Exhibit 10.3

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of May 2, 2017,
is by and between BIO-key International, Inc., a Delaware corporation (the
“Company”), and Xanthe Holdings Ltd., a company organized and existing under the
laws of the British Virgin Islands (the “Investor”).

 

RECITALS

 

A.     The Company and the Investor have entered into that certain Common Stock
Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”),
pursuant to which the Company may issue, from time to time, to the Investor up
to $5,000,000 of newly issued shares of the Company’s common stock, $0.0001 par
value (“Common Stock”), as provided for therein.

 

B.     Pursuant to the terms of, and in consideration for the Investor entering
into, the Purchase Agreement, the Company has issued to the Investor the
Commitment Shares (as defined in the Purchase Agreement) in accordance with the
terms of the Purchase Agreement.

 

C.     Pursuant to the terms of, and in consideration for the Investor entering
into, the Purchase Agreement, and to induce the Investor to execute and deliver
the Purchase Agreement, the Company has agreed to provide the Investor with
certain registration rights with respect to the Registrable Securities (as
defined herein) as set forth herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein and in the Purchase
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, intending to be legally bound
hereby, the Company and the Investor hereby agree as follows:

 

1.

Definitions.

 

Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:

 

(a)     “Business Day” means any day other than Saturday, Sunday or any other
day on which commercial banks in New York, New York are authorized or required
by law to remain closed.

 

(b)     “Closing Date” shall mean the date of this Agreement.

 

(c)     “Effective Date” means the date that the applicable Registration
Statement has been declared effective by the SEC.

 

 
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(d)     “Effectiveness Deadline” means (i) with respect to the initial
Registration Statement required to be filed to pursuant to Section 2(a), the
earlier of (A) the 180th calendar day after the date of this Agreement, if such
Registration Statement is subject to review by the SEC, and (B) the 120th
calendar day after the date of this Agreement, if the Company is notified
(orally or in writing, whichever is earlier) by the SEC that such Registration
Statement will not be reviewed and (ii) with respect to any additional
Registration Statements that may be required to be filed by the Company pursuant
to this Agreement, the earlier of (A) the 180th calendar day following the date
on which the Company was required to file such additional Registration
Statement, if such Registration Statement is subject to review by the SEC, and
(B) the 120th calendar day following the date on which the Company was required
to file such additional Registration Statement, if the Company is notified
(orally or in writing, whichever is earlier) by the SEC that such Registration
Statement will not be reviewed.

 

(e)     “Filing Deadline” means (i) with respect to the initial Registration
Statement required to be filed to pursuant to Section 2(a), the 60th calendar
day after the date of this Agreement and (ii) with respect to any additional
Registration Statements that may be required to be filed by the Company pursuant
to this Agreement, the later of (A) the 60th calendar day following the sale of
substantially all of the Registrable Securities included in the initial
Registration Statement or the most recent prior additional Registration
Statement, as applicable, and (B) six months following the Effective Date of the
initial Registration Statement or the most recent prior additional Registration
Statement, as applicable, or such earlier date as permitted by the SEC.

 

(f)     “Person” means any person or entity, whether a natural person, trustee,
corporation, partnership, limited partnership, limited liability company, trust,
unincorporated organization, business association, firm, joint venture,
governmental agency or authority.

 

(g)     “register,” “registered,” and “registration” refer to a registration
effected by preparing and filing one or more Registration Statements in
compliance with the Securities Act and pursuant to Rule 415 and the declaration
of effectiveness of such Registration Statement(s) by the SEC.

 

(h)     “Registrable Securities” means all of (i) the Shares, (ii) the
Commitment Shares, and (iii) any capital stock of the Company issued or issuable
with respect to such Shares or Commitment Shares, including, without limitation,
(1) as a result of any stock split, stock dividend, recapitalization, exchange
or similar event or otherwise and (2) shares of capital stock of the Company
into which the shares of Common Stock are converted or exchanged and shares of
capital stock of a successor entity into which the shares of Common Stock are
converted or exchanged.

 

(i)     “Registration Statement” means a registration statement or registration
statements of the Company filed under the Securities Act covering the resale by
the Investor of Registrable Securities, as such registration statement or
registration statements may be amended and supplemented from time to time
(including pursuant to Rule 462(b) under the Securities Act), including all
documents filed as part thereof or incorporated by reference therein.

 

(j)     “Rule 144” means Rule 144 promulgated by the SEC under the Securities
Act, as such rule may be amended from time to time, or any other similar or
successor rule or regulation of the SEC that may at any time permit the Investor
to sell securities of the Company to the public without registration.

 

 
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(k)     “Rule 415” means Rule 415 promulgated by the SEC under the Securities
Act, as such rule may be amended from time to time, or any other similar or
successor rule or regulation of the SEC providing for offering securities on a
delayed or continuous basis.

 

(l)     “SEC” means the U.S. Securities and Exchange Commission or any successor
entity.

 

2.

Registration.

 

(a)     Mandatory Registration. The Company shall prepare and, as soon as
practicable, but in no event later than the Filing Deadline, file with the SEC
an initial Registration Statement on Form S-1 (or any successor form) covering
the resale by the Investor of (i) all of the Commitment Shares and (ii) the
maximum number of additional Registrable Securities as shall be permitted to be
included thereon in accordance with applicable SEC rules, regulations and
interpretations so as to permit the resale of such Registrable Securities by the
Investor under Rule 415 under the Securities Act at then prevailing market
prices (and not fixed prices). Such initial Registration Statement shall contain
the “Selling Stockholder” and “Plan of Distribution” sections in substantially
the form attached hereto as Exhibit B. The Company shall use its commercially
reasonable efforts to have such initial Registration Statement, and each other
Registration Statement required to be filed pursuant to the terms hereof,
declared effective by the SEC as soon as practicable, but in no event later than
the applicable Effectiveness Deadline.

 

(b)     Legal Counsel. Subject to Section 5 hereof, the Investor shall have the
right to select one legal counsel to review and oversee, solely on its behalf,
any registration pursuant to this Section 2 (“Legal Counsel”), which shall be
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., or such other counsel as
thereafter designated by the Investor. Except as provided under Section 10.1 of
the Purchase Agreement, the Company shall have no obligation to reimburse the
Investor for any and all legal fees and expenses of the Legal Counsel incurred
in connection with the transactions contemplated hereby.

 

(c)     Reserved.

 

(d)     Sufficient Number of Shares Registered. If at any time all Registrable
Securities are not covered by the initial Registration Statement filed pursuant
to Section 2(a) as a result of Section 2(f) or otherwise, the Company shall file
with the SEC one or more additional Registration Statements (on the short form
available therefor, if applicable), so as to cover all of the Registrable
Securities not covered by such initial Registration Statement, in each case, as
soon as practicable (taking into account any Staff position with respect to date
on which the Staff will permit such additional Registration Statement(s) to be
filed with the SEC), but in no event later than the applicable Filing Deadline
for such additional Registration Statement(s). The Company shall use its
commercially reasonable efforts to cause such additional Registration
Statement(s) to become effective as soon as practicable following the filing
thereof with the SEC, but in no event later than the applicable Effectiveness
Deadline for such Registration Statement.

