's stockholders, at the time of the Company Stockholders' Meeting and at the Closing, 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 therein, in light of the circumstances under which they are made, not false or misleading; or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Company Stockholders' Meeting which has become false or misleading. The Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. If at any time prior to the Closing, any event or information should be discovered by the Company which should be set forth in a supplement to the Proxy Statement, the Company shall promptly inform the Purchaser. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information supplied by the Purchaser which is contained in the Proxy Statement. 2.28 Addition of Mr. Robert LaPenta to the Board of Directors. The Board has approved the appointment of Mr. Robert LaPenta as a member and Chairman of the Board of Directors of the Company, subject to the consummation of the transactions contemplated hereby. 2.29 Fairness Opinion. The Company has received an opinion from USBX Advisory Services, LLC, dated as of October 5, 2005, to the effect that as of such date, the financial consideration provided for in this Agreement is fair to the Company and its shareholders from a financial point of view. 15 ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER The Purchaser hereby represents and warrants to, and covenants with, the Company as follows: 3.1 Investment Representations and Covenants. The Purchaser represents and warrants to, and covenants with, the Company that: (i) the Purchaser is knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with respect to investments in securities including the Securities and has requested, received, reviewed and considered all information it deems relevant in making an informed decision to purchase the Securities; (ii) the Purchaser is acquiring the number of Securities set forth in Section 1.1 above in the ordinary course of its business and for its own account for investment only and with no present intention of distributing any of such Securities or any arrangement or understanding with any other persons regarding the distribution of such Securities within the meaning of Section 2(11) of the Securities Act; (iii) the Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Securities except in compliance with the Securities Act, applicable state securities laws and the respective rules and regulations promulgated thereunder; (iv) the Purchaser has, in connection with its decision to purchase the number of Securities set forth in Section 1.1 above, relied solely upon the SEC Documents and the documents referenced therein and the representations and warranties of the Company contained herein; and (v) the Purchaser is an "accredited investor" within the meaning of Rule 501 of Regulation D promulgated under the Securities Act. The Purchaser understands that its acquisition of the Securities has not been registered under the Securities Act or registered or qualified under any state securities laws in reliance on specific exemptions therefrom, which exemptions may depend upon, among other things, the bona fide nature of the Purchaser's investment intent as expressed herein. 3.2 Authorization; Validity of Transaction Documents. The Purchaser further represents and warrants to, and covenants with, the Company that (i) the Purchaser has full right, power, authority and capacity to enter into the Transaction Documents and to consummate the transactions contemplated thereby and has taken all necessary action to authorize the execution, delivery and performance of the Transaction Documents, and (ii) upon the execution and delivery of the Transaction Documents, assuming the valid execution thereof by the Company and the other parties thereto, the Transaction Documents shall constitute valid and binding obligations of the Purchaser enforceable in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 3.3 No Conflict. The execution, delivery and performance of the Transaction Documents and the consummation of the transactions contemplated thereby by the Purchaser will not result in any violation of, be in conflict with or constitute a default under, any law, statute, regulation ordinance, material contract or agreement, instrument, judgment, decree or order to which the Purchaser is a party or by which it is bound, except as would not reasonably 16 be expected to have a material adverse effect on the ability of Purchaser to consummate the transactions contemplated hereby. 3.4 No Legal, Tax or Investment Advice. The Purchaser understands that nothing in the Transaction Documents, the SEC Documents or any other materials presented to the Purchaser in connection with the purchase and sale of the Securities constitutes legal, tax or investment advice. The Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of Securities. 3.5 Access to Information; Due Diligence Complete. The Purchaser acknowledges that it has had a reasonable opportunity to inspect and evaluate the assets, liabilities, business and prospects of the Company and each Subsidiary. The Purchaser has sufficient experience in evaluating and investing in companies similar to the Company and each Subsidiary so that it is capable of evaluating the merits and risks of the transactions contemplated by the Transaction Documents and of protecting its own interests. The Purchaser has requested all information, made all inquiries, made inspection, received responses and done all other things it deems appropriate in evaluating the transactions contemplated by the Transaction Documents. 3.6 Information in Proxy Statement. The information supplied by the Purchaser for inclusion in the Proxy Statement shall not, on the date the Proxy Statement is first mailed to the Company's stockholders, at the time of the Company Stockholders' Meeting and at the Closing, 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 therein, in light of the circumstances under which they are made, not false or misleading. If at any time prior to the Closing, any event or information should be discovered by the Purchaser which should be set forth in a supplement to the Proxy Statement, the Purchaser shall promptly inform the Company of the same. Notwithstanding the foregoing, the Purchaser makes no representation or warranty with respect to any information supplied by the Company which is contained in the Proxy Statement. 3.7 Restrictive Legend. The Purchaser understands that, subject to Section 4.4 (Lock-Up Agreement), until such time as a registration statement covering the Securities has been declared effective or the Securities may be sold pursuant to Rule 144 under the Securities Act without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Securities shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for the Securities): "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT." 17 3.8 Sufficient Funds. The Purchaser currently has sufficient funds to consummate the purchase of the Shares and such funds will remain available at the Closing. ARTICLE IV COVENANTS 4.1 Board Representation. (a) On or prior to the Closing Date, the Board of Directors of the Company shall be expanded by three positions thereby creating three vacancies on the Board. Mr. Robert LaPenta shall be appointed, immediately following the Closing Date, to fill one of these vacancies as a member and Chairman of the Board, serving in a non-executive capacity. If Mr. Robert LaPenta is unable or ceases to serve on the Board for any reason, the Purchaser shall have the right to recommend to the Governance and Nominating Committee for nomination by the Board one new director (to replace Mr. Robert LaPenta as a member of the Board), who need not qualify as an "independent director" (as that term is defined in Rule 4200 of the National Association of Securities Dealers, Inc. or any comparable regulation to which the Company may be subject from time to time) ("INDEPENDENT Director"), and who shall be the successor Chairman of the Board if approved by the Board (provided that if such individual is rejected by the Board, the Purchaser shall have the right to recommend up to two more candidates to serve as successor Chairman, subject to Board approval, and provided further that if the Board rejects such two additional candidates, Purchaser will retain the rights set forth below to continue recommending candidates to replace Mr. LaPenta, but not as Chairman of the Board). The Purchaser shall have the right to recommend two additional directors to the Governance and Nominating Committee for nomination by the Board to fill the remaining two vacancies created by the expansion, which directors, upon appointment, must each qualify as an Independent Director for all Committee purposes. If one or more candidates recommended by the Purchaser pursuant to this Section are rejected by the Committee or the Board, the Purchaser shall have an ongoing right to recommend candidates to fill the aforementioned vacancies until three candidates are qualified and accepted and there are no remaining vacancies on the Board. Each director recommended to the Board by the Purchaser is referred to herein as a "PURCHASER DESIGNEE". For so long as Purchaser owns, in the aggregate, at least 20% of the outstanding shares of Common Stock of the Company (the "REQUIRED INTEREST"), the Purchaser shall be entitled to nominate three Purchaser Designees to the Company's Board of Directors. In the event that the Purchaser owns an interest in the Company that is less than the Required Interest but equal to or greater than 15% of the outstanding shares of Common Stock of the Company (the "MINIMUM INTEREST"), and Purchaser currently has three Purchaser Designees serving on the Board of Directors, then, unless otherwise agreed by a majority of the Board other than the Purchaser Designees, the Purchaser shall cause one of the two Purchaser Designees who are "independent directors" to resign within ten (10) business days, the Board of Directors shall be reduced by one member and thereafter the Purchaser shall be entitled to nominate two members to the Company's Board of Directors (until such time as the aggregate interest owned by Purchaser shall be less than the Minimum Interest, whereupon Purchaser shall, unless otherwise agreed by a majority of the Board other than the Purchaser Designees, within ten (10) business days cause the remaining two Purchaser Designees to resign and the Purchaser shall have no further rights under this Section 4.1). At least ninety (90) days prior to each annual meeting of stockholders at which Purchaser 18 Designees will stand for election, the Purchaser shall provide written notice to the Company indicating the Purchaser Designees that it will nominate at such annual meeting, and such notice shall set forth as to each person proposed for nomination all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Exchange Act (including such person's written consent to being named in the related proxy statement as a nominee and to serving as a director if elected). (b) The Company shall use its reasonable best efforts at all times to take such action as is necessary to ensure that the Governance and Nominating Committee of the Board of Directors (or the full Board if there is no such committee) of the Company shall nominate and recommend to the stockholders of the Company that the stockholders of the Company shall elect the Purchaser Designees to the Board of Directors. As a condition precedent to the inclusion of any Purchaser Designee on any slate of nominees to be recommended to stockholders by the Board of Directors pursuant to Section 4.1(a), the Governance and Nominating Committee of the Board (or the full Board if there is no such committee) may review the information provided pursuant to Section 4.1(a) to evaluate in good faith such Purchaser Designee's character and fitness to serve as a director. If the Governance and Nominating Committee of the Board (or the full Board if there is no such committee) determines in good faith that any such Purchaser Designee lacks the character or fitness to serve as a director based on applicable legal and reasonable commercial standards, the Governance and Nominating Committee of the Board (or the full Board if there is no such committee) shall inform the Purchaser of such determination, and the Purchaser shall then have the right to propose alternative Purchaser Designees in accordance with Section 4.1(a) above reasonably acceptable to the Company. All Purchaser Designees elected to the Board of Directors shall receive, during the period in which they serve, any and all benefits provided to the other non-executive members of the Board of Directors of the Company. (c) Mr. Robert LaPenta shall have the right to invite representatives of the Purchaser to attend, but not vote, as observers at the open portion of each meeting of the Board of Directors, including telephonic meetings, provided that each such representative has executed and delivered to the Company a confidentiality agreement in a form reasonably satisfactory to the Company. (d) The Board shall establish a new Strategic Committee consisting of the following five (5) directors so long as they remain members of the Board: Mr. Robert LaPenta as Chair of the Committee, Mr. Denis Berube, the Company's Chief Executive Officer serving ex-officio, and two other directors recommended by Mr. Robert LaPenta, only one of whom may be a Purchaser Designee. The Board shall adopt a charter in substantially the form of Exhibit E hereto (the "STRATEGIC COMMITTEE CHARTER"), which shall serve as the directive of the Strategic Committee. The Strategic Committee Charter shall not be amended without the approval of the Chair of the Strategic Committee, which approval shall not be unreasonably withheld. The Strategic Committee may, and it is anticipated that the Strategic Committee will, retain consultants and other service providers, including affiliates of the Purchaser, to provide support to the Strategic Committee and to management, on terms and conditions that are approved by a majority of the disinterested members of the Board of Directors. 19 (e) Subject to availability on reasonable terms and at a reasonable cost, for so long as any Purchaser Designee remains on the Board of Directors, the Company shall maintain directors' and officers' liability insurance with an insurer which maintains a rating of not less than A- by Fitch or A.M. Best with at least the current level of coverage and, in addition, shall consult in good faith with Purchaser with respect to (i) the renewal of existing policies and (ii) side A excess terms and conditions coverage in an amount reasonably satisfactory to Purchaser. (f) Mr. Robert LaPenta and each Purchaser Designee shall be required to comply with the same policies and restrictions as each of the other members of the Board including but not limited to the Company's Governance Policy, Insider Trading Policy and Code of Ethics and Standards of Conduct. (g) Notwithstanding anything herein to the contrary, the responsibility and authority of the Board shall not be altered as a result of the transactions contemplated by this Agreement and the Board shall continue to act in accordance with the Company's certificate of incorporation, bylaws, the Company's Governance Policy and the various committee charters. The current Board members shall remain in office, though it is anticipated that the size of the Board may be reduced to ten through attrition, as determined by the Board. The current Chairman of the Board, Mr. Denis K. Berube, shall remain a director and, in accordance with Section 4.1(d) above, shall be appointed as a member of the Strategic Committee. The current Chief Executive Officer, Mr. Bernard C. Bailey, shall continue in such capacity subject to the terms and conditions of any employment agreement he may have with the Company, shall remain a director and shall serve as an ex-officio member of the Strategic Committee. (h) It is understood and agreed that the Company's Board of Directors is subject to fiduciary duties under applicable law, and that the Company's stockholders have rights with respect to the composition of the Board of Directors under applicable law and the Company's organizational documents. Accordingly, for purposes of this Section 4.1, all obligations of the Company under paragraphs (a), (b) and (d) hereof shall be deemed to be "to use reasonable best efforts" to cause the intended action to be taken, recognizing that the Company cannot guaranty what action its Board of Directors or stockholders may take in the future. In the event that the Board of Directors of the Company shall not cause any action to be taken under paragraphs (a), (b) and (d) hereof, the Purchaser shall be entitled to the following remedies: (i) A full acceleration of the vesting of the Warrants so as to make the Warrants immediately exercisable; and (ii) Upon each failure to comply with the provisions of paragraphs (a), (b) and (d) hereof, to appoint an additional director to the Board of Directors of the Company. Such director shall resign immediately after the default is cured to the Purchaser's reasonable satisfaction. 4.2 Efforts. The Company and Purchaser will use their reasonable best efforts to cause the conditions specified in Article V hereof to be satisfied as soon as practicable. At and from time to time after the Closing, at the request of any party hereto, the other party shall execute and deliver such additional certificates, instruments, and other documents and take such other actions as 20 such party may reasonably request in order to carry out the purposes of this Agreement. 4.3 Lock-Up Agreement. Except in connection with a Change of Control (as defined below), the Purchaser shall not, without prior written approval of the Company, directly or indirectly, sell, offer or agree to sell, contract to sell, grant any option for the sale of, make any short sale, pledge, or enter into any hedging transaction that could result in a transfer of, or otherwise dispose of (1) the Shares, (2) the Warrants or (3) the shares of Common Stock issuable upon exercise of the Warrants, in each case, for a period commencing as of the Closing and ending on the first anniversary of the Closing. For purposes of this Agreement, a "CHANGE OF CONTROL" shall mean (x) the consummation of any of the following transactions: (i) the sale, lease, exchange, conveyance or other disposition of all or substantially all of the Company's property or business, (ii) the merger of the Company into or its consolidation with any other entity in which the Company is not the surviving entity (other than a wholly-owned subsidiary of the Company) or (iii) any transaction (including a merger or other reorganization) or series of related transactions, in which more than 50% of the voting power of the Company is disposed of; or (y) individuals who, immediately after giving effect to the Closing, constitute the Board (the "INCUMBENT DIRECTORS") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to such date, whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director) shall be an Incumbent Director. 