Exhibit 10.2

 

Execution Version

 

 

COMMON STOCK PURCHASE AGREEMENT

 

Dated as of May 2, 2017

 

by and between

 

BIO-KEY INTERNATIONAL, INC.

 

and

 

XANTHE HOLDINGS LTD.

 

 

 

 

 

--------------------------------------------------------------------------------

 

 

Table of Contents

 

Page

 

Article I

DEFINITIONS

1

     

Article II

PURCHASE AND SALE OF COMMON STOCK

1

Section 2.1.

Purchase and Sale of Stock

1

Section 2.2.

Closing Date; Settlement Dates

2

Section 2.3.

Initial Public Announcements and Required Filings

2

     

Article III

FIXED REQUEST TERMS

3

Section 3.1.

Fixed Request Notice

3

Section 3.2.

Fixed Requests

4

Section 3.3.

Share Calculation

5

Section 3.4.

Limitation of Fixed Requests

5

Section 3.5.

Reduction of Commitment

5

Section 3.6.

Below Threshold Price

6

Section 3.7.

Settlement

6

Section 3.8.

Reduction of Pricing Period; End of Pricing Period If Alternative Fixed Amount
Requested

7

Section 3.9.

Failure to Deliver Shares

8

Section 3.10.

Certain Limitations

9

Section 3.11.

Blackout Periods

10

     

Article IV

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR

10

Section 4.1.

Organization and Standing of the Investor

10

Section 4.2.

Authorization and Power

10

Section 4.3.

No Conflicts

11

Section 4.4.

Investment Purpose

11

Section 4.5.

Accredited Investor Status

11

Section 4.6.

Reliance on Exemptions

11

Section 4.7.

Information

12

Section 4.8.

No Governmental Review

12

Section 4.9.

No General Solicitation

12

Section 4.10.

Not an Affiliate

12

Section 4.11.

Statutory Underwriter Status

12

Section 4.12.

Resales of Securities

13

     

Article V

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY

13

Section 5.1.

Organization, Good Standing and Power

13

Section 5.2.

Authorization, Enforcement

13

 

 
i

--------------------------------------------------------------------------------

 

 

Section 5.3.

Capitalization

14

Section 5.4.

Issuance of Securities

14

Section 5.5.

No Conflicts

15

Section 5.6.

Commission Documents, Financial Statements

15

Section 5.7.

Subsidiaries

17

Section 5.8.

No Material Adverse Effect

17

Section 5.9.

No Undisclosed Liabilities

17

Section 5.10.

No Undisclosed Events or Circumstances

17

Section 5.11.

Indebtedness; Solvency

18

Section 5.12.

Title To Assets

18

Section 5.13.

Actions Pending

18

Section 5.14.

Compliance With Law

19

Section 5.15.

Certain Fees

19

Section 5.16.

Disclosure

19

Section 5.17.

Operation of Business

19

Section 5.18.

Environmental Compliance

20

Section 5.19.

Material Agreements

21

Section 5.20.

Transactions With Affiliates

21

Section 5.21.

Employees

21

Section 5.22.

Use of Proceeds

21

Section 5.23.

Investment Company Act Status

22

Section 5.24.

ERISA

22

Section 5.25.

Taxes

22

Section 5.26.

Insurance

22

Section 5.27.

U.S. Real Property Holding Corporation

23

Section 5.28.

Exemption from Registration; Valid Issuances

23

Section 5.29.

No General Solicitation or Advertising

23

Section 5.30.

No Integrated Offering

23

Section 5.31.

Dilutive Effect

23

Section 5.32.

Manipulation of Price

24

Section 5.33.

Securities Act

24

Section 5.34.

Listing and Maintenance Requirements; DTC Eligibility

24

Section 5.35.

Application of Takeover Protections

24

Section 5.36.

Foreign Corrupt Practices Act

25

Section 5.37.

Money Laundering Laws

25

Section 5.38.

OFAC

25

Section 5.39.

No Disqualification Events

25

Section 5.40.