 

 
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(e)     No Inclusion of Other Securities. In no event shall the Company include
any securities other than Registrable Securities on any Registration Statement
pursuant to Section 2(a) or 2(d) without consulting the Investor and Legal
Counsel prior to filing. In connection with any offering involving an
underwriting of shares, the Company shall not be required under this Section 2
or otherwise to include the Registrable Securities of any Investor therein
unless such Investor accepts and agrees to the terms of the underwriting, which
shall be reasonable and customary, as agreed upon between the Company and the
underwriters selected by the Company.

 

(f)     Offering. If the staff of the SEC (the “Staff”) or the SEC seeks to
characterize any offering pursuant to a Registration Statement filed pursuant to
this Agreement as constituting an offering of securities that does not permit
such Registration Statement to become effective and be used for resales by the
Investor on a delayed or continuous basis under Rule 415 at then-prevailing
market prices (and not fixed prices), or if after the filing of the initial
Registration Statement with the SEC pursuant to Section 2(a), the Company is
otherwise required by the Staff or the SEC to reduce the number of Registrable
Securities included in such initial Registration Statement, then the Company
shall reduce the number of Registrable Securities to be included in such initial
Registration Statement (after consultation with the Investor and Legal Counsel
as to the specific Registrable Securities to be removed therefrom) until such
time as the Staff and the SEC shall so permit such Registration Statement to
become effective and be used as aforesaid. Notwithstanding anything in this
Agreement to the contrary, if after giving effect to the actions referred to in
the immediately preceding sentence, the Staff or the SEC does not permit such
Registration Statement to become effective and be used for resales by the
Investor on a delayed or continuous basis under Rule 415 at then-prevailing
market prices (and not fixed prices), the Company shall not request acceleration
of the Effective Date of such Registration Statement, the Company shall promptly
(but in no event later than 48 hours) request the withdrawal of such
Registration Statement pursuant to Rule 477 under the Securities Act, and the
Effectiveness Deadline shall automatically be deemed to have elapsed with
respect to such Registration Statement at such time as the Staff or the SEC has
made a final and non-appealable determination that the SEC will not permit such
Registration Statement to be so utilized (unless prior to such time the Company
has received assurances from the Staff or the SEC that a new Registration
Statement filed by the Company with the SEC promptly thereafter may be so
utilized). In the event of any reduction in Registrable Securities pursuant to
this paragraph, the Company shall file additional Registration Statements in
accordance with Section 2(d) until such time as all Registrable Securities have
been included in Registration Statements that have been declared effective and
the prospectus contained therein is available for use by the Investor.

 

3.

Related Obligations.

 

The Company shall use its commercially reasonable efforts to effect the
registration of the Registrable Securities in accordance with the intended
method of disposition thereof, and, pursuant thereto, the Company shall have the
following obligations:

 

 
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(a)     The Company shall promptly prepare and file with the SEC a Registration
Statement with respect to the Registrable Securities (but in no event later than
the applicable Filing Deadline) and use its commercially reasonable efforts to
cause such Registration Statement to become effective as soon as practicable
after such filing (but in no event later than the applicable Effectiveness
Deadline). Subject to Allowable Grace Periods, the Company shall keep each
Registration Statement effective (and the prospectus contained therein available
for use) pursuant to Rule 415 for resales by the Investor on a delayed or
continuous basis at then-prevailing market prices (and not fixed prices) at all
times until the earlier of (i) the date on which the Investor shall have sold
all of the Registrable Securities covered by such Registration Statement and
(ii) the date of termination of the Purchase Agreement if as of such termination
date the Investor holds no Registrable Securities (the “Registration Period”).
Notwithstanding anything to the contrary contained in this Agreement (but
subject to the provisions of Section 3(q) hereof), the Company shall ensure
that, when filed and at all times while effective, each Registration Statement
(including, without limitation, all amendments and supplements thereto) and the
prospectus (including, without limitation, all amendments and supplements
thereto) used in connection with such Registration Statement shall not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein (in
the case of prospectuses, in the light of the circumstances in which they were
made) not misleading. The Company shall submit to the SEC, within two (2)
Business Days after the date that the Company learns that no review of a
particular Registration Statement will be made by the Staff or that the Staff
has no further comments on a particular Registration Statement (as the case may
be), a request for acceleration of effectiveness of such Registration Statement
to a time and date not later than forty-eight (48) hours after the submission of
such request.

 

(b)     Subject to Section 3(q) of this Agreement, the Company shall prepare and
file with the SEC such amendments (including, without limitation, post-effective
amendments) and supplements to each Registration Statement and the prospectus
used in connection with each such Registration Statement, which prospectus is to
be filed pursuant to Rule 424 promulgated under the Securities Act, as may be
necessary to keep each such Registration Statement effective (and the prospectus
contained therein current and available for use) at all times during the
Registration Period for such Registration Statement, and, during such period,
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities of the Company required to be covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. Without limiting the generality of the foregoing, the Company
covenants and agrees that (i) at or before 8:30 a.m. (New York City time) on the
Trading Day immediately following each Effective Date, the Company shall file
with the SEC in accordance with Rule 424(b) under the Securities Act the final
prospectus to be used in connection with sales pursuant to the applicable
Registration Statement, and (ii) if the transactions contemplated by any Fixed
Request (as defined in the Purchase Agreement) are material to the Company
(individually or collectively with all other prior Fixed Requests, the
consummation of which have not previously been reported in any prospectus
supplement filed with the SEC under Rule 424(b) under the Securities Act or in
any periodic report filed by the Company with the SEC under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), or if otherwise required
under the Securities Act, in each case as reasonably determined by the Company
or the Investor, then, on the first Trading Day immediately following the last
Trading Day of the Pricing Period with respect to such Fixed Request, the
Company shall file with the SEC a prospectus supplement pursuant to Rule 424(b)
under the Securities Act with respect to the applicable Fixed Request(s),
disclosing the total Fixed Amount Requested or the Alternative Fixed Amount
Requested (as applicable) pursuant to such Fixed Request(s), the total number of
Shares that have been (or are to be) issued and sold to the Investor pursuant to
such Fixed Request(s), the total purchase price for the Shares subject to such
Fixed Request(s), the applicable Discount Price(s) for such Shares and the net
proceeds that have been (or are to be) received by the Company from the sale of
such Shares. To the extent not previously disclosed in the prospectus or a
prospectus supplement, the Company shall disclose in its Quarterly Reports on
Form 10-Q and in its Annual Reports on Form 10-K the information described in
the immediately preceding sentence relating to any Fixed Request(s) consummated
during the relevant fiscal quarter. In the case of amendments and supplements to
any Registration Statement on Form S-1 or prospectus related thereto which are
required to be filed pursuant to this Agreement (including, without limitation,
pursuant to this Section 3(b)) by reason of the Company filing a report on Form
8-K, Form 10-Q or Form 10-K or any analogous report under the Exchange Act, the
Company shall have incorporated such report by reference into such Registration
Statement and prospectus, if applicable, or shall file such amendments or
supplements to the Registration Statement or prospectus with the SEC on the same
day on which the Exchange Act report is filed which created the requirement for
the Company to amend or supplement such Registration Statement or prospectus,
for the purpose of including or incorporating such report into such Registration
Statement and prospectus. The Company consents to the use of the prospectus
(including, without limitation, any supplement thereto) included in each
Registration Statement in accordance with the provisions of the Securities Act
and with the securities or “Blue Sky” laws of the jurisdictions in which the
Registrable Securities may be sold by the Investor, in connection with the
resale of the Registrable Securities and for such period of time thereafter as
such prospectus (including, without limitation, any supplement thereto) (or in
lieu thereof, the notice referred to in Rule 173(a) under the Securities Act) is
required by the Securities Act to be delivered in connection with resales of
Registrable Securities.