4.4 Conduct of the Business. (a) Between the date hereof and the Closing Date, the Company will, and will cause its Subsidiaries to, (i) conduct the business of the Company and its Subsidiaries only in the ordinary course of business consistent with past practice in all material respects, (ii) maintain in good repair all of the material assets and properties of the Company and its Subsidiaries consistent with past practices, and (iii) preserve intact in all material respects the current business operations of the Company and its Subsidiaries, keep available the services of the officers and employees of the Company and its Subsidiaries, and preserve the Company's and each of its Subsidiary's relationships with customers, suppliers, licensors, and others having business relationships with the Company or any of its Subsidiaries, consistent with past practices. (b) Without limiting the generality of Section 4.5(a), and except as otherwise expressly provided in this Agreement, neither the Company nor any of its Subsidiaries will, without the prior written consent of Purchaser: (i) amend its certificate of incorporation or bylaws (or other applicable organizational or governance documents) or take any action in respect of such amendment; (ii) authorize for issuance, issue, sell, deliver, or agree or commit to issue, sell, or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase, or 21 otherwise) any stock of any class or series or any other securities convertible into or exercisable or exchangeable for any stock or any equity equivalents (other than the grant of employee or director stock options and other equity awards in the ordinary course of business); (iii) (A) split, combine, or reclassify any shares of its capital stock; (B) declare, set aside, or pay any dividend or make any other distribution or payment (whether in cash, stock, or property or any combination thereof) in respect of its capital stock; (C) make any other actual, constructive, or deemed distribution in respect of any shares of its capital stock or otherwise make any payments to stockholders in their capacity as such; or (D) redeem, repurchase, or otherwise acquire any securities of the Company or any of its Subsidiaries; (iv) fail to comply in any material respect with any material Law; (v) adopt or become obligated to contribute to (i) any "employee benefit plan" (as defined in Section 3(3) of ERISA) subject to Title IV of ERISA, (ii) a "multiemployer plan" (as defined in Section 3(37) of ERISA), or (iii) any "welfare benefit plan" (as defined in Section 3(1) of ERISA) providing for Retiree Benefits; (vi) intentionally take any action, or knowingly omit to take any action, that would or would reasonably be expected to result in (i) any representation or warranty of the Company set forth in Article II becoming untrue or (ii) any of the conditions to the obligations of Purchaser set forth in Section 5.2 not being fully satisfied; or (vii) agree or commit to agree (in writing or otherwise) to do any of the foregoing. 4.5 Preparation of Proxy Statement; Stockholders Meeting. (a) As promptly as practicable following the date of this Agreement, the Company shall prepare and file with the SEC a Proxy Statement. The Company shall use reasonable best efforts to have the Proxy Statement cleared by the SEC and its staff under the Exchange Act, as promptly as practicable after such filing. The Company shall cause the Proxy Statement to be mailed to holders of Company Common Stock as promptly as practicable after Proxy Statement is cleared by the SEC. Without limiting any other provision herein, the Proxy Statement will contain such information and disclosure so that the Proxy Statement conforms in form and substance to the requirements of the Exchange Act. (b) The Company shall promptly notify Purchaser of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Proxy Statement or for additional information and shall supply the Purchaser with copies of all correspondence between the Company or any of its representatives and the SEC or its staff. The 22 Company and the Purchaser shall cooperate with each other and provide to each other all information necessary in order to prepare the Proxy Statement as expeditiously as practicable. (c) If at any time prior to the stockholders vote there shall occur any event with respect to the Company or any of Company Subsidiaries, or with respect to other information supplied by Company for inclusion in the Proxy Statement, which event is required to be described in an amendment of or a supplement the Proxy Statement, such event shall be so described, and such amendment or supplement shall be promptly filed with the SEC and, as required by Law, disseminated to the stockholders of the Company. (d) The Company shall, as soon as practicable following the date hereof, duly call, give notice of, convene and hold a meeting of its stockholders (the "COMPANY STOCKHOLDERS MEETING") for the purpose of seeking the Requisite Stockholder Vote. The Company shall, through the Board of Directors, recommend to its stockholders that they give the Requisite Stockholder Vote, except to the extent that the Board of Directors shall have withdrawn or modified its recommendation of this Agreement. 4.6 Non-Competition. Until the earlier of the termination of this Agreement in accordance with Article VI or the Closing Date, the Purchaser will not make any equity investment in any entity in the identification solutions or biometrics markets without the Company's prior written consent, other than potential investments that have been identified by the Purchaser to the Company in writing prior to the date of this Agreement. 4.7 No Shop Agreement. Until the earlier of the termination of this Agreement in accordance with Article VI or the Closing Date, the Company will not, and will not cause nor permit any of its Subsidiaries or affiliates or any of its or their directors, officers, employees, agents or representatives to, (a) negotiate, authorize, recommend, enter into or propose to enter into, with any person other than the Purchaser or persons designated by the Purchaser, any transaction involving (directly or indirectly) an issuance, sale or acquisition of 5% or more of any class or series of securities of the Company or any of its Subsidiaries, a sale or lease of material assets by the Company or any of its Subsidiaries (other than in the ordinary course of the Company's business consistent with past custom and practice), or any merger, recapitalization, business combination, strategic alliance, joint venture or similar transaction involving the Company or any of its Subsidiaries (a "COMPETING TRANSACTION"), (b) continue to engage in any pending discussions or negotiations with any third party concerning any previously proposed Competing Transaction, (c) encourage, solicit or initiate discussions, negotiations or submissions of proposals, indications of interest or offers in respect of a Competing Transaction, or (d) furnish or cause to be furnished to any person any information in furtherance of a Competing Transaction. Notwithstanding the foregoing, nothing contained in this Agreement shall prevent the Company or the Company's Board of Directors between the date of this Agreement and prior to the date of the meeting of the Company's stockholders at which they will vote on the transactions contemplated by this Agreement from (A) providing information in response to a request therefor by a Person who has made an unsolicited bona fide written Acquisition Proposal (as defined below); (B) engaging in any negotiations or discussions with any person who has made an unsolicited bona fide written Acquisition Proposal; or (C) recommending such an Acquisition Proposal to the stockholders 23 of the Company, if and only to the extent that, (i) in each such case referred to in clause (A), (B) or (C) above, the Company's Board of Directors determines in good faith (after consultation with outside legal counsel) and by a majority vote of the Board that such action would be required in order for the directors to comply with their respective fiduciary duties under applicable law, (ii) in each such case referred to in clause (A) or (B) above, the Company's Board of Directors also determines in good faith that such Acquisition Proposal, if accepted, is reasonably likely to lead to a Superior Proposal (as defined below), and (iii) in the case referred to in clause (C) above, (w) the Company's Board of Directors also determines in good faith and by a majority of the Board that such Acquisition Proposal is a Superior Proposal, (x) the Company's Board of Directors has given the Purchaser two (2) business days' prior written notice of its intention to recommend such Acquisition Proposal to the stockholders of the Company, (y) the Company's Board of Directors has considered any changes to this Agreement (if any) proposed by the Purchaser, and (z) the Company's Board of Directors has determined in good faith and by a majority vote of the Board, after consultation with the Company's outside legal counsel, that such unsolicited proposal remains a Superior Proposal even after the changes proposed by the Purchaser. Nothing contained in this Agreement shall prevent the Company or the Company's Board of Directors from complying with its disclosure obligations under Rule 14d-9 or 14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal. If the Company receives any inquiry, proposal, indication of interest or offer with respect to a Competing Transaction, the Company will promptly notify the Purchaser of the same and the terms thereof in writing. For purposes of this Agreement, an "ACQUISITION PROPOSAL" shall mean (1) a bona fide proposal by any person (other than the Purchaser) to the Company or its stockholders to engage in any Competing Transaction, (2) a public statement by any person (other than the Purchaser) to the Company or its stockholders of such person's intention to make a proposal to engage in a Competing Transaction or (3) the filing by any person (other than the Purchaser) of an application or notice with any governmental authority to engage in a Competing Transaction. A "SUPERIOR PROPOSAL" shall be a bona fide Acquisition Proposal that is reasonably likely to be consummated, taking into account all legal, financial and regulatory aspects of the proposal (including any break-up fees, expense reimbursement provisions and conditions to consummation) and the Person making the proposal and, if consummated, is reasonably likely to result in a transaction more favorable to the Company's stockholders from a financial point of view than the transactions contemplated hereby. 4.8 Standstill. Until the earliest of (i) the termination of this Agreement in accordance with Article VI, (ii) the Closing Date or (iii) a third party publicly making an Acquisition Proposal, the Purchaser will not, and will not cause nor permit any of its subsidiaries or affiliates or any of its or their directors, officers, employees, agents or representatives, directly or indirectly, without the prior written consent of the Company, to (a) acquire, agree to acquire or make any proposal to acquire, directly or indirectly, any voting securities of the Company (other than pursuant to this Agreement) or substantially all of the assets of the Company, (b) propose to enter into, directly or indirectly, any merger, consolidation, recapitalization, business combination or other similar transaction involving the Company, (c) make, or in any way participate in any "solicitation" of "proxies" (as such terms are used in the proxy rules of the SEC) to vote, or seek to advise or influence any person with respect to the voting of any voting securities of the Company, (d) form, join or in any way participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting securities of the 24 Company, (e) otherwise act, alone or in concert with others, to seek to control the Board of Directors of the Company, (f) publicly disclose any intention, plan or arrangement inconsistent with the foregoing, or (g) knowingly advise, assist or encourage any other persons in connection with any of the foregoing. 4.9 Injunctive Relief. Each party acknowledges that any breach or threatened breach of the provisions of Sections 4.1, 4.5(d), 4.6, 4.7, 4.8 or 4.16 of this Agreement will cause irreparable injury to the other party for which an adequate monetary remedy does not exist. Accordingly, in the event of any such breach or threatened breach, the non-breaching party shall be entitled, in addition to the exercise of other remedies, to seek and (subject to court approval) obtain injunctive relief, without necessity of posting a bond, restraining the breaching party from committing such breach or threatened breach. The right provided under this Section 4.10 shall be in addition to, and not in lieu of, any other rights and remedies available to the parties. 4.10 Access to Information. The Purchaser shall have the following management rights as long as it continues to beneficially own the Shares or the Warrants: (a) to receive the same information as is provided to members of the Board and the board of directors of its majority-owned subsidiaries; and (b) to access any other Company information as approved by the Board, subject to the Company's insider policies and applicable regulatory requirements. Further, Purchaser will be permitted to consult on a regular basis with Company management with respect to the business and affairs of the Company and the Subsidiaries and, if requested by Purchaser, exercise other "management rights" as are necessary to qualify the securities of the Company owned by Purchaser as a "venture capital investment" within the plan asset regulations under ERISA (Department of Labor Regulation 2510.3-101). 4.11 Conflicts of Interest. The Purchaser and the Company recognize that Mr. Robert LaPenta shall have, as a director, fiduciary responsibilities, duties and obligations to the Company and its stockholders. The Purchaser and the Company also recognize that Mr. Robert LaPenta has fiduciary responsibilities, duties and obligations to the Purchaser and its affiliates (including its general and limited partners). To the extent that a conflict arises regarding potential investment opportunities, the Purchaser's portfolio, companies or affiliates, or otherwise, then the Purchaser shall bring the potential conflict and a proposed resolution to the attention of the Company's Board of Directors and the applicable advisory board representing the interests of the Purchaser and its affiliates. If it is determined that a conflict exists, the independent members of the respective boards shall decide on a resolution which could include Mr. Robert LaPenta recusing himself from any active involvement (other than as passive investor) on behalf of Company or the Purchaser or its affiliates in the matter giving rise to the conflict (the "CONFLICT POLICY"). Provided that all the material facts relating to the conflict are disclosed by Mr. LaPenta to the Board and Mr. LaPenta adheres to the resolution of the conflict that is approved by the majority of the disinterested members of the Board, Mr. LaPenta will be presumed, with respect to such conflict, to (i) have satisfied and fulfilled the fiduciary duty of a director and stockholder, (ii) have acted in good faith and in a manner that Mr. LaPenta reasonably believes to be in or not opposed to the best interest of the Company and (iii) not have breached his duty of loyalty to the Company or derived an improper benefit therefrom. This provision shall not relieve the Board of its fiduciary obligations to the Company and its shareholders including, without limitation, its obligations under Section 145(d) of the Delaware General Corporation Law. 25 4.12 Covenants. (a) Each party hereto shall take all commercially reasonable steps necessary or desirable, and proceed diligently and in good faith and shall use its reasonable best efforts to obtain, as promptly as practicable, (i) all authorizations, consents, orders and approvals of all Governmental Entities that may be or become necessary for such party's execution and delivery of, and the performance of its obligations pursuant to, this Agreement and the other Transaction Documents, including without limitation under the HSR Act, and (ii) all approvals and consents required under all Contracts to which the Company or any of its Subsidiaries is a party to consummate the transactions contemplated hereby. Each party will cooperate fully (including, without limitation, by providing all information the other party reasonably requests) with the other parties in promptly seeking to obtain all such authorizations, consents, orders and approvals. All filing fees required to be paid in connection with any filing under the HSR Act shall be paid by the Company. (b) Each party hereto shall promptly inform the other party of any communication from any Governmental Entity regarding any of the transactions contemplated by this Agreement. If any party or affiliate thereof receives a request for additional information or documentary material from any such Governmental Entity in respect of the transactions contemplated hereby, then such party will endeavor in good faith to make, or cause to be made, as soon as reasonably practicable and after consultation with the other party, an appropriate response in compliance with such request. 4.13 Pre-Closing Information Rights. Until the earlier of the termination of this Agreement pursuant to Article VI or the Closing Date, the Company will permit the authorized representatives of the Purchaser full and free access, at all times during regular working hours, and upon reasonable advance notice, to any of the properties of the Company, including its books and records, and to discuss its affairs, finances and accounts with the Company's officers, agents and representative. 4.14 Public Announcements. The Company and Purchaser will consult with each other and will mutually agree (the agreement of each party not to be unreasonably withheld) upon the content and timing of any press release or other public statement in respect of the transactions contemplated hereby and shall not issue any such press release or make any such public statement prior to such consultation and agreement, except as may be required by applicable law. 4.15 Termination of Purchaser's Rights. The Purchaser's rights and the Company's obligations under Section 4.1 shall terminate in the event that the Purchaser does not own at least the Minimum Interest. 