Acknowledgement Regarding Investor’s Acquisition of Securities

26

     

Article VI

ADDITIONAL COVENANTS

26

Section 6.1.

Securities Compliance

26

Section 6.2.

Reservation of Common Stock

26

Section 6.3.

Registration and Listing

27

Section 6.4.

Compliance with Laws

27

Section 6.5.

Keeping of Records and Books of Account; Due Diligence.

27

 

 
ii

--------------------------------------------------------------------------------

 

 

Section 6.6.

Limitations on Holdings and Issuances

28

Section 6.7.

Other Agreements and Alternate Transactions

28

Section 6.8.

Corporate Existence

30

Section 6.9.

Fundamental Transaction

31

Section 6.10.

Delivery of Registration Statement and Prospectus; Subsequent Changes

31

Section 6.11.

Amendments to the Registration Statement; Prospectus Supplements

31

Section 6.12.

Stop Orders

32

Section 6.13.

Selling Restrictions

33

Section 6.14.

Effective Registration Statement

33

Section 6.15.

Blue Sky

33

Section 6.16.

Non-Public Information

33

Section 6.17.

Broker/Dealer

34

Section 6.18.

Disclosure Schedule

34

Section 6.19.

Bring Down Opinions

34

     

Article VII

CONDITIONS TO CLOSING AND CONDITIONS TO THE SALE AND PURCHASE OF THE SHARES

35

Section 7.1.

Conditions Precedent to Closing

35

Section 7.2.

Conditions Precedent to a Fixed Request

36

     

Article VIII

TERMINATION

39

Section 8.1.

Termination

39

Section 8.2.

Other Termination

39

Section 8.3.

Effect of Termination

40

     

Article IX

INDEMNIFICATION

41

Section 9.1.

Indemnification of Investor

41

Section 9.2.

Indemnification Procedures

42

     

Article X

MISCELLANEOUS

43

Section 10.1.

Fees and Expenses; Commitment Shares

43

Section 10.2.

Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial

45

Section 10.3.

Entire Agreement; Amendment

46

Section 10.4.

Notices

46

Section 10.5.

Waivers

47

Section 10.6.

Headings

47

Section 10.7.

Construction

47

Section 10.8.

Binding Effect

48

Section 10.9.

No Third Party Beneficiaries

48

Section 10.10.

Governing Law

48

Section 10.11.

Survival

48

Section 10.12.

Counterparts

48

Section 10.13.

Publicity

48

Section 10.14.

Severability

49

Section 10.15.

Further Assurances

49

 

Annex I. Definitions

 

 
iii

--------------------------------------------------------------------------------

 

 

COMMON STOCK PURCHASE AGREEMENT

 

This COMMON STOCK PURCHASE AGREEMENT is made and entered into as of May 2, 2017
(this “Agreement”), by and between Xanthe Holdings Ltd., a company organized and
existing under the laws of the British Virgin Islands (together with its
investment managers and investment advisors, the “Investor”), and BIO-key
International, Inc., a corporation organized and existing under the laws of the
State of Delaware (the “Company”).

 

RECiTALS

 

WHEREAS, the parties desire that, upon the terms and subject to the conditions
and limitations set forth herein, the Company may issue and sell to the
Investor, from time to time as provided herein, and the Investor shall purchase
from the Company, up to the lesser of (i) $5,000,000 worth of newly issued
shares of the Company’s common stock, $0.0001 par value (“Common Stock”), and
(ii) the Exchange Cap;

 

WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(a)(2) of the Securities Act (“Section 4(a)(2)”) and Rule 506 of
Regulation D promulgated by the Commission under the Securities Act
(“Regulation D”), and upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any or
all of the investments in Common Stock to be made hereunder;

 

WHEREAS, the parties hereto are concurrently entering into a Registration Rights
Agreement in the form of Exhibit A hereto (the “Registration Rights Agreement”),
pursuant to which the Company shall register the Registrable Securities (as
defined in the Registration Rights Agreement), upon the terms and subject to the
conditions set forth therein; and

 

WHEREAS, in consideration for the Investor’s execution and delivery of this
Agreement, the Company is concurrently causing its transfer agent to issue to
the Investor the Commitment Shares, upon the terms and subject to the conditions
set forth in this Agreement;

 

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree
as follows:

 

ARTICLE I
DEFINITIONS

 

Capitalized terms used in this Agreement shall have the meanings ascribed to
such terms in Annex I hereto, and hereby made a part hereof, or as otherwise set
forth in this Agreement.