 

 
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(c)     The Company shall (A) permit Legal Counsel to review and comment upon
(i) each Registration Statement at least five (5) Business Days prior to its
filing with the SEC (or such shorter period as may be agreed to by the Investor
and Legal Counsel) and (ii) all amendments and supplements to each Registration
Statement (including, without limitation, the prospectus contained therein)
(except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, and any similar or successor reports or prospectus
supplements the contents of which is limited to that set forth in such reports)
within a reasonable number of days prior to their filing with the SEC, and (B)
shall reasonably consider any comments of the Investor and Legal Counsel on any
such Registration Statement or amendment or supplement thereto or to any
prospectus contained therein. The Company shall promptly furnish to Legal
Counsel, without charge, (i) electronic copies of any correspondence from the
SEC or the Staff to the Company or its representatives relating to each
Registration Statement (which correspondence shall be redacted to exclude any
material, non-public information regarding the Company or any of its
Subsidiaries), (ii) after the same is prepared and filed with the SEC, one (1)
electronic copy of each Registration Statement and any amendment(s) and
supplement(s) thereto, including, without limitation, financial statements and
schedules, all documents incorporated therein by reference, if requested by the
Investor, and all exhibits and (iii) upon the effectiveness of each Registration
Statement, one (1) electronic copy of the prospectus included in such
Registration Statement and all amendments and supplements thereto.

 

 
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(d)     Without limiting any obligation of the Company under the Purchase
Agreement, the Company shall promptly furnish to the Investor, without charge,
(i) after the same is prepared and filed with the SEC, at least one (1)
electronic copy of each Registration Statement and any amendment(s) and
supplement(s) thereto, including, without limitation, financial statements and
schedules, all documents incorporated therein by reference, if requested by the
Investor, all exhibits and each preliminary prospectus, (ii) upon the
effectiveness of each Registration Statement, one (1) electronic copy of the
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as the Investor may
reasonably request from time to time) and (iii) such other documents, including,
without limitation, copies of any preliminary or final prospectus, as the
Investor may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by the Investor.

 

(e)     The Company shall take such action as is necessary to (i) register and
qualify, unless an exemption from registration and qualification applies, the
resale by the Investor of the Registrable Securities covered by a Registration
Statement under such other securities or “Blue Sky” laws of all applicable
jurisdictions in the United States, (ii) prepare and file in those
jurisdictions, such amendments (including, without limitation, post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the Registration Period,
(iii) take such other actions as may be necessary to maintain such registrations
and qualifications in effect at all times during the Registration Period, and
(iv) take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, the
Company shall not be required in connection therewith or as a condition thereto
to (x) qualify to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(e), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to service of
process in any such jurisdiction. The Company shall promptly notify Legal
Counsel and the Investor of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or “Blue Sky” laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.

 

(f)     The Company shall notify Legal Counsel and the Investor in writing of
the happening of any event, as promptly as practicable after becoming aware of
such event, as a result of which the prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading (provided that in no event shall such notice contain
any material, non-public information regarding the Company or any of its
Subsidiaries), and, subject to Section 3(q), promptly prepare a supplement or
amendment to such Registration Statement and such prospectus contained therein
to correct such untrue statement or omission and deliver one (1) electronic copy
of such supplement or amendment to Legal Counsel and the Investor (or such other
number of copies as Legal Counsel or the Investor may reasonably request). The
Company shall also promptly notify Legal Counsel and the Investor in writing (i)
when a prospectus or any prospectus supplement or post-effective amendment has
been filed, when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be delivered to Legal
Counsel and the Investor by facsimile or e-mail on the same day of such
effectiveness and by overnight mail), and when the Company receives written
notice from the SEC that a Registration Statement or any post-effective
amendment will be reviewed by the SEC, (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, (iii) of the Company’s reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate and
(iv) of the receipt of any request by the SEC or any other federal or state
governmental authority for any additional information relating to the
Registration Statement or any amendment or supplement thereto or any related
prospectus. The Company shall respond as promptly as practicable to any comments
received from the SEC with respect to a Registration Statement or any amendment
thereto. Nothing in this Section 3(f) shall limit any obligation of the Company
under the Purchase Agreement.

 

 
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(g)     The Company shall (i) use its reasonable best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement or the use of any prospectus contained therein, or the
suspension of the qualification, or the loss of an exemption from qualification,
of any of the Registrable Securities for sale in any jurisdiction and, if such
an order or suspension is issued, to obtain the withdrawal of such order or
suspension at the earliest possible time and (ii) notify Legal Counsel and the
Investor of the issuance of such order and the resolution thereof or its receipt
of actual notice of the initiation or threat of any proceeding for such purpose.

 

(h)     Reserved.

 

(i)     The Company shall hold in confidence and not make any disclosure of
information concerning the Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement or is
otherwise required to be disclosed in such Registration Statement pursuant to
the Securities Act, (iii) the release of such information is ordered pursuant to
a subpoena or other final, non-appealable order from a court or governmental
body of competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this Agreement
or any other Transaction Document. The Company agrees that it shall, upon
learning that disclosure of such information concerning the Investor is sought
in or by a court or governmental body of competent jurisdiction or through other
means, give prompt written notice to the Investor and allow the Investor, at the
Investor’s expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.