4.16 Right of First Refusal for New Securities. (a) The Company hereby grants to the Purchaser a right of first refusal to purchase shares of any New Securities (as defined below) which Company may, from time to time, propose to sell and issue. Such right of first refusal shall allow Purchaser to purchase a pro rata portion of the New Securities proposed to be issued, determined with reference to the aggregate number of outstanding shares of Common Stock held by the Purchaser or its permitted transferees before the proposed issuance of New Securities. The right 26 of first refusal granted hereunder shall terminate if unexercised within 15 Business Days after receipt of the notice described in Section 4.16(b) below. "NEW SECURITIES" shall mean any authorized but unissued shares, and any treasury shares, of capital stock of Company and all rights, options or warrants to purchase capital stock, and securities of any type whatsoever that are, or may become, convertible into capital stock; provided, however, that the term "New Securities" does not include securities issued (i) to employees, directors, consultants and other service providers for the primary purpose of soliciting or retaining their services; (ii) pursuant to an underwritten public offering; (iii) pursuant to the conversion or exercise of convertible or exercisable securities outstanding on the date hereof; (iv) as consideration in connection with a bona fide business acquisition by the Company; (v) to an entity as a component of any business relationship with such entity for purposes of (A) joint venture, technology licensing or development activities, (B) distribution, supply or manufacture of the Company's products or services or (C) any other arrangements involving corporate partners that are primarily for purposes other than raising capital; or (vi) to financial institutions or lessors in connection with commercial credit arrangements, equipment financing or similar transactions; provided, that in the case of the foregoing clauses (i), (iv), (v) and (vi), such arrangements shall have been approved by a majority of the Board of Directors of the Company. Prior to commencing any underwritten public offering of securities, the Company shall consult with Purchaser to determine whether Purchaser desires to participate in such capital raising transaction. (b) If the Company proposes to issue New Securities, it shall give the Purchaser written notice thereof, describing the New Securities, the number thereof to be issued, the purchase price therefor and the terms upon which Company proposes to issue the same. The Purchaser shall have 15 Business Days from the date such notice is given to determine whether to purchase all or any portion of the Purchaser's pro rata share of such New Securities for the purchase price and upon the terms specified in the notice by giving written notice to the Company and stating therein the number of New Securities to be purchased. (c) If the Purchaser has not elected to purchase all of the New Securities proposed to be issued (within the time period for notifying the Company set forth above), then the Company shall have 90 calendar days in which to complete the proposed issuance of the portion of the New Securities not purchased by the Purchaser at a price not less than that contained in the notice previously given to the Purchaser and on terms and conditions not more favorable to the third party than those contained in such notice. If, at the end of such 90-calendar day period, the Company has not completed such issuance of New Securities, the Company shall no longer be permitted to issue such New Securities pursuant to this Section 4.16 without again fully complying with all of the provisions of this Section 4.16. ARTICLE V CONDITIONS TO CLOSING 5.1 The Company's obligation to complete the purchase and sale of the Securities and deliver such stock certificates and Warrants to the Purchaser at the Closing shall be subject to the following conditions, any one or more of which may be waived by the Company (to the extent legally permissible): 27 (a) Payment of Purchase Price. The Company shall have received same-day funds in the full amount of the purchase price for the Securities being purchased hereunder; (b) Representations and Warranties True. The representations and warranties made by the Purchaser shall be true and correct in all material respects as of the Closing, except to the extent such representations and warranties expressly related to any earlier date, in which case such representations and warranties shall be true and correct in all material respects on and as of such earlier date or for changes contemplated by this Agreement; (c) Compliance with Covenants. The Purchaser shall have performed and complied in all material respects with all covenants and agreements contained in this Agreement that are required to be performed or complied with by it on or before the Closing; (d) Certificate. The Purchaser shall have delivered to the Company a certificate executed by an officer of the Purchaser, dated as of the Closing Date, as to the matters set forth in Sections 5.1(b) and 5.1(c) above; (e) Registration Rights Agreement. The Purchaser shall have executed and delivered a Registration Rights Agreement in the form of Exhibit C attached hereto (the "REGISTRATION RIGHTS AGREEMENT"); (f) Lau Technologies Lock-Up Agreement. Lau Technologies shall have executed and delivered a Lock-Up Agreement in the form of Exhibit D attached hereto (the "LAU TECHNOLOGIES LOCK-UP AGREEMENT"); (g) Stockholder Approval. The Company shall have received approval from its stockholders of the transactions contemplated by this Agreement (the "REQUISITE STOCKHOLDER VOTE"); (h) Reverse Stock Split. The Company shall have effected a 1-for-2.5 reverse stock split of its Common Stock which, if required, shall be reflected in the Company's certificate of incorporation to be filed with the Delaware Secretary of State; (i) Third Party Approvals. All material third party consents and approvals required to be obtained for the transactions contemplated hereby shall have been obtained and effective as of the Closing; and (j) Chairman Able to Serve. Mr. LaPenta shall remain able on the Closing Date to serve as Chairman of the Board of the Company. 5.2 The Purchaser's obligation to accept delivery of such stock certificate(s) and to pay for the Securities evidenced thereby shall be subject to the following condition, any one or more of which may be waived by the Purchaser (to the extent legally permissible): (a) Representations and Warranties True. The representations and warranties made by the Company shall be true and correct in all material respects as of the Closing, except to the extent such representations and warranties expressly related to any earlier date, in which case such 28 representations and warranties shall be true and correct in all material respects on and as of such earlier date or for changes contemplated by this Agreement; (b) Compliance with Covenants. The Company shall have performed and complied with in all material respects all covenants and agreements contained in this Agreement that are required to be performed or complied with by it on or before the Closing; (c) Certificate. The Company shall have delivered to the Purchaser a certificate executed by the chief executive officer of the Company, dated the Closing Date, as to the matters set forth in Sections 5.2(a) and 5.2(b) above; (d) Registration Rights Agreement. The Company shall have executed and delivered the Registration Rights Agreement; (e) Lau Technologies Lock-Up Agreement. The Company and Lau Technologies shall have executed and delivered the Lau Technologies Lock-Up Agreement; (f) Shares and Warrants. The Company shall have executed and delivered the Shares and the Warrants to the Purchaser; (g) Reverse Stock Split. The Company shall have effected a 1-for-2.5 reverse stock split of its Common Stock which, if required, shall be reflected in the Company's certificate of incorporation as filed with the Delaware Secretary of State; (h) Litigation. No action, suit, or proceeding shall have been initiated or threatened for the purpose or with the probable or reasonably likely effect of enjoining or preventing the consummation of the transactions contemplated hereby or seeking material damages on account thereof; (i) Stockholder Approval. The Company shall have received the Requisite Stockholder Vote; (j) Board of Directors. Each of the Purchaser Designees shall have been duly nominated and elected to the Board of Directors of the Company, and immediately after the Closing the entire Board of Directors shall consist of no more than twelve (12) board members; (k) HSR Act. All applicable waiting periods, if any, in respect of the transactions contemplated hereby under the HSR Act shall have expired or terminated; (l) Expenses. The Company shall have paid certain costs and expenses of Purchaser incurred prior to Closing in accordance with Section 8.3 hereof; (m) Nasdaq Approvals. The Company shall have provided appropriate notice to Nasdaq with respect to the Shares, such that the Shares are eligible for trading on Nasdaq; (n) Third Party Approvals. All material third party consents and approvals required to be obtained for the transactions contemplated hereby shall have been obtained and effective as of the Closing; 29 (o) Strategic Committee Charter. The Board shall have approved and adopted the Strategic Committee Charter in the form attached hereto as Exhibit E; and (p) Chairman Able to Serve. Mr. LaPenta shall remain able on the Closing Date to serve as Chairman of the Board of the Company. ARTICLE VI TERMINATION 6.1 Termination. This Agreement and the transactions contemplated hereby may be terminated at any time prior to the Closing: (a) by mutual written consent of the Purchaser and the Company; (b) by the Purchaser, if the Company shall have breached or failed to perform in any material respect any of its obligations, covenants or agreements under this Agreement, or if any of the representations and warranties of the Company set forth in this Agreement shall not be true and correct to the extent set forth in Sections 5.2(a) and (b), and such breach, failure or misrepresentation is not cured to the Purchaser's reasonable satisfaction within 10 days after the Purchaser gives the Company written notice identifying such breach, failure or misrepresentation; (c) by the Company, if the Purchaser shall have breached or failed to perform in any material respect any of its obligations, covenants or agreements under this Agreement, or any of the representations and warranties of the Purchaser set forth in this Agreement shall not be true and correct to the extent set forth in Sections 5.1(b) and (c), and such breach, failure or misrepresentation is not cured to the Company's reasonable satisfaction within 10 days after the Company gives the Purchaser written notice identifying such breach, failure or misrepresentation; (d) by the Purchaser, if the conditions set forth in Section 5.2 become incapable of satisfaction; (e) by the Company, if the conditions set forth in Section 5.1 become incapable of satisfaction; (f) by the Purchaser, or the Company, if the Closing shall not have occurred on or before March 31, 2006 or such other date, if any, as the Purchaser and the Company may agree in writing, except to the extent that the failure to consummate the transactions arises out of or results from the material breach of the party seeking to terminate; (g) by the Purchaser, if, at any time prior to the Company Stockholders' Meeting, the Company's Board of Directors shall have failed to make or withdrawn its recommendation to the stockholders that they approve of the sale of the Shares contemplated hereby; or (h) by the Purchaser, if the Company shall have materially breached its obligations under Section 4.7 above. 30 6.2 Effect of Termination. (a) In the event that this Agreement is validly terminated as provided herein, then each of the parties shall be relieved of their duties and obligations arising under this Agreement after the date of such termination and such termination shall be without liability or obligation to Purchaser or the Company, including any liability for a breach of this Agreement prior to the effective date of such termination, except as specifically provided in the remaining provisions of this Section 6.2, which shall be the parties' sole remedy in the event of any termination of this Agreement or if the Closing does not otherwise occur (whether due to a party's breach, the failure of a condition to be satisfied or for any other reason). (b) If this Agreement is terminated under Section 6.1(c), the Purchaser shall pay to the Company, within three Business Days of such termination, (i) the Termination Fee plus (ii) up to $1,000,000 of the actual out-of-pocket expenses of the Company relating to the transactions contemplated hereby. (c) If this Agreement is terminated under Section 6.1(b), (g) or (h), the Company shall pay to the Purchaser, within three Business Days of such termination, (i) the Termination Fee plus (ii) up to $1,000,000 of the actual out-of-pocket expenses of the Purchaser relating to the transactions contemplated hereby. (d) For purposes of this Agreement, the "TERMINATION FEE" shall mean the sum of $4,000,000. ARTICLE VII INDEMNIFICATION 7.1 Survival. The representations, warranties, covenants and agreements contained herein shall survive the Closing and any investigation or finding made by or on behalf of the Purchaser or the Company. No action for a breach of the representations and warranties contained herein shall be brought more than 18 months following the Closing Date, except for claims of which Company has been notified with reasonable specificity by the Purchaser, or claims of which the Purchaser has been notified with reasonable specificity by the Company, within such 18-month period. 7.2 Limits on Claims. The parties' indemnification obligations under this Agreement shall be subject to the following: (a) Neither party shall have any obligation to indemnify or hold harmless the other party unless, and only to the extent that, the aggregate amount of Losses incurred by the such other party exceeds $1,000,000; (b) Neither party shall have any obligation to make indemnification payments hereunder that exceed in the aggregate $15,000,000; (c) Neither party shall have any obligation to indemnify the other party for consequential damages, punitive or exemplary damages, special damages, lost profits, unrealized expectations or other similar items, nor shall 31 any damages be calculated using a "multiplier" or any other similar method having a similar effect. In determining the foregoing thresholds and in otherwise determining the amount of any Losses for which a party is entitled to assert a claim for indemnification hereunder, the amount of any such Losses shall be determined (i) disregarding any materiality, Material Adverse Effect or similar qualifiers contained in this Agreement or any other Transaction Document or in any other certificate or document delivered pursuant to this Agreement, (ii) after deducting therefrom the amount of any insurance proceeds (after giving effect to any applicable deductible or retention), and other third party recoveries actually received by such party in respect of such Losses (which proceeds and recoveries each party agrees to use commercially reasonable efforts to obtain), and (iii) net of the amount of any tax benefit (reduced by the amount of taxes paid or payable by the indemnified party which are attributable to the receipt of the indemnification payment, insurance proceeds or third party recoveries) actually realized related thereto. If an indemnification payment is received by a party, and such party later receives insurance proceeds, other third party recoveries, or actually received any tax benefits, in respect of the related Losses, such party shall immediately pay to the indemnifying party a sum equal to the lesser of (y) the actual amount of such insurance proceeds, or other third party recoveries, and tax benefits (reduced by the amount of taxes paid or payable by the indemnified party which are attributable to the receipt of the indemnification payment, insurance proceeds or third party recoveries) or (z) the actual amount of the indemnification payment previously paid by the indemnifying party with respect to such Losses. 7.3 Indemnification by the Company. From and after the Closing Date, subject to any applicable limitations set forth in Section 7.1 and Section 7.2, the Company shall indemnify and hold the Purchaser and its affiliates, and their respective officers, directors, stockholders, partners, managers, members, employees, agents, and representatives (the "PURCHASER INDEMNIFIED PARTIES") harmless from and against all claims, liabilities, obligations, costs, damages, losses and expenses (including reasonable attorneys fees) of any nature (each a "LOSS" and collectively, "LOSSES") arising out of or relating to any breach or violation of the representations, warranties, covenants or agreements of the Company set forth in this Agreement or any other Transaction Document or in any other certificate or document delivered by the Company pursuant to this Agreement (in each case disregarding for this purpose any materiality, Material Adverse Effect or similar qualifiers contained herein or therein). 7.4 Indemnification by the Purchaser. From and after the Closing Date, subject to any applicable limitations set forth in Section 7.1 and Section 7.2, the Purchaser shall indemnify and hold the Company and its affiliates, and their respective officers, directors, stockholders, partners, managers, members, employees, agents, and representatives (the "COMPANY INDEMNIFIED PARTIES") harmless from and against all Losses arising out of or relating to any breach or violation of the representations, warranties, covenants or agreements of the Purchaser set forth in this Agreement or any other Transaction Document or in any other certificate or document delivered by the Purchaser pursuant to this Agreement (in each case disregarding for this purpose any materiality, material adverse effect or similar qualifiers contained herein or therein). 32 7.5 Procedure for Indemnification. Any party making a claim for indemnification hereunder shall promptly notify the indemnifying party of the claim in writing, describing the claim in reasonable detail, the amount thereof, and the basis therefor; provided, however, that the failure to provide prompt notice shall not relieve the indemnifying party of its indemnification obligations hereunder, except to the extent that the indemnifying party is actually prejudiced by the failure to give such prompt notice. The party from whom indemnification is sought shall respond to each such claim within thirty (30) days of receipt of such notice. No action shall be taken pursuant to the provisions of this Agreement or otherwise by the party seeking indemnification until the later of (i) the expiration of the 30-day response period (unless reasonably necessary to protect the rights of the party seeking indemnification), or (ii) 30 days following the termination of the 30-day response period if a response, received within such 30-day period by the party seeking indemnification, requests an opportunity to cure the matter giving rise to indemnification (and, in such event, the amount of such claim for indemnification shall be reduced to the extent so cured). 