 

ARTICLE II
PURCHASE AND SALE OF COMMON STOCK

 

Section 2.1.     Purchase and Sale of Stock. Upon the terms and subject to the
conditions of this Agreement, during the Investment Period, the Company in its
discretion may issue and sell to the Investor, and the Investor shall purchase
from the Company, up to the lesser of (i) $5,000,000 (the “Total Commitment”)
worth of duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock (based on the prices actually paid by the Investor to the Company
for Shares) and (ii) the Exchange Cap (the “Aggregate Limit”), by the delivery
to the Investor of Fixed Request Notices as provided in Article III hereof.

 

 

--------------------------------------------------------------------------------

 

 

Section 2.2.     Closing Date; Settlement Dates. This Agreement shall become
effective and binding (the “Closing”) upon payment of the Document Preparation
Fee prior to the Closing pursuant to Sections 7.1 and 10.1(i), the delivery of
irrevocable instructions to issue the Commitment Shares to the Investor or its
designees as provided in Sections 7.1 and 10.1(ii), the delivery of counterpart
signature pages of this Agreement and the Registration Rights Agreement executed
by each of the parties hereto and thereto, and the delivery of all other
documents, instruments and writings required to be delivered at the Closing, in
each case as provided in Section 7.1, to the offices of Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., 666 Third Avenue, New York, NY 10017, at 5:00
p.m., New York City time, on the Closing Date. In consideration of and in
express reliance upon the representations, warranties and covenants contained
in, and upon the terms and subject to the conditions of, this Agreement, during
the Investment Period the Company shall issue and sell to the Investor, and the
Investor shall purchase from the Company, the Shares in respect of each Fixed
Request. The issuance and sale of Shares to the Investor pursuant to any Fixed
Request shall occur on the applicable Settlement Dates in accordance with
Section 3.7, provided that all of the conditions precedent thereto set forth in
Article VII theretofore shall have been fulfilled on or prior to such Settlement
Dates.

 

Section 2.3.     Initial Public Announcements and Required Filings. The Company
shall, at or before 8:30 a.m., New York City time, on the first Trading Day
after the Closing Date, issue a press release (the “Press Release”) reasonably
acceptable to the Investor disclosing the execution of this Agreement and the
Registration Rights Agreement by the Company and the Investor and briefly
describing the transactions contemplated hereby and thereby, including the
issuance of the Commitment Shares to the Investor. At or before 8:30 a.m., New
York City time, on the fourth Trading Day following the Closing Date, the
Company shall file a Current Report on Form 8-K describing the material terms of
the transactions contemplated by the Transaction Documents as required by said
form, including the issuance of the Commitment Shares to the Investor, and
attaching copies of each of this Agreement, the Registration Rights Agreement
and the Press Release as exhibits thereto (including all exhibits thereto, the
“Current Report”). The Company shall provide the Investor a reasonable
opportunity to comment on a draft of the Current Report (or, if permitted,
applicable disclosure in its Annual Report on Form 10-K) prior to filing the
Current Report with the Commission and shall give due consideration to all such
comments. From and after the issuance of the Press Release and the filing of the
Current Report, the Company shall have publicly disclosed all material,
nonpublic information delivered to the Investor (or the Investor’s
representatives or agents) by the Company or any of its Subsidiaries, or any of
their respective officers, directors, employees, agents or representatives (if
any) in connection with the transactions contemplated by the Transaction
Documents. The Investor covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company as
described in this Section 2.3, the Investor will maintain the confidentiality of
all disclosures made to it in connection with the transactions contemplated by
the Transaction Documents (including the existence and terms of the
transactions), except that the Investor may disclose the terms of such
transactions to its financial, accounting, legal and other advisors (provided
that the Investor directs such Persons to maintain the confidentiality of such
information). Not later than 15 calendar days following the Closing Date, the
Company shall file a Form D with respect to the Securities in accordance with
Regulation D and shall provide a copy thereof to the Investor promptly after
such filing. The Company shall prepare and file with the Commission the
Registration Statement (including the Prospectus) covering only the resale by
the Investor of the Registrable Securities in accordance with the Securities Act
and the Registration Rights Agreement. At or before 8:30 a.m. (New York City
time) on the Trading Day immediately following the Effective Date, the Company
shall file with the Commission in accordance with Rule 424(b) under the
Securities Act the final Prospectus to be used in connection with sales pursuant
to the Registration Statement. If the transactions contemplated by any Fixed
Request 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 Commission under Rule
424(b) under the Securities Act or in any report, statement or other document
filed by the Company with the Commission under the Exchange Act), or if
otherwise required under the Securities Act (or the interpretations of the
Commission thereof), in each case as reasonably determined by the Company and
the Investor, then, on the first Trading Day immediately following the last
Trading Day of the applicable Pricing Period with respect to such Fixed Request,
the Company shall file with the Commission 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 are to be (and, if applicable, have been) 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 are to be (and, if applicable, have
been) 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 all Fixed Request(s) consummated during the relevant fiscal quarter.