 

(j)     Without limiting any obligation of the Company under the Purchase
Agreement, the Company shall use its reasonable best efforts either to (i) cause
all of the Registrable Securities covered by each Registration Statement to be
listed on each securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange or
(ii) secure designation and quotation of all of the Registrable Securities
covered by each Registration Statement on another Trading Market, or (iii) if,
despite the Company’s reasonable best efforts to satisfy the preceding clauses
(i) or (ii) the Company is unsuccessful in satisfying the preceding clauses (i)
or (ii), without limiting the generality of the foregoing, to use its reasonable
best efforts to arrange for at least two market makers to register with the
Financial Industry Regulatory Authority (“FINRA”) as such with respect to such
Registrable Securities. In addition, the Company shall cooperate with the
Investor and any Broker-Dealer through which the Investor proposes to sell its
Registrable Securities in effecting a filing with FINRA pursuant to FINRA Rule
5110 as requested by the Investor. The Company shall pay all fees and expenses
in connection with satisfying its obligation under this Section 3(j).

 

 
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(k)     The Company shall cooperate with the Investor and, to the extent
applicable, facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legend, provided the condition in Section 7.2(iii) of
the Purchase Agreement has been satisfied with respect to the Investor’s
purchase of such Registrable Securities) representing the Registrable Securities
to be offered pursuant to a Registration Statement and enable such certificates
to be in such denominations or amounts (as the case may be) as the Investor may
reasonably request from time to time and registered in such names as the
Investor may request. Certificates for Registrable Securities free from all
restrictive legends may be transmitted by the transfer agent to the Investor by
crediting an account at DTC as directed by the Investor.

 

(l)     If requested by the Investor, the Company shall as soon as practicable
after receipt of notice from the Investor and subject to Section 3(q) hereof,
(i) incorporate in a prospectus supplement or post-effective amendment such
information as the Investor reasonably requests to be included therein relating
to the sale and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable Securities
being offered or sold, the purchase price being paid therefor and any other
terms of the offering of the Registrable Securities to be sold in such offering;
(ii) make all required filings of such prospectus supplement or post-effective
amendment after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii) supplement or make
amendments to any Registration Statement or prospectus contained therein if
reasonably requested by the Investor.

 

(m)     The Company shall use its reasonable best efforts to cause the
Registrable Securities covered by a Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.

 

(n)     The Company shall make generally available to its security holders as
soon as practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with, and in
the manner provided by, the provisions of Rule 158 under the Securities Act)
covering a twelve-month period beginning not later than the first day of the
Company’s fiscal quarter next following the applicable Effective Date of each
Registration Statement.

 

(o)     The Company shall otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.

 

(p)     Within one (1) Business Day after each Registration Statement which
covers Registrable Securities is declared effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities (with copies to the Investor)
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as Exhibit A.

 

 
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(q)     Notwithstanding anything to the contrary herein (but subject to the last
sentence of this Section 3(q)), at any time after the Effective Date of a
particular Registration Statement, the Company may delay the disclosure of
material, non-public information concerning the Company or any of its
Subsidiaries the disclosure of which at the time is not, in the good faith
opinion of the Company, in the best interest of the Company and, in the opinion
of counsel to the Company, otherwise required (a “Grace Period”), provided that
the Company shall promptly, but in no event later than 9:30 a.m. (New York City
time) on the second Trading Day immediately prior to the commencement of any
Grace Period (except for such case where it is impossible to provide such
two-Trading Day advance notice, in which case the Company shall provide such
notice as soon as possible), notify the Investor in writing of the (i) existence
of material, non-public information giving rise to a Grace Period (provided that
in each such notice the Company shall not disclose the content of such material,
non-public information to the Investor) and the date on which such Grace Period
will begin and (ii) date on which such Grace Period ends, provided further that
(I) no Grace Period shall exceed 20 consecutive Trading Days and during any
365-day period all such Grace Periods shall not exceed an aggregate of 60
Trading Days; provided, further, that the Company shall not register any
securities for the account of itself or any other stockholder during any such
Grace Period (other than pursuant to a registration statement on Form S-4 or
S-8), (II) the first day of any Grace Period must be at least three Trading Days
(or such shorter period as may be agreed by the parties) after the last day of
any prior Grace Period and (III) no Grace Period may exist during (A) the first
10 consecutive Trading Days after the Effective Date of the particular
Registration Statement or (B) the five-Trading Day period following each
Settlement Date (each, an “Allowable Grace Period”). For purposes of determining
the length of a Grace Period above, such Grace Period shall begin on and include
the date set forth in the notice referred to in clause (i) above, provided that
such notice is received by the Investor not later than 9:30 a.m. (New York City
time) on the second Trading Day immediately prior to such commencement date
(except for such case where it is impossible to provide such two-Trading Day
advance notice, in which case the Company shall provide such notice as soon as
possible) and shall end on and include the later of the date the Investor
receives the notice referred to in clause (ii) above and the date referred to in
such notice. The provisions of Section 3(f) hereof shall not be applicable
during the period of any Allowable Grace Period. Upon expiration of each Grace
Period, the Company shall again be bound by the first sentence of Section 3(f)
with respect to the information giving rise thereto unless such material,
non-public information is no longer applicable. Notwithstanding anything to the
contrary contained in this Section 3(q), the Company shall cause its transfer
agent to deliver unlegended shares of Common Stock to a transferee of the
Investor in accordance with the terms of the Purchase Agreement in connection
with any sale of Registrable Securities with respect to which the Investor has
entered into a contract for sale, and delivered a copy of the prospectus
included as part of the particular Registration Statement to the extent
applicable, prior to the Investor’s receipt of the notice of a Grace Period and
for which the Investor has not yet settled.

 

(r)     The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investor of its Registrable
Securities pursuant to each Registration Statement.

 

 
10

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4.

Obligations of the Investor.

 

(a)     At least five (5) Business Days prior to the first anticipated filing
date of each Registration Statement (or such shorter period to which the parties
agree), the Company shall notify the Investor in writing of the information the
Company requires from the Investor with respect to such Registration Statement.
It shall be a condition precedent to the obligations of the Company to complete
the registration pursuant to this Agreement with respect to the Registrable
Securities of the Investor that the Investor shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it, as
shall be reasonably required to effect and maintain the effectiveness of the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.

 

(b)     The Investor, by its acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of each Registration Statement hereunder, unless
the Investor has notified the Company in writing of the Investor’s election to
exclude all of the Investor’s Registrable Securities from such Registration
Statement.

 

(c)     The Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3(g) or the first
sentence of 3(f), the Investor will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until the Investor’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(g) or the first
sentence of Section 3(f) or receipt of notice that no supplement or amendment is
required. Notwithstanding anything to the contrary in this Section 4(c), the
Company shall cause its transfer agent to deliver unlegended shares of Common
Stock to a transferee of the Investor in accordance with the terms of the
Purchase Agreement in connection with any sale of Registrable Securities with
respect to which the Investor has entered into a contract for sale prior to the
Investor’s receipt of a notice from the Company of the happening of any event of
the kind described in Section 3(g) or the first sentence of Section 3(f) and for
which the Investor has not yet settled.