7.6 Remedies Exclusive. Subject to Sections 4.1(h) and 4.9 hereof, the remedies provided in this Article VII shall be the exclusive remedies of the parties hereto after the Closing in connection with the transactions contemplated by this Agreement, including without limitation any breach or non-performance of any representation, warranty, covenant or agreement contained herein or in any other Transaction Document or in any other certificate or document delivered pursuant to this Agreement. Subject to Sections 4.1(h) and 4.9 hereof, no party may commence any suit, action or proceeding against any other party hereto with respect to the subject matter of this Agreement, whether in contract, tort or otherwise, except to enforce such party's express rights under this Article VII. 7.7 Right of Set-Off. If the indemnifying party has not satisfied in cash any indemnification obligation owed by them hereunder, the party seeking indemnification may, at its discretion, satisfy the unpaid portion of such obligation by, to the extent permitted by law, setting-off against any amounts due and owing from the party seeking indemnification to the indemnifying party. 7.8 No Double Recovery. Notwithstanding the fact that any party may have the right to assert claims for indemnification under or in respect of more than one provision of this Agreement or another agreement entered into in connection herewith in respect of any fact, event, condition or circumstance, no party shall be entitled to recover the amount of any Losses suffered by such party more than once under all such agreements in respect of such fact, event, condition or circumstance. ARTICLE VIII MISCELLANEOUS 8.1 Broker's Fee. Each of the parties hereto hereby represents that, on the basis of any actions and agreements by it, there are no brokers or finders entitled to compensation in connection with the sale of the Securities to the Purchaser other than USBX Advisory Services and Janney Montgomery Scott LLC. 33 8.2 Assignment. This Agreement and the rights and obligations hereunder shall not be assigned, delegated, or otherwise transferred (whether by operation of law, by contract, or otherwise) without the prior written consent of the other party hereto; provided, however, that Purchaser may, without obtaining the prior written consent of the Company, assign, delegate, or otherwise transfer its rights and obligations hereunder to any Affiliate of Purchaser (provided that in such case Purchaser shall not be relieved of its obligations hereunder). The Company shall execute such acknowledgements of such assignments and collateral assignments in such forms as Purchaser may from time to time reasonably request. Any attempted assignment, delegation, or transfer in violation of this Section 8.2 shall be void and of no force or effect. "AFFILIATE" means, in respect of any Person, any other Person that is directly or indirectly controlling, controlled by, or under common control with such Person or any of its Subsidiaries, and the term "control" (including the terms "controlled by" and "under common control with") means having, directly or indirectly, the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities or by contract or otherwise. 8.3 Expenses. Whether or not the transactions contemplated hereby are consummated, (a) the legal, accounting, financing and due diligence expenses incurred by the Purchaser in connection with such transactions will be borne by the Purchaser and (b) the legal and other costs and expenses incurred by the Company in connection with the transactions contemplated hereby will be borne by the Company; provided however that upon the Closing, the Company shall pay one-half of the Purchaser's actual, out-of-pocket third party fees and expenses up to a maximum of $500,000. 8.4 Notices. All notices, requests, consents and other communications hereunder shall be in writing, shall be mailed by first-class registered or certified airmail, facsimile (with receipt confirmed by telephone) or nationally recognized overnight express courier postage prepaid, and shall be deemed given when so mailed and shall be delivered as addressed as follows: (a) if to the Company, to: Viisage Technology, Inc. 296 Concord Road, Third Floor Billerica, MA 01821 Attention: President with copies to: Viisage Technology, Inc. 296 Concord Road, Third Floor Billerica, MA 01821 Attention: General Counsel Choate, Hall & Stewart LLP Two International Place Boston, MA 02110 Attention: Charles J. Johnson, Esq. 34 or to such other person at such other place as the Company shall designate to the Purchaser in writing; and (b) if to the Purchaser, to: L-1 Investment Partners LLC 177 Broad Street Stamford, CT 06901 Attention: Chairman with a copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Attention: Marita A. Makinen, Esq. or at such other address as may have been furnished to the Company in writing. 8.5 Changes. This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and Purchaser. 8.6 Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement. 8.7 Severability. In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. 8.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware with respect to Sections 4.1, 4.7, 4.8, 4.11 and 4.16 only, and otherwise the laws of the State of New York, without giving effect to the principles of conflicts of laws. 8.9 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties. 8.10 Entire Agreement. This Agreement, the attached exhibits and schedules, the Non-Disclosure Agreement effective as of June 15, 2005, and the other agreements, documents and instruments contemplated hereby and referenced herein contain the entire understanding of the parties, and there are no further or other agreements or understanding, written or oral, in effect between the parties relating to the subject matter hereof unless expressly referred to herein. 35 8.11 Press Releases. Press releases shall be mutually agreed upon by the Company and the Purchaser before they are externally distributed. 8.12 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person (other than the Purchaser Indemnified Parties and the Company Indemnified Parties). [Signatures appear on following page.] 36 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written. COMPANY: VIISAGE TECHNOLOGY, INC. By ------------------------------------------ Name: Title: PURCHASER: L-1 INVESTMENT PARTNERS LLC By ------------------------------------------ Name: Title: 37 EX-10 3 mv12-23ex10_2.txt 10.2 Exhibit 10.2 THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. VIISAGE TECHNOLOGY, INC. COMMON STOCK PURCHASE WARRANT 1,280,000 SHARES Warrant No. L-1 Dated: December 16, 2005 1. Number of Shares Subject to Warrant. FOR VALUE RECEIVED, subject to the terms and conditions herein set forth, Aston Capital Partners L.P. (the "HOLDER") is entitled to purchase from Viisage Technology, Inc., a Delaware corporation (the "COMPANY"), up to One Million Two Hundred and Eighty Thousand (1,280,000) shares (the "WARRANT SHARES") of the Company's common stock, par value $0.001 per share (the "COMMON STOCK"), at a price per share equal to Thirteen Dollars and Seventy-Five Cents ($13.75) per share (the "WARRANT PRICE"), upon exercise of this Common Stock Purchase Warrant (the "WARRANT") pursuant to the provisions set forth herein. This Warrant is issued pursuant to that certain Investment Agreement dated as of October 5, 2005 between the Company and L-1 Investment Partners LLC (which assigned its rights and obligations thereunder to the Holder) (the "INVESTMENT AGREEMENT"). The Holder is subject to certain restrictions and entitled to certain rights as set forth in the Investment Agreement and that certain Registration Rights Agreement of even date herewith by and among the Company and the Holder (the "REGISTRATION RIGHTS AGREEMENT"). 2. Exercisability. (a) Subject to Sections 2(b), 4, 7 and 8, this Warrant shall be exercisable for that number of Warrant Shares determined by multiplying (i) the aggregate number of Warrant Shares issuable hereunder by (ii) a fraction, the numerator of which is the Cumulative Transaction Value (as defined below) and the denominator of which is $125 million. For purposes of this Warrant, the "CUMULATIVE TRANSACTION VALUE" as of any given date shall mean the aggregate Consideration (as defined below) paid to acquisition targets in Qualified Transactions (as defined below) as of such date. The "CONSIDERATION" paid in a Qualified Transaction shall be the total fair market value (on the date of payment) of all consideration paid by the Company to an acquisition target or its security holders in connection with a Qualified Transaction, plus the principal amount of any long-term indebtedness for borrowed money of such ---- acquisition target assumed by the Company. The fair market value of any securities (whether debt or equity) or other property paid to an acquisition target shall be determined under the merger or other acquisition agreement between the Company and the acquisition target, or if not provided for therein, shall be as follows: (i) the value of securities that are freely tradable in an established public market will be determined on the basis of the average closing market prices on the twenty trading days prior to the public announcement of the Qualified Transaction; and (ii) the value of securities that are not freely tradable or have no established public market, and the value of consideration that consists of other property, shall be the fair market value as determined in good faith by the Board of Directors of the Company. A "QUALIFIED TRANSACTION" shall be of the following: (i) a sale, lease, license, exchange, conveyance or other disposition of all or substantially all of an acquisition target's property or business to the Company, it being understood that for purposes of this clause (i), an acquisition target may be a division or line of business of any entity (ii) a merger of an acquisition target into, or its consolidation with, the Company such that the Company is the surviving entity or (iii) any transaction (including a merger or other reorganization) or series of related transactions, in which the Company acquires more than 50% of the voting power of an acquisition target. The Company and the Holder acknowledge and agree that the acquisition by the Company of Integrated Biometric Technology, Inc. on the date hereof is a Qualified Transaction with Consideration of $60 million, such that this Warrant shall be immediately exercisable for 614,400 Warrant Shares on the date hereof as a result of such acquisition. (b) Notwithstanding anything herein to the contrary, immediately prior to a Change of Control, this Warrant shall become fully exercisable with respect to all the Warrant Shares. For purposes of this Warrant, a "CHANGE OF CONTROL" shall mean the consummation of any of the following transactions: (i) the sale, lease, exchange, conveyance or other disposition of all or substantially all of the property or business of the Company, (ii) the merger of the Company into or its consolidation with any other entity in which the Company is not the surviving entity (other than a wholly-owned subsidiary of the Company) or (iii) any transaction (including a merger or other reorganization) or series of related transactions, in which more than 50% of the voting power of the Company is disposed of or (iv) individuals who, immediately after giving effect to the Closing, constitute the Board (the "INCUMBENT DIRECTORS") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to such date, whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board (either by specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director) shall be an Incumbent Director. 3. Adjustment of Exercise Price and Number of Shares. The number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities or property at the time receivable or issuable upon exercise of this Warrant) and the Warrant Price therefor are subject to adjustment upon the occurrence of the following events: 2 (a) Adjustment for Subdivisions, Stock Dividends and Combinations. In case the Company shall at any time subdivide the outstanding shares of the Common Stock or shall issue a stock dividend with respect to the Common Stock, the Warrant Price in effect immediately prior to such subdivision or the issuance of such dividend shall be proportionately decreased, and the number of Warrant Shares for which this Warrant may be exercised immediately prior to such subdivision or the issuance of such dividend shall be proportionately increased. In case the Company shall at any time combine the outstanding shares of the Common Stock, the Warrant Price in effect immediately prior to such combination shall be proportionately increased, and the number of Warrant Shares for which this Warrant may be exercised immediately prior to such combination shall be proportionately decreased. In each of the foregoing cases, the adjustment shall be effective at the close of business on the date of such subdivision, dividend or combination, as the case may be. (b) Reclassifications, Exchanges, Substitutions, In-Kind Distributions. Upon any reclassification, exchange, substitution or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant or upon the payment of a dividend in securities or property other than shares of Common Stock, the Holder shall be entitled to receive, upon exercise of this Warrant, the number and kind of securities and property that Holder would have received if this Warrant had been exercised immediately before the record date for such reclassification, exchange, substitution, or other event or immediately prior to the record date for such dividend. The Company or its successor shall promptly issue to Holder a new warrant for such new securities or other property. The new warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 3 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise or conversion of the new warrant. The provisions of this Section 3(b) shall similarly apply to successive reclassifications, exchanges, substitutions, or other events and successive dividends. (c) Certificate of Adjustment. In each case of an adjustment or readjustment of the Warrant Price, the Company, at its own expense, shall cause its Chief Financial Officer to compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to the Holder. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based. No adjustment of the Warrant Price shall be required to be made unless it would result in an increase or decrease of at least one cent, but any adjustments not made because of this sentence shall be carried forward and taken into account in any subsequent adjustment otherwise required hereunder. (d) Fractional Shares. No fractional shares shall be issuable upon exercise or conversion of the Warrant and the number of shares to be issued shall be rounded down to the nearest whole share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall 3 eliminate such fractional share interest by paying the Holder an amount computed by multiplying the fractional interest by the fair market value of a full share. 4. Termination. This Warrant shall terminate and no longer be exercisable at 5:00 p.m., Boston time, on December 16, 2008. 5. No Shareholder Rights. This Warrant, by itself, as distinguished from any Warrant Shares purchased hereunder, shall not entitle the Holder to any of the rights of a shareholder of the Company. 6. Reservation of Stock. The Company will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise or conversion of this Warrant. Issuance of this Warrant shall constitute full authority to the Company's officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares issuable upon the exercise or conversion of this Warrant. 7. Exercise of Warrant. Subject to Sections 2, 4, and 8, this Warrant may be exercised in whole or in part by the Holder, at any time from and after the date hereof and prior to the termination of this Warrant, by the surrender of this Warrant at the principal office of the Company, together with the Notice of Exercise (attached hereto as Attachment 1) and, in the event the Warrant or the Warrant Shares shall not be registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"), the Investment Representation Letter (attached hereto as Attachment 2), each duly completed and executed, specifying that portion of the Warrant that is to be exercised and accompanied by payment in full of the Warrant Price by wire transfer or certified check with respect to the Warrant Shares being purchased. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the Warrant Shares issuable upon such exercise shall be treated for all purposes as the holder of such shares of record as of the close of business on such date. As promptly as practicable after such date, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of full Warrant Shares issuable upon such exercise. 8. Change of Control Transactions. Prior to a Change of Control, the Company shall send a written notice of the same to the Holder. The Holder shall have twenty (20) days from the date of such notice to exercise this Warrant in accordance with Section 7. If within such twenty (20) day period any portion of this Warrant shall not have been exercised, then, upon the consummation of the Change of Control, the unexercised portion of the Warrant shall be deemed forfeited. 9. Charges, Taxes and Expenses. The Company shall cause the issuance and delivery of certificates for the Warrant Shares to the Holder without charge for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in 4 respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof. 10. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a new warrant (the "NEW WARRANT"), but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable bond or indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. 11. Transfer of Warrant. This Warrant and the Warrant Shares issuable upon exercise of this Warrant shall be freely transferable, subject to compliance with this Section 11, the Investment Agreement, the Registration Rights Agreement and all applicable laws, including, but not limited to the Securities Act. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant or the resale of the Warrant Shares, this Warrant or the Warrant Shares, as applicable, shall not be registered under the Securities Act, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant or the Warrant Shares as the case may be, furnish to the Company a written opinion of counsel that is reasonably acceptable to the Company to the effect that such transfer may be made without registration under the Securities Act (provided that, in the event that the Warrant or Warrant Shares are to be transferred to an affiliate of the Holder, no such written opinion of such Holder's counsel shall be required; provided further that, the Holder and/or the proposed transferee shall provide any documentation and/or back-up certificates reasonably requested by counsel to the Company in order that counsel to the Company may render any opinion as may be required by the Company's transfer agent), (ii) that the Holder or transferee execute and deliver to the Company an investment representation letter in form and substance acceptable to the Company and substantially in the form attached as Attachment 2 hereto and (iii) in the event that the Holder has elected to transfer registration rights to such transferee, the transferee shall agree in writing to be bound by all of the terms and obligations under, and to receive all of the benefits under, the Registration Rights Agreement as a holder of Warrant Shares thereunder. 12. Notices. All notices, requests, consents and other communications hereunder shall be in writing, shall be mailed by first-class registered or certified airmail, facsimile (with receipt confirmed by telephone) or nationally recognized overnight express courier postage prepaid, and shall be deemed given when so mailed and shall be delivered as addressed as follows: (a) if to the Company, to: Viisage Technology, Inc. 296 Concord Road, Third Floor Billerica, MA 01821 Attention: General Counsel 5 with a copy to: Choate, Hall & Stewart LLP Two International Place Boston, MA 02110 Attention: Charles J. Johnson, Esq. or to such other person at such other place as the Company shall designate to the Holder in writing; and (b) if to the Holder, to: c/o L-1 Investment Partners LLC 177 Broad Street Stamford, CT 06901 Attention: Chairman with a copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Attention: Marita A. Makinen, Esq. or at such other address as may have been furnished to the Company in writing. 13. Amendments. Neither this Warrant nor any term hereof may be amended or waived orally, but only by an instrument in writing signed by the Company and the Holder. 14. Governing Law. This Warrant shall be governed by the laws of the State of Delaware, without giving effect to any conflict of laws principles to the contrary. 15. Headings. The headings in this Warrant are for purposes of convenience and reference only, and shall not be deemed to constitute a part hereof. 16. Capitalized Terms. Capitalized terms used in this Warrant but not otherwise defined herein shall have the meanings ascribed to them in the Investment Agreement. [Remainder of page intentionally left blank.] 6 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized representatives as of the day and year first above written. VIISAGE TECHNOLOGY, INC. By: ------------------------------------- Name: Title: [SIGNATURE PAGE TO FIRST WARRANT] ATTACHMENT 1 NOTICE OF EXERCISE TO: VIISAGE TECHNOLOGY, INC. 1. The undersigned hereby elects to purchase ________________ shares of the Common Stock of Viisage Technology, Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of $_____________ in full, together with all applicable transfer taxes. 2. Please issue a certificate or certificates representing said shares of Common Stock, or such other security issuable upon exercise of the Warrant, in the name of the undersigned or in such other name as is specified below: ---------------------------------- (Name) ---------------------------------- (Address) By: ----------------------------------- Name: --------------------------------- Title: -------------------------------- Date: --------------------------------- [NOTICE OF EXERCISE] ATTACHMENT 2 INVESTMENT REPRESENTATION STATEMENT Warrant Shares (as defined in the attached Warrant) of Viisage Technology, Inc. In connection with the purchase of the above-listed securities, the undersigned hereby represents to Viisage Technology, Inc. (the "COMPANY") as follows: (a) The securities to be received upon the exercise of the Warrant (the "WARRANT SHARES") will be acquired for investment for its own account; not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and the undersigned has no present intention of selling, granting participation in or otherwise distributing the same, but subject, nevertheless, to any requirement of law that the disposition of its property shall at all times be within its control. By executing this Statement, the undersigned further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer, or grant participation to such person or to any third person, with respect to any Warrant Shares issuable upon exercise of the Warrant. (b) The undersigned understands that the Warrant Shares issuable upon exercise of the Warrant at the time of issuance may not be registered under the Securities Act, and applicable state securities laws, on the ground that the issuance of such securities is exempt pursuant to Section 4(2) of the Securities Act and state law exemptions relating to offers and sales not by means of a public offering, and that the Company's reliance on such exemptions is predicated on the undersigned's representations set forth herein. (c) The undersigned agrees that until the underlying Warrant Shares are subject to an effective registration statement, in no event will it make a disposition of any Warrant Shares acquired upon the exercise of the Warrant unless and until (i) it shall have notified the Company of the proposed disposition and (ii) it shall have either (A) furnished the Company with an opinion of counsel satisfactory to the Company and Company's counsel to the effect that appropriate action necessary for compliance with the Securities Act and any applicable state securities laws has been taken or an exemption from the registration requirements of the Securities Act and such laws is available, and the proposed transfer will not violate any of said laws, or (B) provided such other evidence reasonable satisfactory to the Company that the proposed transfer will not violate any of said laws. (d) The undersigned acknowledges that an investment in the Company is highly speculative and represents that it is able to fend for itself in the transactions contemplated by this Statement, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investments, and has the ability to bear the economic risks (including the risk of a total loss) of its investment. The undersigned represents that it has had the opportunity to ask questions of the Company concerning the Company's business and assets and to obtain any additional information which it considered necessary to verify the accuracy of or to amplify the Company's disclosures, and has had all questions which have been asked by it satisfactorily answered by the Company. (e) The undersigned acknowledges that the Warrant Shares issuable upon exercise of the Warrant must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available. The undersigned is aware of the provisions of Rule 144 promulgated under the Securities Act which permit limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale occurring not less than one year after a party has purchased and paid for the security to be sold, the sale being through a "broker's transaction" or in transactions directly with a "market makers" (as provided by Rule 144(f)) and the number of shares being sold during any three-month period not exceeding specified limitations. Dated:______________________ By: ----------------------------------- Name: --------------------------------- Title: -------------------------------- [INVESTMENT REPRESENTATION STATEMENT] EX-10 4 mv12-23ex10_3.txt 10.3 Exhibit 10.3 THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. VIISAGE TECHNOLOGY, INC. COMMON STOCK PURCHASE WARRANT 320,000 SHARES Warrant No. L-2 Dated: December 16, 2005 1. Number of Shares Subject to Warrant. FOR VALUE RECEIVED, subject to the terms and conditions herein set forth, Aston Capital Partners L.P. (the "HOLDER") is entitled to purchase from Viisage Technology, Inc., a Delaware corporation (the "COMPANY"), up to Three Hundred and Twenty Thousand (320,000) shares (the "WARRANT SHARES") of the Company's common stock, par value 0.001 per share (the "COMMON STOCK"), at a price per share equal to Thirteen Dollars and Seventy-Five Cents ($13.75) per share (the "WARRANT Price"), upon exercise of this Common Stock Purchase Warrant (the "WARRANT") pursuant to the provisions set forth herein. This Warrant is issued pursuant to that certain Investment Agreement dated as of October 5, 2005 between the Company L-1 Investment Partners LLC (which assigned its rights and obligations thereunder to the Holder) (the "INVESTMENT AGREEMENT"). The Holder is subject to certain restrictions and entitled to certain rights as set forth in the Investment Agreement and that certain Registration Rights Agreement of even date herewith by and among the Company and the Holder (the "REGISTRATION RIGHTS AGREEMENT"). 2. Exercisability. (a) This Warrant shall become exercisable as to (i) Two Hundred and Thirteen Thousand Three Hundred Thirty Three (213,333) Warrant Shares if and when the Company's gross revenues in any four consecutive quarters, as reported on the Company's Form 10-K or 10-Q filed with the Securities and Exchange Commission (the gross revenues for such four-quarter period, the "GROSS REVENUES"), are equal to or greater than Two Hundred Million Dollars ($200,000,000), and (ii) One Hundred Six Thousand Six Hundred Sixty Seven (106,667) Warrant Shares if and when the Gross Revenues are equal to or greater than Three Hundred Million Dollars ($300,000,000), in each instance effective as of the filing date of the Form 10-K or 10-Q with the Securities and Exchange Commission. (b) Notwithstanding anything herein to the contrary, immediately prior to a Change of Control, this Warrant shall become fully exercisable with respect to all the Warrant Shares. For purposes of this Warrant, a "CHANGE OF CONTROL" shall mean the consummation of any of the following transactions: (i) the sale, lease, exchange, conveyance or other disposition of all or substantially all of the property or business of the Company, (ii) the merger of the Company into or its consolidation with any other entity in which the Company is not the surviving entity (other than a wholly-owned subsidiary of the Company), (iii) any transaction (including a merger or other reorganization) or series of related transactions, in which more than 50% of the voting power of the Company is disposed of or (iv) individuals who, immediately after giving effect to the Closing, constitute the Board (the "INCUMBENT DIRECTORS") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to such date, whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board (either by specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director) shall be an Incumbent Director. 3. Adjustment of Exercise Price and Number of Shares. The number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities or property at the time receivable or issuable upon exercise of this Warrant) and the Warrant Price therefor are subject to adjustment upon the occurrence of the following events: (a) Adjustment for Subdivisions, Stock Dividends and Combinations. In case the Company shall at any time subdivide the outstanding shares of the Common Stock or shall issue a stock dividend with respect to the Common Stock, the Warrant Price in effect immediately prior to such subdivision or the issuance of such dividend shall be proportionately decreased, and the number of Warrant Shares for which this Warrant may be exercised immediately prior to such subdivision or the issuance of such dividend shall be proportionately increased. In case the Company shall at any time combine the outstanding shares of the Common Stock, the Warrant Price in effect immediately prior to such combination shall be proportionately increased, and the number of Warrant Shares for which this Warrant may be exercised immediately prior to such combination shall be proportionately decreased. In each of the foregoing cases, the adjustment shall be effective at the close of business on the date of such subdivision, dividend or combination, as the case may be. (b) Reclassifications, Exchanges, Substitutions, In-Kind Distributions. Upon any reclassification, exchange, substitution or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant or upon the payment of a dividend in securities or property other than shares of Common Stock, the Holder shall be entitled to receive, upon exercise of this Warrant, the number and kind of securities and property that Holder would have received if this Warrant had been exercised immediately before the record date for such reclassification, 2 exchange, substitution, or other event or immediately prior to the record date for such dividend. The Company or its successor shall promptly issue to Holder a new warrant for such new securities or other property. The new warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 3 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise or conversion of the new warrant. The provisions of this Section 3(b) shall similarly apply to successive reclassifications, exchanges, substitutions, or other events and successive dividends. (c) Certificate of Adjustment. In each case of an adjustment or readjustment of the Warrant Price, the Company, at its own expense, shall cause its Chief Financial Officer to compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to the Holder. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based. No adjustment of the Warrant Price shall be required to be made unless it would result in an increase or decrease of at least one cent, but any adjustments not made because of this sentence shall be carried forward and taken into account in any subsequent adjustment otherwise required hereunder. (d) Fractional Shares. No fractional shares shall be issuable upon exercise or conversion of the Warrant and the number of shares to be issued shall be rounded down to the nearest whole share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying the Holder an amount computed by multiplying the fractional interest by the fair market value of a full share. 4. Termination. This Warrant shall terminate and no longer be exercisable at 5:00 p.m., Boston time, on December 16, 2008. 5. No Shareholder Rights. This Warrant, by itself, as distinguished from any Warrant Shares purchased hereunder, shall not entitle the Holder to any of the rights of a shareholder of the Company. 6. Reservation of Stock. The Company will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise or conversion of this Warrant. Issuance of this Warrant shall constitute full authority to the Company's officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares issuable upon the exercise or conversion of this Warrant. 7. Exercise of Warrant. Subject to Sections 2, 4, and 8, this Warrant may be exercised in whole or in part by the Holder, at any time from and after the date hereof and prior to the termination of this Warrant, by the surrender of this Warrant at the principal office of the Company, together with the Notice of Exercise (attached hereto as Attachment 1) and, in the event the Warrant or the Warrant Shares shall not be registered under the Securities Act of 1933, as 3 amended (the "SECURITIES ACT"), the Investment Representation Letter (attached hereto as Attachment 2), each duly completed and executed, specifying that portion of the Warrant that is to be exercised and accompanied by payment in full of the Warrant Price by wire transfer or certified check with respect to the Warrant Shares being purchased. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the Warrant Shares issuable upon such exercise shall be treated for all purposes as the holder of such shares of record as of the close of business on such date. As promptly as practicable after such date, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of full Warrant Shares issuable upon such exercise. 8. Change of Control Transactions. Prior to a Change of Control, the Company shall send a written notice of the same to the Holder. The Holder shall have twenty (20) days from the date of such notice to exercise this Warrant in accordance with Section 7. If within such twenty (20) day period any portion of this Warrant shall not have been exercised, then, upon the consummation of the Change of Control, the unexercised portion of the Warrant shall be deemed forfeited. 9. Charges, Taxes and Expenses. The Company shall cause the issuance and delivery of certificates for the Warrant Shares to the Holder without charge for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof. 10. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a new warrant (the "NEW WARRANT"), but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable bond or indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. 11. Transfer of Warrant. This Warrant and the Warrant Shares issuable upon exercise of this Warrant shall be freely transferable, subject to compliance with this Section 11, the Investment Agreement, the Registration Rights Agreement and all applicable laws, including, but not limited to the Securities Act. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant or the resale of the Warrant Shares, this Warrant or the Warrant Shares, as applicable, shall not be registered under the Securities Act, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant or the Warrant Shares as the case may be, furnish to the Company a written opinion of counsel that is 4 reasonably acceptable to the Company to the effect that such transfer may be made without registration under the Securities Act (provided that, in the event that the Warrant or Warrant Shares are to be transferred to an affiliate of the Holder, no such written opinion of such Holder's counsel shall be required; provided further that, the Holder and/or the proposed transferee shall provide any documentation and/or back-up certificates reasonably requested by counsel to the Company in order that counsel to the Company may render any opinion as may be required by the Company's transfer agent), (ii) that the Holder or transferee execute and deliver to the Company an investment representation letter in form and substance acceptable to the Company and substantially in the form attached as Attachment 2 hereto and (iii) in the event that the Holder has elected to transfer registration rights to such transferee, the transferee shall agree in writing to be bound by all of the terms and obligations under, and to receive all of the benefits under, the Registration Rights Agreement as a holder of Warrant Shares thereunder. . 