 

 
2

--------------------------------------------------------------------------------

 

 

ARTICLE III
FIXED REQUEST TERMS

 

Subject to the satisfaction of the conditions set forth in this Agreement, the
parties agree as follows:

 

Section 3.1.     Fixed Request Notice. From time to time during the Investment
Period, the Company may, in its sole discretion, no later than 9:30 a.m. (New
York City time) on the first Trading Day of the Pricing Period, provide to the
Investor a Fixed Request Notice, substantially in the form attached hereto as
Exhibit B (the “Fixed Request Notice”), which Fixed Request Notice shall become
effective at 9:30 a.m. (New York City time) on the first Trading Day of the
Pricing Period specified in the Fixed Request Notice; provided, however, that if
the Company delivers the Fixed Request Notice to the Investor later than 9:30
a.m. (New York City time) on a Trading Day, then the first Trading Day of such
Pricing Period shall not be the Trading Day on which the Investor received such
Fixed Request Notice, but rather shall be the immediately following Trading Day
(unless a subsequent Trading Day is therein specified). The Fixed Request Notice
shall specify the Fixed Amount Requested (up to the Maximum Fixed Amount
Requested) or the number of Shares cap for the Alternative Fixed Amount
Requested (as applicable), the applicable Threshold Price (calculated in
accordance with the defined term) for such Fixed Request, the first and last
Trading Day of the Pricing Period, and the Settlement Dates. Upon the terms and
subject to the conditions of this Agreement, the Investor is obligated to accept
each Fixed Request Notice prepared and delivered in accordance with the
provisions of this Agreement.

 

 
3

--------------------------------------------------------------------------------

 

 

Section 3.2.     Fixed Requests. If from time to time during the Investment
Period, the Company, in its sole discretion, delivers to the Investor a Fixed
Request Notice for a specified Fixed Amount Requested (up to the Maximum Fixed
Amount Requested) or for the Alternative Fixed Amount Requested in accordance
with the provisions of this Agreement, the Investor is obligated to accept such
Fixed Request Notice and shall purchase from the Company the Shares subject to
such Fixed Request Notice at the applicable Discount Price at the applicable
times in accordance with the settlement procedures set forth in Section 3.7. The
date on which the Company delivers any Fixed Request Notice in accordance with
this Section 3.2 hereinafter shall be referred to as a “Fixed Request Exercise
Date”. Anything to the contrary in this Agreement notwithstanding, at no time
shall the Investor be required to purchase more than: (i) the Alternative Fixed
Amount Requested (assuming for this purpose the Company elects the Alternative
Fixed Amount Requested for the applicable Pricing Period) or (ii) the Maximum
Fixed Amount Requested (assuming for this purpose the Company does not elect the
Alternative Fixed Amount Requested for the applicable Pricing Period), in each
case in respect of any Pricing Period (subject in all cases to the provisions of
Sections 3.10 and 6.6 of this Agreement).