 

(d)     The Investor covenants and agrees that it will comply with the
prospectus delivery and other requirements of the Securities Act as applicable
to it in connection with sales of Registrable Securities pursuant to a
Registration Statement.

 

5.

Expenses of Registration.

 

All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, FINRA filing fees (if any)
and fees and disbursements of counsel for the Company shall be paid by the
Company.

 

 
11

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6.

Indemnification.

 

(a)     In the event any Registrable Securities are included in any Registration
Statement under this Agreement, to the fullest extent permitted by law, the
Company will, and hereby does, indemnify, hold harmless and defend the Investor,
each of its directors, officers, shareholders, members, partners, employees,
agents, advisors, representatives (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding the lack of such
title or any other title) and each Person, if any, who controls the Investor
within the meaning of the Securities Act or the Exchange Act and each of the
directors, officers, shareholders, members, partners, employees, agents,
advisors, representatives (and any other Persons with a functionally equivalent
role of a Person holding such titles notwithstanding the lack of such title or
any other title) of such controlling Persons (each, an “Investor Party” and
collectively, the “Investor Parties”), against any losses, obligations, claims,
damages, liabilities, contingencies, judgments, fines, penalties, charges, costs
(including, without limitation, court costs, reasonable attorneys’ fees, costs
of defense and investigation), amounts paid in settlement or expenses, joint or
several, (collectively, “Claims”) incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or appeal
taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an Investor Party is or may be a party thereto (“Indemnified
Damages”), to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification of
the offering under the securities or other “Blue Sky” laws of any jurisdiction
in which Registrable Securities are offered (“Blue Sky Filing”), or the omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
prospectus (as amended or supplemented) or in any prospectus supplement or the
omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading (the matters in the foregoing
clauses (i) and (ii) being, collectively, “Violations”). Subject to Section
6(c), the Company shall reimburse the Investor Parties, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim by an Investor Party arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Investor Party for such Investor
Party expressly for use in connection with the preparation of such Registration
Statement, prospectus or prospectus supplement or any such amendment thereof or
supplement thereto; (ii) shall not be available to the Investor to the extent
such Claim is based on a failure of the Investor to deliver or to cause to be
delivered the prospectus (as amended or supplemented) made available by the
Company (to the extent applicable), including, without limitation, a corrected
prospectus, if such prospectus (as amended or supplemented) or corrected
prospectus was timely made available by the Company pursuant to Section 3(d) and
then only if, and to the extent that, following the receipt of the corrected
prospectus no grounds for such Claim would have existed; and (iii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld or delayed. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Investor
Party and shall survive the transfer of any of the Registrable Securities by the
Investor pursuant to Section 9.

 

 
12

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(b)     In connection with any Registration Statement in which the Investor is
participating, the Investor agrees to severally and not jointly indemnify, hold
harmless and defend, to the same extent and in the same manner as is set forth
in Section 6(a), the Company, each of its directors, each of its officers who
signs the Registration Statement and each Person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act (each, an
“Company Party”), against any Claim or Indemnified Damages to which any of them
may become subject, under the Securities Act, the Exchange Act or otherwise,
insofar as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case, to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
relating to the Investor furnished to the Company by the Investor expressly for
use in connection with such Registration Statement, or any violation by Investor
Party of the Plan of Distribution; and, subject to Section 6(c) and the below
provisos in this Section 6(b), the Investor will reimburse a Company Party any
legal or other expenses reasonably incurred by such Company Party in connection
with investigating or defending any such Claim; provided, however, the indemnity
agreement contained in this Section 6(b) and the agreement with respect to
contribution contained in Section 7 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Investor, which consent shall not be unreasonably withheld or
delayed, provided further that the Investor shall be liable under this Section
6(b) for only that amount of a Claim or Indemnified Damages as does not exceed
the net proceeds to the Investor as a result of the applicable sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Company Party and shall survive the transfer of any of the
Registrable Securities by the Investor pursuant to Section 9.

 

 
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(c)     Promptly after receipt by an Investor Party or Company Party (as the
case may be) under this Section 6 of notice of the commencement of any action or
proceeding (including, without limitation, any governmental action or
proceeding) involving a Claim, such Investor Party or Company Party (as the case
may be) shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Investor Party or the Company Party (as the case may
be); provided, however, an Investor Party or Company Party (as the case may be)
shall have the right to retain its own counsel with the fees and expenses of
such counsel to be paid by the indemnifying party if: (i) the indemnifying party
has agreed in writing to pay such fees and expenses; (ii) the indemnifying party
shall have failed promptly to assume the defense of such Claim and to employ
counsel reasonably satisfactory to such Investor Party or Company Party (as the
case may be) in any such Claim; or (iii) the named parties to any such Claim
(including, without limitation, any impleaded parties) include both such
Investor Party or Company Party (as the case may be) and the indemnifying party,
and such Investor Party or such Company Party (as the case may be) shall have
been advised by counsel that a conflict of interest is likely to exist if the
same counsel were to represent such Investor Party or such Company Party and the
indemnifying party (in which case, if such Investor Party or such Company Party
(as the case may be) notifies the indemnifying party in writing that it elects
to employ separate counsel at the expense of the indemnifying party, then the
indemnifying party shall not have the right to assume the defense thereof on
behalf of the indemnified party and such counsel shall be at the expense of the
indemnifying party, provided further that in the case of clause (iii) above the
indemnifying party shall not be responsible for the reasonable fees and expenses
of more than one (1) separate legal counsel for all Investor Parties or Company
Parties (as the case may be). The Company Party or Investor Party (as the case
may be) shall reasonably cooperate 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 Company Party or Investor Party (as the case may be) which
relates to such action or Claim. The indemnifying party shall keep the Company
Party or Investor Party (as the case may be) reasonably apprised at all times as
to the status of the defense or any settlement negotiations with respect
thereto. No indemnifying party shall be liable for any settlement of any action,
claim or proceeding effected without its prior written consent; provided,
however, the indemnifying party shall not unreasonably withhold, delay or
condition its consent. No indemnifying party shall, without the prior written
consent of the Company Party or Investor Party (as the case may be), consent to
entry of any judgment or enter into any settlement or other compromise which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Company Party or Investor Party (as the case may be) of a
release from all liability in respect to such Claim or litigation, and such
settlement shall not include any admission as to fault on the part of the
Company Party. For the avoidance of doubt, the immediately preceding sentence
shall apply to Sections 6(a) and 6(b) hereof. Following indemnification as
provided for hereunder, the indemnifying party shall be subrogated to all rights
of the Company Party or Investor Party (as the case may be) with respect to all
third parties, firms or corporations relating to the matter for which
indemnification has been made. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Investor Party or Company Party (as the case may be) under this Section 6,
except to the extent that the indemnifying party is materially and adversely
prejudiced in its ability to defend such action.