12. Notices. All notices, requests, consents and other communications hereunder shall be in writing, shall be mailed by first-class registered or certified airmail, facsimile (with receipt confirmed by telephone) or nationally recognized overnight express courier postage prepaid, and shall be deemed given when so mailed and shall be delivered as addressed as follows: (a) if to the Company, to: Viisage Technology, Inc. 296 Concord Road, Third Floor Billerica, MA 01821 Attention: General Counsel with a copy to: Choate, Hall & Stewart LLP Two International Place Boston, MA 02110 Attention: Charles J. Johnson, Esq. or to such other person at such other place as the Company shall designate to the Holder in writing; and (b) if to the Holder, to: c/o L-1 Investment Partners LLC 177 Broad Street Stamford, CT 06901 Attention: Chairman 5 with a copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Attention: Marita A. Makinen, Esq. or at such other address as may have been furnished to the Company in writing. 13. Amendments. Neither this Warrant nor any term hereof may be amended or waived orally, but only by an instrument in writing signed by the Company and the Holder. 14. Governing Law. This Warrant shall be governed by the laws of the State of Delaware, without giving effect to any conflict of laws principles to the contrary. 15. Headings. The headings in this Warrant are for purposes of convenience and reference only, and shall not be deemed to constitute a part hereof. 16. Capitalized Terms. Capitalized terms used in this Warrant but not otherwise defined herein shall have the meanings ascribed to them in the Investment Agreement. [Remainder of page intentionally left blank.] 6 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized representatives as of the day and year first above written. VIISAGE TECHNOLOGY, INC. By: ---------------------------------- Name: Title: [SIGNATURE PAGE TO SECOND WARRANT] ATTACHMENT 1 NOTICE OF EXERCISE TO: VIISAGE TECHNOLOGY, INC. 1. The undersigned hereby elects to purchase ________________ shares of the Common Stock of Viisage Technology, Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of $_____________ in full, together with all applicable transfer taxes. 2. Please issue a certificate or certificates representing said shares of Common Stock, or such other security issuable upon exercise of the Warrant, in the name of the undersigned or in such other name as is specified below: --------------------------------------- (Name) --------------------------------------- (Address) By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- Date: ---------------------------------- [NOTICE OF EXERCISE] ATTACHMENT 2 INVESTMENT REPRESENTATION STATEMENT Warrant Shares (as defined in the attached Warrant) of Viisage Technology, Inc. In connection with the purchase of the above-listed securities, the undersigned hereby represents to Viisage Technology, Inc. (the "COMPANY") as follows: (a) The securities to be received upon the exercise of the Warrant (the "WARRANT SHARES") will be acquired for investment for its own account; not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and the undersigned has no present intention of selling, granting participation in or otherwise distributing the same, but subject, nevertheless, to any requirement of law that the disposition of its property shall at all times be within its control. By executing this Statement, the undersigned further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer, or grant participation to such person or to any third person, with respect to any Warrant Shares issuable upon exercise of the Warrant. (b) The undersigned understands that the Warrant Shares issuable upon exercise of the Warrant at the time of issuance may not be registered under the Securities Act, and applicable state securities laws, on the ground that the issuance of such securities is exempt pursuant to Section 4(2) of the Securities Act and state law exemptions relating to offers and sales not by means of a public offering, and that the Company's reliance on such exemptions is predicated on the undersigned's representations set forth herein. (c) The undersigned agrees that until the underlying Warrant Shares are subject to an effective registration statement, in no event will it make a disposition of any Warrant Shares acquired upon the exercise of the Warrant unless and until (i) it shall have notified the Company of the proposed disposition, and (ii) it shall have either (A) furnished the Company with an opinion of counsel satisfactory to the Company and Company's counsel to the effect that appropriate action necessary for compliance with the Securities Act and any applicable state securities laws has been taken or an exemption from the registration requirements of the Securities Act and such laws is available, and the proposed transfer will not violate any of said laws, or (B) provided such other evidence reasonable satisfactory to the Company that the proposed transfer will not violate any of said laws. (d) The undersigned acknowledges that an investment in the Company is highly speculative and represents that it is able to fend for itself in the transactions contemplated by this Statement, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investments, and has the ability to bear the economic risks (including the risk of a total loss) of its investment. The undersigned represents that it has had the opportunity to ask questions of the Company concerning the Company's business and assets and to obtain any additional information which it considered necessary to verify the accuracy of or to amplify the Company's disclosures, and has had all questions which have been asked by it satisfactorily answered by the Company. (e) The undersigned acknowledges that the Warrant Shares issuable upon exercise of the Warrant must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available. The undersigned is aware of the provisions of Rule 144 promulgated under the Securities Act which permit limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale occurring not less than one year after a party has purchased and paid for the security to be sold, the sale being through a "broker's transaction" or in transactions directly with a "market makers" (as provided by Rule 144(f)) and the number of shares being sold during any three-month period not exceeding specified limitations. Dated:______________________ By: ------------------------------- Name: ----------------------------- Title: ---------------------------- [INVESTMENT REPRESENTATION STATEMENT] EX-10 5 mv12-23ex10_4.txt 10.4 Exhibit 10.4 THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. VIISAGE TECHNOLOGY, INC. COMMON STOCK PURCHASE WARRANT 440,000 SHARES Warrant No. L-3 Dated: December 16, 2005 1. Number of Shares Subject to Warrant. FOR VALUE RECEIVED, subject to the terms and conditions herein set forth, L-1 Investment Partners LLC (the "HOLDER") is entitled to purchase from Viisage Technology, Inc., a Delaware corporation (the "COMPANY"), up to Four Hundred and Forty Thousand (440,000) shares (the "WARRANT SHARES") of the Company's common stock, par value $0.001 per share (the "COMMON STOCK"), at a price per share equal to Thirteen Dollars and Seventy-Five Cents ($13.75) per share (the "WARRANT Price"), upon exercise of this Common Stock Purchase Warrant (the "WARRANT") pursuant to the provisions set forth herein. This Warrant is issued in connection with the consummation of the transactions contemplated by the Agreement and Plan of Merger dated as of November 15, 2005, between Integrated Biometric Technology, Inc , Integrated Biometric Technology, LLC ("IBT") and the Company (the "IBT MERGER AGREEMENT"). 2. Exercisability. (a) This Warrant shall become exercisable as to (i) Two Hundred and Eighty Thousand (280,000) Warrant Shares immediately upon issuance of this Warrant; and (ii) One Hundred and Sixty Thousand (160,000) Warrant Shares if and when the earnings before taxes, interest, depreciation and amortization generated by IBT in any of calendar years 2006, 2007 or 2008, exceeds Six Million Dollars ($6,000,000). (b) Notwithstanding anything herein to the contrary, immediately prior to a Change of Control, this Warrant shall become fully exercisable with respect to all the Warrant Shares. For purposes of this Warrant, a "CHANGE OF CONTROL" shall mean the consummation of any of the following transactions: (i) the sale, lease, exchange, conveyance or other disposition of all or substantially all of the property or business of the Company, (ii) the merger of the Company into or its consolidation with any other entity in which the Company is not the surviving entity (other than a wholly-owned subsidiary of the Company), (iii) any transaction (including a merger or other reorganization) or series of related transactions, in which more than 50% of the voting power of the Company is disposed of or (iv) individuals who, immediately after giving effect to the Closing, constitute the Board (the "INCUMBENT DIRECTORS") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to such date, whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board (either by specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director) shall be an Incumbent Director. 3. Adjustment of Exercise Price and Number of Shares. The number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities or property at the time receivable or issuable upon exercise of this Warrant) and the Warrant Price therefor are subject to adjustment upon the occurrence of the following events: (a) Adjustment for Subdivisions, Stock Dividends and Combinations. In case the Company shall at any time subdivide the outstanding shares of the Common Stock or shall issue a stock dividend with respect to the Common Stock, the Warrant Price in effect immediately prior to such subdivision or the issuance of such dividend shall be proportionately decreased, and the number of Warrant Shares for which this Warrant may be exercised immediately prior to such subdivision or the issuance of such dividend shall be proportionately increased. In case the Company shall at any time combine the outstanding shares of the Common Stock, the Warrant Price in effect immediately prior to such combination shall be proportionately increased, and the number of Warrant Shares for which this Warrant may be exercised immediately prior to such combination shall be proportionately decreased. In each of the foregoing cases, the adjustment shall be effective at the close of business on the date of such subdivision, dividend or combination, as the case may be. (b) Reclassifications, Exchanges, Substitutions, In-Kind Distributions. Upon any reclassification, exchange, substitution or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant or upon the payment of a dividend in securities or property other than shares of Common Stock, the Holder shall be entitled to receive, upon exercise of this Warrant, the number and kind of securities and property that Holder would have received if this Warrant had been exercised immediately before the record date for such reclassification, exchange, substitution, or other event or immediately prior to the record date for such dividend. The Company or its successor shall promptly issue to Holder a new warrant for such new securities or other property. The new warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 3 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise or conversion of the new warrant. The provisions of this Section 3(b) shall similarly apply to successive reclassifications, exchanges, substitutions, or other events and successive dividends. (c) Certificate of Adjustment. In each case of an adjustment or readjustment of the Warrant Price, the Company, at its own expense, shall cause its Chief Financial Officer to compute such adjustment or readjustment in 2 accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to the Holder. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based. No adjustment of the Warrant Price shall be required to be made unless it would result in an increase or decrease of at least one cent, but any adjustments not made because of this sentence shall be carried forward and taken into account in any subsequent adjustment otherwise required hereunder. (d) Fractional Shares. No fractional shares shall be issuable upon exercise or conversion of the Warrant and the number of shares to be issued shall be rounded down to the nearest whole share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying the Holder an amount computed by multiplying the fractional interest by the fair market value of a full share. 4. Termination. This Warrant shall terminate and no longer be exercisable with respect to any particular Warrant Shares (the "SUBJECT WARRANT SHARES"), at 5:00 p.m., Boston time, on the date that is three years after the date upon which this Warrant becomes exercisable for the Subject Warrant Shares. 5. No Shareholder Rights. This Warrant, by itself, as distinguished from any Warrant Shares purchased hereunder, shall not entitle the Holder to any of the rights of a shareholder of the Company. 6. Reservation of Stock. The Company will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise or conversion of this Warrant. Issuance of this Warrant shall constitute full authority to the Company's officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares issuable upon the exercise or conversion of this Warrant. 7. Exercise of Warrant. Subject to Sections 2, 4, and 8, this Warrant may be exercised in whole or in part by the Holder, at any time from and after the date hereof and prior to the termination of this Warrant, by the surrender of this Warrant at the principal office of the Company, together with the Notice of Exercise (attached hereto as Attachment 1) and, in the event the Warrant or the Warrant Shares shall not be registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"), the Investment Representation Letter (attached hereto as Attachment 2), each duly completed and executed, specifying that portion of the Warrant that is to be exercised and accompanied by payment in full of the Warrant Price by wire transfer or certified check with respect to the Warrant Shares being purchased. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the Warrant Shares issuable upon such exercise shall be treated for all purposes as the holder of such shares of record as of the close of business on such date. As promptly as practicable after such date, the Company shall issue and 3 deliver to the person or persons entitled to receive the same a certificate or certificates for the number of full Warrant Shares issuable upon such exercise. 8. Change of Control Transactions. Prior to a Change of Control, the Company shall send a written notice of the same to the Holder. The Holder shall have twenty (20) days from the date of such notice to exercise this Warrant in accordance with Section 7. If within such twenty (20) day period any portion of this Warrant shall not have been exercised, then, upon the consummation of the Change of Control, the unexercised portion of the Warrant shall be deemed forfeited. 9. Charges, Taxes and Expenses. The Company shall cause the issuance and delivery of certificates for the Warrant Shares to the Holder without charge for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof. 10. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a new warrant (the "NEW WARRANT"), but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable bond or indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. 11. Transfer of Warrant. This Warrant and the Warrant Shares issuable upon exercise of this Warrant shall be freely transferable, subject to compliance with this Section 11, the Investment Agreement, the Registration Rights Agreement and all applicable laws, including, but not limited to the Securities Act. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant or the resale of the Warrant Shares, this Warrant or the Warrant Shares, as applicable, shall not be registered under the Securities Act, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant or the Warrant Shares as the case may be, furnish to the Company a written opinion of counsel that is reasonably acceptable to the Company to the effect that such transfer may be made without registration under the Securities Act (provided that, in the event that the Warrant or Warrant Shares are to be transferred to an affiliate of the Holder, no such written opinion of such Holder's counsel shall be required; provided further that, the Holder and/or the proposed transferee shall provide any documentation and/or back-up certificates reasonably requested by counsel to the Company in order that counsel to the Company may render any opinion as may be required by the Company's transfer agent), (ii) that the Holder or transferee execute and deliver to the Company an investment representation letter in form and substance acceptable to the Company and substantially in the form attached as Attachment 2 hereto and (iii) 4 in the event that the Holder has elected to transfer registration rights to such transferee, the transferee shall agree in writing to be bound by all of the terms and obligations under, and to receive all of the benefits under, the Registration Rights Agreement as a holder of Warrant Shares thereunder. 12. Notices. All notices, requests, consents and other communications hereunder shall be in writing, shall be mailed by first-class registered or certified airmail, facsimile (with receipt confirmed by telephone) or nationally recognized overnight express courier postage prepaid, and shall be deemed given when so mailed and shall be delivered as addressed as follows: (a) if to the Company, to: Viisage Technology, Inc. 296 Concord Road, Third Floor Billerica, MA 01821 Attention: General Counsel with a copy to: Choate, Hall & Stewart LLP Two International Place Boston, MA 02110 Attention: Charles J. Johnson, Esq. or to such other person at such other place as the Company shall designate to the Holder in writing; and (b) if to the Holder, to: L-1 Investment Partners, LLC 177 Broad Street Stamford, CT 06901 Attention: Chairman with a copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Attention: Marita A. Makinen, Esq. or at such other address as may have been furnished to the Company in writing. 5 13. Amendments. Neither this Warrant nor any term hereof may be amended or waived orally, but only by an instrument in writing signed by the Company and the Holder. 14. Governing Law. This Warrant shall be governed by the laws of the State of Delaware, without giving effect to any conflict of laws principles to the contrary. 