 

For purposes of this Agreement, the term “Alternative Fixed Amount Requested”
shall mean a dollar amount equal to the aggregate sum of each DAFAR (as defined
below) for each Trading Day during the applicable Pricing Period for which the
VWAP equals or exceeds the applicable Threshold Price). Each DAFAR shall be
determined pursuant to the following equation (rounded to the nearest cent):

 

DAFAR = A x B x C, where:

 

DAFAR = the daily allocable portion of the total Alternative Fixed Amount
Requested for the applicable Trading Day during the applicable Pricing Period,

 

A =  0.25

 

B =  the trading volume of the Common Stock for the applicable Trading Day
during the applicable Pricing Period, as reported by Bloomberg L.P. using the
AQR function (excluding block trades of 25,000 shares or more), and

 

C =  the applicable Discount Price for such Trading Day;

 

provided, however, that the number of Shares sold pursuant to such Alternative
Fixed Amount Requested shall not exceed the number of Shares cap therefor to be
specified by the Company in the applicable Fixed Request Notice (and shall in
all cases be subject to the provisions of Sections 3.10 and 6.6 of this
Agreement).

 

 
4

--------------------------------------------------------------------------------

 

  

Section 3.3.     Share Calculation.

 

(a)     If the Company has not elected the Alternative Fixed Amount Requested in
accordance with the provisions of Section 3.2 hereof, then, with respect to each
Trading Day during the applicable Pricing Period for which the VWAP equals or
exceeds the applicable Threshold Price, the number of Shares to be issued by the
Company to the Investor pursuant to a Fixed Request shall equal the quotient
(calculated for each Trading Day during the applicable Pricing Period for which
the VWAP equals or exceeds the applicable Threshold Price) determined pursuant
to the following equation (rounded to the nearest whole Share):

 

N =  (A x B)/C, where:

 

N =  the number of Shares to be issued by the Company to the Investor in respect
of a Trading Day during the applicable Pricing Period for which the VWAP equals
or exceeds the applicable Threshold Price,

 

A =  0.20 (the “Multiplier”),

 

B =  the total Fixed Amount Requested, and

 

C =  the applicable Discount Price for such Trading Day.

 

(b)     If the Company has elected the Alternative Fixed Amount Requested in
accordance with the provisions of Section 3.2 hereof, then, with respect to each
Trading Day during the applicable Pricing Period for which the VWAP equals or
exceeds the applicable Threshold Price, the number of Shares to be issued by the
Company to the Investor pursuant to a Fixed Request shall equal the product
(calculated for each Trading Day during the applicable Pricing Period for which
the VWAP equals or exceeds the applicable Threshold Price) determined pursuant
to the following equation (rounded to the nearest whole Share):

 

N =  A x B, where:

 

N =  the number of Shares to be issued by the Company to the Investor in respect
of a Trading Day during the applicable Pricing Period for which the VWAP equals
or exceeds the applicable Threshold Price,

 

A =  0.25, and

 

B =  the trading volume of the Common Stock for the applicable Trading Day
during the applicable Pricing Period, as reported by Bloomberg L.P. using the
AQR function (excluding block trades of 25,000 shares or more).

 

Section 3.4.     Limitation of Fixed Requests. The Company shall not make more
than one Fixed Request in each Pricing Period. Not less than five (5) Trading
Days shall elapse between the end of one Pricing Period and the commencement of
any other Pricing Period during the Investment Period. Each Fixed Request
automatically shall expire immediately following the last Trading Day of each
Pricing Period.

 

Section 3.5.     Reduction of Commitment. On each Settlement Date, the
Investor’s Total Commitment under this Agreement automatically shall be reduced,
on a dollar-for-dollar basis, by the total portion of the Fixed Request Amount
paid to the Company on such Settlement Date.