 

(d)     No Person involved in the sale of Registrable Securities who is guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) in connection with such sale shall be entitled to
indemnification from any Person involved in such sale of Registrable Securities
who is not guilty of fraudulent misrepresentation.

 

(e)     The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or Indemnified Damages are incurred;
provided that the Investor shall promptly reimburse the Company for all such
payments to the extent a court of competent jurisdiction determines that any
Investor Party was not entitled to such payments.

 

(f)     The indemnity and contribution agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Company Party or
Investor Party against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.

 

 
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7.

Contribution.

 

To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however: (i) no contribution
shall be made under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 6 of this
Agreement, (ii) no Person involved in the sale of Registrable Securities which
Person is guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) in connection with such sale shall be entitled to
contribution from any Person involved in such sale of Registrable Securities who
was not guilty of fraudulent misrepresentation; and (iii) contribution by any
seller of Registrable Securities shall be limited in amount to the amount of net
proceeds received by such seller from the applicable sale of such Registrable
Securities pursuant to such Registration Statement. Notwithstanding the
provisions of this Section 7, the Investor shall not be required to contribute,
in the aggregate, any amount in excess of the amount by which the net proceeds
actually received by the Investor from the applicable sale of the Registrable
Securities subject to the Claim exceeds the amount of any damages that the
Investor has otherwise been required to pay, or would otherwise be required to
pay under Section 6(b), by reason of such untrue or alleged untrue statement or
omission or alleged omission.

 

8.

Reports Under the Exchange Act.

 

With a view to making available to the Investor the benefits of Rule 144, the
Company agrees to:

 

(a)     use its reasonable best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144;

 

(b)     use its reasonable best efforts to file with the SEC in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Exchange Act so long as the Company remains subject to such requirements
(it being understood that nothing herein shall limit any of the Company’s
obligations under the Purchase Agreement) and the filing of such reports and
other documents is required for the applicable provisions of Rule 144;

 

(c)     furnish to the Investor so long as the Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company, if
true, that it has complied with the reporting, submission and posting
requirements of Rule 144 and the Exchange Act, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company with the SEC if such reports are not publicly available
via EDGAR, and (iii) such other information as may be reasonably requested to
permit the Investor to sell such securities pursuant to Rule 144 without
registration; and

 

(d)     take such additional action as is reasonably requested by the Investor
to enable the Investor to sell the Registrable Securities pursuant to Rule 144,
including, without limitation, delivering all such legal opinions, consents,
certificates, resolutions and instructions to the Company’s Transfer Agent as
may be reasonably requested from time to time by the Investor and otherwise
fully cooperate with Investor and Investor’s broker to effect such sale of
securities pursuant to Rule 144.

 

 
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9.

Assignment of Registration Rights.

 

Neither the Company nor the Investor shall assign this Agreement or any of their
respective rights or obligations hereunder.

 

10.

Amendment or Waiver.

 

No provision of this Agreement may be amended or waived by the parties from and
after the date that is one Trading Day immediately preceding the initial filing
of the Registration Statement with the SEC. Subject to the immediately preceding
sentence, no provision of this Agreement may be (i) amended other than by a
written instrument signed by both parties hereto or (ii) waived other than in a
written instrument signed by the party against whom enforcement of such waiver
is sought. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

 

11.

Miscellaneous.

 

(a)     Solely for purposes of this Agreement, a Person is deemed to be a holder
of Registrable Securities whenever such Person owns or is deemed to own of
record such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more Persons with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from such record owner of such
Registrable Securities.

 

(b)     Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement shall be given in
accordance with Section 10.4 of the Purchase Agreement.

 

(c)     Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof. The Company and the Investor acknowledge
and agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that either
party shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement by the other party and to enforce
specifically the terms and provisions hereof (without the necessity of showing
economic loss and without any bond or other security being required), this being
in addition to any other remedy to which either party may be entitled by law or
equity.

 

 
16

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(d)     All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

 

(e)     The Transaction Documents set forth the entire agreement and
understanding of the parties solely with respect to the subject matter thereof
and supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written, solely with respect
to such matters. There are no promises, undertakings, representations or
warranties by either party relative to subject matter hereof not expressly set
forth in the Transaction Documents. Notwithstanding anything in this Agreement
to the contrary and without implication that the contrary would otherwise be
true, nothing contained in this Agreement shall limit, modify or affect in any
manner whatsoever (i) the conditions precedent to a Fixed Request contained in
Article VII of the Purchase Agreement, including, without limitation, the
condition precedent contained in Section 7.2(iii) thereof or (ii) any of the
Company’s obligations under the Purchase Agreement.

 

(f)     This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors. This Agreement is not for the
benefit of, nor may any provision hereof be enforced by, any Person, other than
the parties hereto, their respective successors and the Persons referred to in
Sections 6 and 7 hereof.

 

(g)     The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof. Unless the context
clearly indicates otherwise, each pronoun herein shall be deemed to include the
masculine, feminine, neuter, singular and plural forms thereof. The terms
“including,” “includes,” “include” and words of like import shall be construed
broadly as if followed by the words “without limitation.” The terms “herein,”
“hereunder,” “hereof” and words of like import refer to this entire Agreement
instead of just the provision in which they are found.

 

(h)     This Agreement may be executed in two or more identical counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party. If any signature is delivered by facsimile transmission or by an
e-mail which contains a portable document format (.pdf) file of an executed
signature page, such signature page shall create a valid and binding obligation
of the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such signature page were an original thereof.

 

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

 

(j)     The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent and no rules of strict
construction will be applied against any party.

 

[signature pages follow]

 

 
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IN WITNESS WHEREOF, Investor and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.

 

 

COMPANY:

 

        BIO-KEY INTERNATIONAL, INC.  

 

 

 

 

 

 

 

 

 

By:

/s/ Cecilia Welch

 

 

 

Name: Cecilia Welch

 

 

 

Title: Chief Financial Officer

 

 

 
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IN WITNESS WHEREOF, Investor and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.

 

 

 

INVESTOR:

 

       

XANTHE HOLDINGS LTD.

 

 

 

 

 

 

 

 

 

 

By:

/s/ Eliyahu Hassett

 

 

Its:

Director

 

  

 
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EXHIBIT A

 

FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT

 

______________________
______________________
______________________
Attention: _____________

 

Re:     BIO-Key International, Inc.