15. Headings. The headings in this Warrant are for purposes of convenience and reference only, and shall not be deemed to constitute a part hereof. 16. Capitalized Terms. Capitalized terms used in this Warrant but not otherwise defined herein shall have the meanings ascribed to them in the IBT Merger Agreement. [Remainder of page intentionally left blank.] 6 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized representatives as of the day and year first above written. VIISAGE TECHNOLOGY, INC. By: ------------------------------------ Name: Title: [SIGNATURE PAGE TO ADVISORY WARRANT] ATTACHMENT 1 NOTICE OF EXERCISE TO: VIISAGE TECHNOLOGY, INC. 1. The undersigned hereby elects to purchase ________________ shares of the Common Stock of Viisage Technology, Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of $_____________ in full, together with all applicable transfer taxes. 2. Please issue a certificate or certificates representing said shares of Common Stock, or such other security issuable upon exercise of the Warrant, in the name of the undersigned or in such other name as is specified below: --------------------------------- (Name) --------------------------------- (Address) By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- Date: ------------------------------------ [NOTICE OF EXERCISE] ATTACHMENT 2 INVESTMENT REPRESENTATION STATEMENT Warrant Shares (as defined in the attached Warrant) of Viisage Technology, Inc. In connection with the purchase of the above-listed securities, the undersigned hereby represents to Viisage Technology, Inc. (the "COMPANY") as follows: (a) The securities to be received upon the exercise of the Warrant (the "WARRANT SHARES") will be acquired for investment for its own account; not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and the undersigned has no present intention of selling, granting participation in or otherwise distributing the same, but subject, nevertheless, to any requirement of law that the disposition of its property shall at all times be within its control. By executing this Statement, the undersigned further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer, or grant participation to such person or to any third person, with respect to any Warrant Shares issuable upon exercise of the Warrant. (b) The undersigned understands that the Warrant Shares issuable upon exercise of the Warrant at the time of issuance may not be registered under the Securities Act, and applicable state securities laws, on the ground that the issuance of such securities is exempt pursuant to Section 4(2) of the Securities Act and state law exemptions relating to offers and sales not by means of a public offering, and that the Company's reliance on such exemptions is predicated on the undersigned's representations set forth herein. (c) The undersigned agrees that until the underlying Warrant Shares are subject to an effective registration statement, in no event will it make a disposition of any Warrant Shares acquired upon the exercise of the Warrant unless and until (i) it shall have notified the Company of the proposed disposition and (ii) it shall have either (A) furnished the Company with an opinion of counsel satisfactory to the Company and Company's counsel to the effect that appropriate action necessary for compliance with the Securities Act and any applicable state securities laws has been taken or an exemption from the registration requirements of the Securities Act and such laws is available, and the proposed transfer will not violate any of said laws, or (B) provided such other evidence reasonable satisfactory to the Company that the proposed transfer will not violate any of said laws. (d) The undersigned acknowledges that an investment in the Company is highly speculative and represents that it is able to fend for itself in the transactions contemplated by this Statement, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investments, and has the ability to bear the economic risks (including the risk of a total loss) of its investment. The undersigned represents that it has had the opportunity to ask questions of the Company concerning the Company's business and assets and to obtain any additional information which it considered necessary to verify the accuracy of or to amplify the Company's disclosures, and has had all questions which have been asked by it satisfactorily answered by the Company. (e) The undersigned acknowledges that the Warrant Shares issuable upon exercise of the Warrant must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available. The undersigned is aware of the provisions of Rule 144 promulgated under the Securities Act which permit limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale occurring not less than one year after a party has purchased and paid for the security to be sold, the sale being through a "broker's transaction" or in transactions directly with a "market makers" (as provided by Rule 144(f)) and the number of shares being sold during any three-month period not exceeding specified limitations. Dated:______________________ By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- [INVESTMENT REPRESENTATION STATEMENT] EX-10 6 mv12-23ex10_5.txt 10.5 Exhibit 10.5 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "AGREEMENT") is made and entered into as of December 16, 2005, by and among Viisage Technology, Inc. (the "COMPANY"), a corporation organized under the laws of the State of Delaware, with its principal offices at 296 Concord Road, Third Floor, Billerica, Massachusetts 01821, L-1 Investment Partners LLC, a limited liability company organized under the laws of the state of Delaware, with its principal offices at 177 Broad Street, Stamford, Connecticut 06901 ("L-1") Aston Capital Partners L.P. a limited partnership organized under the laws of the state of Delaware, with its principal offices at 177 Broad Street, Stamford, Connecticut 06901 ("ASTON" collectively with L-1, the "PURCHASER" ). This Agreement is being entered into pursuant to the Investment Agreement dated as of October 5, 2005 between the Company and L-1 (the "INVESTMENT AGREEMENT"). The Company and the Purchaser hereby agree as follows: 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Investment Agreement. As used in this Agreement, the following terms shall have the following meanings: "AFFILIATE" means, with respect to any Person, any other Person that directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings correlative to the foregoing. "BOARD" or "BOARD OF DIRECTORS" means the board of directors of the Company. "BUSINESS DAY" means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in The Commonwealth of Massachusetts generally are authorized or required by law or other government actions to close. "CLOSING DATE" means the date of the closing of the purchase and sale of the Shares pursuant to the Investment Agreement. "COMMISSION" means the Securities and Exchange Commission. "COMMON STOCK" means the Company's common stock, par value $0.001 per share. "COMPANY INDEMNITEES" shall have the meaning set forth in Section 5(b). "EFFECTIVE DATE" means with respect to the Registration Statement the earlier of the 90th day (or the 120th day in the event the Registration Statement is reviewed by the Commission, including, without limitation, any form of "modified" or "limited" review) following the receipt of a written request from the Holders pursuant to Section 2 or the date which is five (5) Business Days after the date on which the Commission informs the Company (i) that the Commission will not review the Registration Statement or (ii) that the Company may request the acceleration of the effectiveness of the Registration Statement and the Company makes such request. "EFFECTIVE PERIOD" shall have the meaning set forth in Section 2. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "FILING DATE" means the 45th day following the receipt by the Company of the written request pursuant to Section 2. "HOLDER" or "HOLDERS" means the holder or holders, as the case may be, from time to time of Registrable Securities. "HOLDER INDEMNITEES" shall have the meaning set forth in Section 5(a). "INDEMNITEES" shall have the meaning set forth in Section 5(c). "PERSON" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "PROCEEDING" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. "PROSPECTUS" means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to such prospectus, including post-effective amendments, and all material incorporated by reference in such prospectus. "REGISTRABLE SECURITIES" means (i) the shares of Common Stock issued to the Purchaser pursuant to the Investment Agreement, (ii) the shares of Common Stock issuable upon exercise of the Warrants, and (iii) any other shares of Common Stock that Purchaser may hereafter acquire, provided, however, that such securities shall no longer be deemed Registrable Securities if (x) such shares have been sold pursuant to a Registration Statement that has been declared effective by the SEC; or (y) such shares are sold in compliance with Rule 144. "REGISTRATION STATEMENT" means any registration statement contemplated by Section 2, including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference in such registration statement. 2 "RULE 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such rule. "RULE 415" means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such rule. "SECURITIES ACT" means the Securities Act of 1933, as amended. "VIOLATION" shall have the meaning set forth in Section 5(a). 2. Request for Resale Registration. If the Company shall receive at any time after one (1) year after the date of this Agreement, a written request from one or more Holders that the Company file a registration statement under the Securities Act of the Registrable Securities then outstanding, then the Company shall prepare and file with the Commission a Registration Statement covering the resale of such Registrable Securities as would permit or facilitate the sale and distribution of all such Registrable Securities in the manner reasonably requested by the Holders; provided that Purchaser shall be entitled to no more than two demand registrations pursuant to this Section 2, and that in any event no more than one demand may be made in any twelve month period. The Registration Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance with the Securities Act and the rules promulgated thereunder). The Company shall (i) not permit any securities other than the Registrable Securities to be included in the Registration Statement and (ii) use its reasonable best efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event prior to the Effective Date, and to keep such Registration Statement continuously effective under the Securities Act until the earlier of (x) the date when all Registrable Securities covered by such Registration Statement have been sold; or (y) the date on which the Registrable Securities may be sold without any restriction pursuant to Rule 144(k) as determined by the counsel to the Company pursuant to a written opinion letter addressed to the Company's transfer agent to such effect (the "EFFECTIVE PERIOD"). 3. Registration Procedures. In connection with the Company's registration obligations hereunder: (a) The Company shall prepare and file with the Commission on or prior to the Filing Date, a Registration Statement on Form S-3 (or if the Company is not then eligible to register for resale the Registrable Securities on Form S-3 such registration shall be on another appropriate form in accordance with the Securities Act and the rules and regulations promulgated thereunder) covering the resale to the public of the Registrable Securities, and use its reasonable best efforts to cause the Registration Statement to become effective and remain effective as provided herein. (b) The Company shall prepare and file with the Commission such amendments, including post-effective amendments, to the Registration Statement as may be necessary to keep the Registration Statement continuously effective as 3 to the applicable Registrable Securities for the Effective Period and prepare and file with the Commission such additional Registration Statements, if necessary, in order to register for resale under the Securities Act all of the Registrable Securities; (i) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; (ii) respond promptly to any comments received from the Commission with respect to the Registration Statement or any amendment thereto and promptly provide the Holders true and complete copies of all correspondence from and to the Commission relating to the Registration Statement; and (iii) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the applicable period in accordance with the intended methods of disposition by the Holders thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented. (c) The Company shall promptly notify the Holders of Registrable Securities (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement is filed; (B) when the Commission notifies the Company whether there will be a "review" of such Registration Statement and whenever the Commission comments in writing on such Registration Statement and (C) with respect to the Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to the Registration Statement or Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (v) of the occurrence of any event that makes any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to the Registration Statement, Prospectus or other documents so that, in the case of the Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) The Company shall use its reasonable best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of, (i) any order suspending the effectiveness of the Registration Statement or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any United States jurisdiction, at the earliest practicable moment. (e) If requested by the Holders of a majority of the Registrable Securities, the Company shall (i) promptly incorporate in a Prospectus supplement or post-effective amendment to the Registration Statement such information as the Company reasonably agrees should be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective 4 amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment. (f) The Company shall furnish to each Holder, without charge and upon request, at least one conformed copy of each Registration Statement and each amendment thereto, including financial statements and schedules, and, to the extent requested by such Person, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission. (g) The Company shall promptly deliver to each Holder, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request; and the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Registrable Securities, the Company shall use its reasonable best efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each such registration or qualification (or exemption therefrom) effective during the Effective Period and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by a Registration Statement; provided, however, the Company shall in no event be required to (x) qualify to do business in any state where it is not then qualified or (y) take any action that would subject it to tax or to the general service of process in any such state where it is not then subject, or (z) comply with state securities or "blue sky" laws of any state for which registration by coordination is unavailable to the Company. (i) The Company shall, in the case of an underwritten offering, furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to Section 2, on the date that such shares of Registrable Securities are delivered to the underwriters for sale pursuant to such registration (1) an opinion, dated such date, of the independent counsel representing Company for the purposes of such registration, addressed to the underwriters, in customary form and covering matters of the type customarily covered in such legal opinions; and (2) a comfort letter dated such date, from the independent certified public accountants of Company, addressed to the underwriters, in a customary form and covering matters of the type customarily covered by such comfort letters and as the underwriters shall reasonably request; (j) The Company shall enter into customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities; and (k) The Company shall cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold pursuant to a Registration Statement, and to enable such 5 Registrable Securities to be in such denominations and registered in such names as any Holder may reasonably request. (l) Upon the occurrence of any event contemplated by Section 3(c)(v), the Company shall promptly prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (m) The Company shall use its reasonable best efforts to cause all Registrable Securities relating to the Registration Statement to be listed on the National Association of Securities Dealers Automatic Quotation System or any other securities exchange, quotation system or market, if any, on which similar securities issued by the Company are then listed or traded as and when required pursuant to the Investment Agreement. (n) The Company may require each selling Holder to furnish to the Company information regarding such Holder and the distribution of such Registrable Securities as is required by law to be disclosed in the Registration Statement, and the Company may exclude from such registration the Registrable Securities of any such Holder who fails to furnish such information within fifteen (15) days after receiving such request. (o) Each Holder covenants and agrees that (i) it will not sell any Registrable Securities under the Registration Statement until it has received copies of the Prospectus as then amended or supplemented as contemplated in Section 3(g) and notice from the Company that such Registration Statement and any post-effective amendments thereto have become effective as contemplated by Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will comply with the prospectus delivery requirements of the Securities Act as applicable to them in connection with sales of Registrable Securities pursuant to the Registration Statement. (p) Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(o), such Holder will forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such Holder's receipt of the copies of the supplemented Prospectus and/or amended Registration Statement contemplated by Section 3(j), or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. (q) If (i) there is material non-public information regarding the Company which the Board reasonably and in good faith determines not to be in the Company's best interest to disclose and which the Company is not otherwise required to disclose, or (ii) there is a significant business opportunity (including, but not limited to, the acquisition or disposition of assets (other than in the ordinary course of business) or any merger, consolidation, tender 6 offer or other similar transaction) available to the Company which the Board reasonably determines not to be in the Company's best interest to disclose, then the Company may postpone or suspend filing or effectiveness of a registration statement for a period not to exceed ninety (90) consecutive days, provided that the Company may not postpone or suspend its obligation under this Section 3(o) for more than one hundred and twenty (120) days in the aggregate during any 12 month period. 