 

Ladies and Gentlemen:

 

We are counsel to BIO-Key International, Inc., a Delaware corporation (the
“Company”), and have represented the Company in connection with that certain
Common Stock Purchase Agreement, dated May 2, 2017 (the “Purchase Agreement”),
entered into by and among the Company and the Investor named therein (the
“Holder”) pursuant to which the Company will issue to the Holder from time to
time shares of the Company’s common stock, $0.0001 par value per share
(the ”Common Stock”). Pursuant to the Purchase Agreement, the Company also has
entered into a Registration Rights Agreement with the Holder (the “Registration
Rights Agreement”) pursuant to which the Company agreed, among other things, to
register the offer and sale of the Registrable Securities (as defined in the
Registration Rights Agreement) under the Securities Act of 1933, as amended (the
“Securities Act”). In connection with the Company’s obligations under the
Registration Rights Agreement, on ____________ ___, 20__, the Company filed a
Registration Statement on Form S-[3][1] (File No. 333-_____________) (the
“Registration Statement”) with the Securities and Exchange Commission (the
“SEC”) relating to the Registrable Securities which names the Holder as an
underwriter and a selling stockholder thereunder.

 

In connection with the foregoing, based solely upon oral advice from the staff
of the SEC, the Registration Statement was declared effective under the
Securities Act on [ENTER DATE OF EFFECTIVENESS], and no stop order suspending
its effectiveness has been issued and no proceedings for that purpose have been
instituted or overtly threatened.

 

This letter shall serve as our standing opinion to you that the shares of Common
Stock are freely transferable by the Holder pursuant to the Registration
Statement, provided the Registration Statement remains effective.

 

Very truly yours,

 

[ISSUER’S COUNSEL]

 

By:_____________________

CC:     [LIST NAMES OF HOLDERS]

 

 
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EXHIBIT B

 

SELLING STOCKHOLDER

 

This prospectus relates to the possible resale from time to time by the selling
stockholder of any or all of the shares of common stock that may be issued by us
to [INVESTOR] under the Purchase Agreement. For additional information regarding
the issuance of common stock covered by this prospectus, see “Prospectus
Summary--Committed Equity Financing With [INVESTOR]” above. We are registering
the shares of common stock pursuant to the provisions of the Registration Rights
Agreement we entered into with [INVESTOR] on _________, 2017 in order to permit
the selling stockholder to offer the shares for resale from time to time. Except
for the transactions contemplated by the Purchase Agreement and the Registration
Rights Agreement, [INVESTOR] has not had any material relationship with us
within the past three years.

 

The table below presents information regarding the selling stockholder and the
shares of common stock that it may offer from time to time under this
prospectus. This table is prepared based on information supplied to us by the
selling stockholder, and reflects holdings as of _________, 20__. As used in
this prospectus, the term “selling stockholder” means [INVESTOR]. The number of
shares in the column “Maximum Number of Shares of Common Stock to be Offered
Pursuant to this Prospectus” represents all of the shares of common stock that
the selling stockholder may offer under this prospectus. The selling stockholder
may sell some, all or none of its shares in this offering. We do not know how
long the selling stockholder will hold the shares before selling them, and we
currently have no agreements, arrangements or understandings with the selling
stockholder regarding the sale of any of the shares.

 

Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated
by the SEC under the Exchange Act, and includes shares of common stock with
respect to which the selling stockholder has voting and investment power. The
percentage of shares of common stock beneficially owned by the selling
stockholder prior to the offering shown in the table below is based on an
aggregate of ____________ shares of our common stock outstanding on ___________,
20__. Because the purchase price of the shares of common stock issuable under
the Purchase Agreement is determined on each settlement date, the number of
shares that may actually be sold by the Company under the Purchase Agreement may
be fewer than the number of shares being offered by this prospectus. The fourth
column assumes the sale of all of the shares offered by the selling stockholder
pursuant to this prospectus.

 

 
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Name of Selling Stockholder

 

Number of Shares of

Common Stock Owned

Prior to Offering

 

Maximum Number of Shares

of Common Stock to be

Offered Pursuant to this

Prospectus

 

Number of Shares of

Common Stock Owned

After Offering

                     

Number

   

Percent

     

Number

   

Percent

                                     

[INVESTOR] (4)

    0       *                    

 

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*     Represents beneficial ownership of less than one percent of the
outstanding shares of our common stock.

 

(1)

This number represents the 55,000 shares of common stock we issued to [INVESTOR]
on May 2, 2017 as Commitment Shares in consideration for entering into the
Purchase Agreement with us. In accordance with Rule 13d-3(d) under the Exchange
Act, we have excluded from the number of shares beneficially owned prior to the
offering all of the shares that [INVESTOR] may be required to purchase under the
Purchase Agreement because the issuance of such shares is solely at our
discretion and is subject to certain conditions, the satisfaction of all of
which are outside of [INVESTOR]’s control, including the registration statement
of which this prospectus is a part becoming and remaining effective.
Furthermore, the maximum amount of each put of common stock to [INVESTOR] under
the Purchase Agreement is subject to certain agreed upon threshold limitations
set forth in the Purchase Agreement, and, if we determine in our sole
discretion, a percentage of the daily trading volume of our common stock during
the Draw Down Period as well. Also, under the terms of the Purchase Agreement,
we may not issue shares of our common stock to [INVESTOR] to the extent that
[INVESTOR] or any of its affiliates would, at any time, beneficially own more
than 9.99% of our outstanding common stock. This beneficial ownership limitation
may not be amended or waived by the parties.

 

(2)

Applicable percentage ownership is based on [______________] shares of our
common stock outstanding as of __________, 20___.

 

(3)

Assumes the sale of all shares being offered pursuant to this prospectus.

 

(4)

The business address of [INVESTOR] is ___________________. [INVESTOR]’s
principal business is that of a private investor. We have been advised that
[INVESTOR] is not a member of the Financial Industry Regulatory Authority, or
FINRA, or an independent broker-dealer, and that neither [INVESTOR] nor any of
its affiliates is an affiliate or an associated person of any FINRA member or
independent broker-dealer. ________ and __________ are the directors of
[INVESTOR] and have sole voting control and investment discretion over
securities owned by [INVESTOR]. The foregoing should not be construed in and of
itself as an admission by Messrs. __________ and _______ as to beneficial
ownership of the securities owned by [INVESTOR].

 

 
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PLAN OF DISTRIBUTION

 

We are registering shares of common stock that may be issued by us from time to
time to [INVESTOR] under the Purchase Agreement to permit the resale of these
shares of common stock after the issuance thereof by the selling stockholder
from time to time after the date of this prospectus. We will not receive any of
the proceeds from the sale by the selling stockholder of the shares of common
stock. We will bear all fees and expenses incident to our obligation to register
the shares of common stock.