4. Registration Expenses. All reasonable fees and expenses incident to the performance of or compliance with this Agreement by the Company (excluding underwriters' discounts and commissions), except as and to the extent specified in this Section 4, shall be borne by the Company whether or not the Registration Statement is filed or becomes effective and whether or not any Registrable Securities are sold pursuant to the Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with the OTC Bulletin Board and each other securities exchange or market on which Registrable Securities are required hereunder to be listed, (B) with respect to filings required to be made with the National Association of Securities Dealers, Inc. and the NASD Regulation, Inc. and (C) in compliance with state securities or blue sky laws, (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is requested by the holders of a majority of the Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement, including, without limitation, the Company's independent public accountants. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. 5. Indemnification. (a) The Company shall indemnify and hold harmless each selling Holder, the officers, directors, partners, agents and employees of each selling Holder, any underwriter (as defined in the Securities Act) for such Holder and each Person, if any, who controls such selling Holder or underwriter within the meaning of the Securities Act or the Exchange Act and their agents (collectively, the "HOLDER INDEMNITEES"), against any losses, claims, damages or liabilities (joint or several) to which they or any of them may become subject under the Securities Act, the Exchange Act or any other federal or state law, rule or regulation, including any amount paid in settlement of any litigation, commenced or threatened, and to reimburse them for any reasonable legal or other expenses incurred by them, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (A) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (B) the 7 omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; or (C) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with any matter relating to the Registration Statement (each, a "VIOLATION"); provided, however, the indemnity agreement contained in this Section 5(a) shall not (i) apply to any loss, claim, damage, liability or action arising out of, or based upon, a Violation which occurs in reliance upon and in conformity with written information furnished by any Holder expressly for use in connection with such registration; or (ii) in the case of a sale directly by a Holder (including a sale of such Registrable Securities through any underwriter retained by such Holder engaging in a distribution solely on behalf of such Holder), inure to the benefit of any Holder Indemnitee to the extent that any such loss, claim, damage, liability or action results from an untrue statement or alleged untrue statement or omission or alleged omission that was contained in a preliminary prospectus and corrected in a final or amended prospectus, and such Holder, having previously been provided with copies of such final or amended prospectus by Company, failed to deliver a copy of the final or amended prospectus at or prior to the confirmation of the sale of the Registrable Securities to the Person asserting any such loss, claim, damage or liability in any case in which such delivery is required by the Securities Act. (b) Each Holder shall indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the Registration Statement, each Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act, each agent and any underwriter for the Company, and any other selling Holder or other stockholder selling securities in such Registration Statement or any of its directors, officers, partners, agents or employees or any Person who controls such selling Holder or such other stockholder or such underwriter (collectively, the "COMPANY INDEMNITEES") against any losses, claims, damages or liabilities (joint or several) to which any Company Indemnitee may become subject under the Securities Act, the Exchange Act or other federal or state law, including any amount paid in settlement of any litigation, commenced or threatened, and to reimburse them for any reasonable legal or other expenses incurred by them, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that (i) such Violation occurs in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration and (ii) only in an amount not exceeding the net proceeds received by such Holder with respect to securities sold pursuant to such Registration Statement; provided, however, that the indemnity agreement contained in this Section 5(b) shall not, in the case of a sale directly by the Company of its securities (including a sale of such securities through any underwriter retained by the Company to engage in a distribution solely on behalf of the Company), inure to the benefit of any Person to the extent that any such loss, claim, damage, liability or action results from an untrue statement or alleged untrue statement or omission or alleged omission that was contained in a preliminary prospectus and corrected in a final or amended prospectus, and the Company failed to deliver a copy of the final or amended prospectus at or prior to the confirmation of the sale of the securities to the Person asserting any such loss, claim, damage or liability in any case in which such delivery is required by the Securities Act. 8 (c) Promptly after receipt by any Company Indemnitee or Holder Indemnitee (collectively, the "INDEMNITEES") under this Section 5 of notice of the commencement of any action (including any governmental action), such Indemnitee will, if a claim in respect thereof is to be made against any indemnifying party under this Section 5, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume and control the defense thereof with counsel mutually satisfactory to the parties; provided, however, that such Indemnitee shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such Indemnitee by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests, as reasonably determined by either party, between such Indemnitee and any other party represented by such counsel in such proceeding. In no event shall the Indemnitees be entitled to more than one firm of counsel at the expense of the indemnifying party. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the Indemnitee under this Section 5 to the extent of such prejudice, but the omission to so deliver written notice to the indemnifying party will not relieve it of any liability that it may have to such Indemnitee otherwise than under this Section 5. If the indemnifying party advises an Indemnitee that it will contest a claim for indemnification hereunder, or fails, within 30 days of receipt of any indemnification notice to notify, in writing, such Indemnitee of its election to defend, settle or compromise, at its sole cost and expense, any action, proceeding or claim (or discontinues its defense at any time after it commences such defense), then the Indemnitee may, at its option, defend, settle or otherwise compromise or pay such action or claim in each case at the indemnifying party's expense. In any event, unless and until the indemnifying party elects in writing to assume and does so assume the defense of any such claim, proceeding or action, the Indemnitee's reasonable costs and expenses arising out of the defense, settlement or compromise of any such action, claim or proceeding shall be losses subject to indemnification hereunder. The Indemnitee shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnitee that relates to such action or claim. The indemnifying party shall keep the Indemnitee fully informed at all times as to the status of the defense or any settlement negotiations with respect thereto. If the indemnifying party elects not to defend any such action or claim, the Indemnitee party shall keep the indemnifying party informed at all times as to the status of the defense; provided, however, that the failure to keep the indemnifying party so informed shall not affect the obligations of the indemnifying party hereunder. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its written consent; provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the written consent of the Indemnitee, consent to entry of any judgment or enter into any settlement that (i) does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnitee of a general written release from all liability with respect to such claim or litigation or (ii) contains an admission of guilt on the part of the Indemnitee. 9 (d) The obligations of the Company and the Holders under this Section 5 shall survive the completion of any offering of Registrable Securities in a Registration Statement whether under Section 2 or otherwise. (e) If the indemnification provided for in this Section 5 is unavailable to a party that would have been an Indemnitee under this Section 5 in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to herein, then each party that would have been an indemnifying party hereunder shall, in lieu of indemnifying such Indemnitee, contribute to the amount paid or payable by such Indemnitee as a result of such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative fault of such indemnifying party, on the one hand, and such Indemnitee, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions or proceedings in respect thereof). The relative fault shall be determined by reference to, among other things, whether the Violation relates to information supplied by such indemnifying party or such Indemnitee and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such Violation. The parties agree that it would not be just and equitable if contribution pursuant to this Section 5(e) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the preceding sentence. The amount paid or payable by a contributing party as a result of the losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to above in this Section 5(e) shall include any legal or other expenses reasonably incurred by such Indemnitee in connection with investigating or defending any such action or claim. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (f) The indemnity and contribution agreements contained herein shall be in addition to (i) any cause of action or similar right of an Indemnitee against an indemnifying party or others and (ii) any liabilities the indemnifying party may be subject to pursuant to applicable law. 6. Rule 144. With a view to making available to the Holders the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration, the Company agrees to use its reasonable best efforts: (a) to file with the SEC in a timely manner all reports and other documents required of the Company under the Exchange Act and the rules and regulations promulgated thereunder; (b) if not required to file such reports and documents referred to in subsection (a) above, to keep publicly available certain information regarding the Company, as contemplated by Rule 144(c)(2) of the Securities Act; and (c) to take all other actions reasonably necessary to enable a Holder to sell the Registrable Securities without registration under the Securities Act within the limitation of the exemption provided by Rule 144. 10 7. Miscellaneous. (a) Remedies. In the event of a breach by the Company or by a Holder, of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (b) Entire Agreement; Amendment. This Agreement and the Investment Agreement contain the entire understanding and agreement of the parties with respect to the matters covered hereby and, except as specifically set forth herein or in the Investment Agreement, neither the Company nor the Purchaser makes any representation, warranty, covenant or undertaking with respect to such matters, and they supersede all prior understandings and agreements with respect to said subject matter, all of which are merged herein. No provision of this Agreement may be waived or amended other than by a written instrument signed by the Company and the Holders of at least a majority of all Registrable Securities then outstanding; provided that any waiver or amendment that adversely affects a Holder without adversely affecting other Holders in a similar manner must be approved in writing by such Holder. Any amendment or waiver effected in accordance with this Section 7(b) shall be binding upon each Holder (and their permitted assigns) and the Company. (c) Notices. All notices, requests, consents and other communications hereunder shall be in writing, shall be mailed by first-class registered or certified airmail, facsimile (with receipt confirmed by telephone) or nationally recognized overnight express courier postage prepaid, and shall be deemed given when so mailed and shall be delivered as addressed as follows: If to the Company: Viisage Technology, Inc. 296 Concord Road, Third Floor Billerica, MA 01821 Attention: General Counsel With a copy to: Choate, Hall & Stewart LLP Two International Place Boston, MA 02110 Attention: Charles J. Johnson, Esq. 11 If to the Purchaser, to: C/O L-1 Investment Partners, LLC 177 Broad Street Stamford, CT 06901 Attention: Chairman With a copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Attention: Marita A. Makinen, Esq. or at such other address as may have been furnished to the Company in writing. Any party hereto may from time to time change its address for notices by giving written notice of such changed address to the other party hereto. (d) Waivers. No waiver by either party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (e) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns and shall inure to the benefit of each Holder and its successors and assigns. The Company may not assign this Agreement or any of its rights or obligations hereunder without the prior written consent of each Holder. The Purchaser may assign its rights hereunder in the manner and to the Persons as permitted herein and under the Investment Agreement. (f) Assignment of Registration Rights. The rights of each Holder hereunder, including the right to have the Company register for resale Registrable Securities in accordance with the terms of this Agreement, shall be assignable by each Holder of all or a portion of the Registrable Securities if: (i) the Holder agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned, (iii) following such transfer or assignment the further disposition of such securities by the transferee or assignees is restricted under the Securities Act and applicable state securities laws, (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this Section, the transferee or assignee agrees in writing with the Company to be bound by all of the provisions of this Agreement, and (v) such transfer shall have been made in 12 accordance with the applicable requirements of the Investment Agreement. The rights to assignment shall apply to the Holders (and to subsequent) successors and assigns. (g) Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof. (h) Termination. This Agreement shall terminate on the earlier of (i) the date on which all remaining Registrable Securities may be sold without restriction pursuant to Rule 144(k) of the Securities Act or (ii) the date when all Registrable Securities have been sold. (i) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law thereof. (j) Severability. The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible. (k) Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (l) Submission to Jurisdiction; Waiver of Jury Trial. Each of the parties (a) submits to the jurisdiction of any state or federal court sitting in the State of New York in any action or proceeding arising out of or relating to this Agreement, (b) agrees that all claims in respect of such action or proceeding may be heard and determined in any such court, and (c) agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Each of the parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. Any party may make service on another party by sending or delivering a copy of the process to the party to be served at the address and in the manner provided for the giving of notices in Section 7(c). Nothing in this Section 7(l), however, shall affect the right of any party to serve legal process in any other manner permitted by law. IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED HEREBY, THE PARTIES HERETO IRREVOCABLY CONSENT TO TRIAL WITHOUT A JURY. [Reminder of page intentionally left blank] 13 IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed by their respective authorized officers as of the date first above written. COMPANY: VIISAGE TECHNOLOGY, INC. By: ------------------------------------------ Name: Title: PURCHASER: L-1 INVESTMENT PARTNERS LLC By: ------------------------------------------ Name: Title: ASTON CAPITAL PARTNERS L.P. By: ASTON CAPITAL PARTNERS GP LLC, as its General Partner By: ------------------------------------------ Name: Title: [SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT] EX-10 7 mv12-23ex10_6.txt 10.6 Exhibit 10.6 JOINT FILING AGREEMENT This will confirm the agreement by and among all the undersigned that the Schedule 13D filed on or about this date and any amendments thereto with respect to beneficial ownership by the undersigned of shares of the common stock, par value $0.001 per share, of Viisage Technology, Inc. is being filed on behalf of each of the undersigned in accordance with Rule 13d-1(k)(1) under the Securities Exchange Act of 1934. 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. Dated: December 23, 2005 ASTON CAPITAL PARTNERS L.P. By: Aston Capital Partners GP LLC, its general partner Name: /s/ James DePalma Title: Partner ASTON CAPITAL PARTNERS GP LLC By: /s/ James DePalma ----------------------------------- Name: James DePalma Title: Partner L-1 INVESTMENT PARTNERS LLC By: /s/ James DePalma ----------------------------------- Name: James DePalma Title: Partner ROBERT V. LAPENTA /s/ Robert V. Lapenta --------------------------------------- JAMES A. DEPALMA /s/ James A. DePalma --------------------------------------- JOSEPH S. PARESI /s/ Joseph S. Paresi --------------------------------------- DONI L. FORDYCE /s/ Doni L. Fordyce --------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----