 

The selling stockholder may decide not to sell any shares of common stock. The
selling stockholder may sell all or a portion of the shares of common stock
beneficially owned by it and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents, who may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholder and/or the purchasers of the shares of common stock for whom
they may act as agent. In effecting sales, broker-dealers that are engaged by
the selling stockholder may arrange for other broker-dealers to participate.
[INVESTOR] is an “underwriter” within the meaning of the Securities Act. Any
brokers, dealers or agents who participate in the distribution of the shares of
common stock by the selling stockholder may also be deemed to be “underwriters,”
and any profits on the sale of the shares of common stock by them and any
discounts, commissions or concessions received by any such brokers, dealers or
agents may be deemed to be underwriting discounts and commissions under the
Securities Act. [INVESTOR] has advised us that it will use an unaffiliated
broker-dealer to effectuate all resales of our common stock. To our knowledge,
[INVESTOR] has not entered into any agreement, arrangement or understanding with
any particular broker-dealer or market maker with respect to the shares of
common stock offered hereby, nor do we know the identity of the broker-dealers
or market makers that may participate in the resale of the shares. Because
[INVESTOR] is, and any other selling stockholder, broker, dealer or agent may be
deemed to be, an “underwriter” within the meaning of the Securities Act,
[INVESTOR] will (and any other selling stockholder, broker, dealer or agent may)
be subject to the prospectus delivery requirements of the Securities Act and may
be subject to certain statutory liabilities of the Securities Act (including,
without limitation, Sections 11, 12 and 17 thereof) and Rule 10b-5 under the
Exchange Act.

 

The selling stockholder will act independently of us in making decisions with
respect to the timing, manner and size of each sale. The shares of common stock
may be sold in one or more transactions at fixed prices, at prevailing market
prices at the time of the sale, at varying prices determined at the time of
sale, or at negotiated prices. These sales may be effected in transactions,
which may involve crosses or block transactions, pursuant to one or more of the
following methods:

 

 

●

on any national securities exchange or quotation service on which the securities
may be listed or quoted at the time of sale;

 

 

●

in the over-the-counter market in accordance with the rules of such market;

 

 
24

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●

in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;

 

 

●

through the writing or settlement of options, whether such options are listed on
an options exchange or otherwise;

 

 

●

ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;

 

 

●

block trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to facilitate
the transaction;

 

 

●

purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;

 

 

●

an exchange distribution in accordance with the rules of the applicable
exchange;

 

 

●

privately negotiated transactions;

 

 

●

broker-dealers may agree with the selling stockholder to sell a specified number
of such shares at a stipulated price per share;

 

 

●

a combination of any such methods of sale; and

 

 

●

any other method permitted pursuant to applicable law.

 

In addition, the selling stockholder may transfer the shares of common stock by
other means not described in this prospectus.

 

Any broker-dealer participating in such transactions as agent may receive
commissions from the selling stockholder (and, if they act as agent for the
purchaser of such shares, from such purchaser). [INVESTOR] has informed us that
each such broker-dealer will receive commissions from [INVESTOR] which will not
exceed customary brokerage commissions. Broker-dealers may agree with the
selling stockholder to sell a specified number of shares at a stipulated price
per share, and, to the extent such a broker-dealer is unable to do so acting as
agent for the selling stockholder, to purchase as principal any unsold shares at
the price required to fulfill the broker-dealer commitment to the selling
stockholder. Broker-dealers who acquire shares as principal may thereafter
resell such shares from time to time in one or more transactions (which may
involve crosses and block transactions and which may involve sales to and
through other broker-dealers, including transactions of the nature described
above and pursuant to the one or more of the methods described above) at fixed
prices, at prevailing market prices at the time of the sale, at varying prices
determined at the time of sale, or at negotiated prices, and in connection with
such resales may pay to or receive from the purchasers of such shares
commissions computed as described above. To the extent required under the
Securities Act, an amendment to this prospectus or a supplemental prospectus
will be filed, disclosing:

 

 
25

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●

the name of any such broker-dealers;

 

 

●

the number of shares involved;

 

 

●

the price at which such shares are to be sold;

 

 

●

the commission paid or discounts or concessions allowed to such broker-dealers,
where applicable;

 

 

●

that such broker-dealers did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus, as
supplemented; and

 

 

●

other facts material to the transaction.

 

[INVESTOR] has informed us that it does not have any written or oral agreement
or understanding, directly or indirectly, with any person to distribute the
common stock.

 

Under the securities laws of some states, the shares of common stock may be sold
in such states only through registered or licensed brokers or dealers. In
addition, in some states the shares of common stock may not be sold unless such
shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with.

 

There can be no assurance that the selling stockholder will sell any or all of
the shares of common stock registered pursuant to the registration statement, of
which this prospectus forms a part.

 

Underwriters and purchasers that are deemed underwriters under the Securities
Act may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock, including the entry of stabilizing bids or syndicate
covering transactions or the imposition of penalty bids. The selling stockholder
and any other person participating in the sale or distribution of the shares of
common stock will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder (including, without limitation, Regulation
M of the Exchange Act), which may restrict certain activities of, and limit the
timing of purchases and sales of any of the shares of common stock by, the
selling stockholder and any other participating person. To the extent
applicable, Regulation M may also restrict the ability of any person engaged in
the distribution of the shares of common stock to engage in market-making and
certain other activities with respect to the shares of common stock. In
addition, the anti-manipulation rules under the Exchange Act may apply to sales
of the shares of common stock in the market. All of the foregoing may affect the
marketability of the shares of common stock and the ability of any person or
entity to engage in market-making activities with respect to the shares of
common stock.

 

 
26

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We have agreed to pay all expenses of the registration of the shares of common
stock pursuant to the registration rights agreement, estimated to be $[     ] in
total, including, without limitation, Securities and Exchange Commission filing
fees and expenses of compliance with state securities or “Blue Sky” laws;
provided, however, [INVESTOR] will pay all selling commissions, concessions and
discounts, and other amounts payable to underwriters, dealers or agents, if any,
as well as transfer taxes and certain other expenses associated with the sale of
the shares of common stock. We have agreed to indemnify [INVESTOR] and certain
other persons against certain liabilities in connection with the offering of
shares of common stock offered hereby, including liabilities arising under the
Securities Act or, if such indemnity is unavailable, to contribute amounts
required to be paid in respect of such liabilities. [INVESTOR] has agreed to
indemnify us against liabilities under the Securities Act that may arise from
any written information furnished to us by [INVESTOR] specifically for use in
this prospectus or, if such indemnity is unavailable, to contribute amounts
required to be paid in respect of such liabilities.

 

At any time a particular offer of the shares of common stock is made by the
selling stockholder, a revised prospectus or prospectus supplement, if required,
will be distributed. Such prospectus supplement or post-effective amendment will
be filed with the Securities and Exchange Commission to reflect the disclosure
of any required additional information with respect to the distribution of the
shares of common stock. We may suspend the sale of shares by the selling
stockholder pursuant to this prospectus for certain periods of time for certain
reasons, including if the prospectus is required to be supplemented or amended
to include additional material information.

 

 

27