 

 
5

--------------------------------------------------------------------------------

 

 

Section 3.6.     Below Threshold Price.

 

(a)     With respect to each Trading Day (if any) during the applicable Pricing
Period with respect to which the Company has not elected the Alternative Fixed
Amount Requested in accordance with the provisions of Section 3.2 hereof, if the
VWAP on such Trading Day in a Pricing Period is lower than the applicable
Threshold Price, then for each such Trading Day, the Fixed Amount Requested
shall be reduced, on a dollar-for-dollar basis, by an amount equal to the
product of (x) the Multiplier and (y) the total Fixed Amount Requested, and no
Shares shall be purchased or sold with respect to such Trading Day. If trading
in the Common Stock on the Trading Market is suspended for any reason for more
than three hours on any Trading Day during the applicable Pricing Period, then
for each such Trading Day during the Pricing Period the Fixed Amount Requested
shall be reduced as provided in the immediately preceding sentence, and no
Shares shall be purchased or sold with respect to such Trading Day.

 

(b)     With respect to each Trading Day (if any) during the applicable Pricing
Period with respect to which the Company has elected the Alternative Fixed
Amount Requested in accordance with the provisions of Section 3.2 hereof, if the
VWAP on such Trading Day in a Pricing Period is lower than the applicable
Threshold Price, then for each such Trading Day, no Shares shall be purchased or
sold with respect to such Trading Day. If trading in the Common Stock on the
Trading Market is suspended for any reason for more than three hours on any
Trading Day, then for each such Trading Day during the Pricing Period no Shares
shall be purchased or sold with respect to such Trading Day.

 

Section 3.7.     Settlement. The payment for, against simultaneous delivery of,
Shares in respect of each Fixed Request shall be settled as set forth in this
Section 3.7 on the dates specified herein (each, a “Settlement Date” and,
collectively, the “Settlement Dates”). On the fourth (4th) Trading Day of the
applicable Pricing Period (provided such Pricing Period has not been reduced to
less than three (3) Trading Days pursuant to Section 3.8) (such date, the “First
Settlement Date”), the Company shall, or shall cause its transfer agent to,
electronically transfer to the Investor on such First Settlement Date a number
of Shares to be purchased by the Investor on such First Settlement Date with
respect to the first three (3) Trading Days of such Pricing Period, calculated
in accordance with Section 3.3 (provided that “First Settlement Discount Price”
shall be substituted for “Discount Price” in Section 3.3 for purposes of
calculating the number of Shares to be issued to the Investor on such First
Settlement Date), by crediting the Investor’s or its designees’ account
(provided the Investor shall have given the Company written notice of such
designee prior to such Settlement Date) at DTC through its Deposit/Withdrawal at
Custodian (DWAC) system, which Shares shall be freely tradable and transferable
and without restriction on resale pursuant to the Registration Statement,
against simultaneous payment therefor to the Company’s designated account, by
wire transfer of immediately available funds, in an amount equal to the product
of (i) the number of Shares so issued to the Investor on such First Settlement
Date calculated as set forth above and (ii) the applicable First Settlement
Discount Price; provided that if such Shares are received by the Investor later
than 1:00 p.m., New York City time, payment therefor shall be made with next day
funds. On the Trading Day immediately following the last Trading Day of the
applicable Pricing Period (including any such Pricing Period that has been
reduced pursuant to Section 3.8) (such date, the “Final Settlement Date”), the
applicable Discount Price per Share at which Shares issuable to the Investor in
respect of the applicable Fixed Request are to be purchased by the Investor and
the total number of Shares to be purchased by the Investor in respect of all
Trading Days during the applicable Fixed Request shall be calculated in
accordance with this Agreement, and the Company shall, or shall cause its
transfer agent to, electronically transfer to the Investor on such Final
Settlement Date a number of Shares equal to (i) the total number of Shares to be
purchased by the Investor in respect of all Trading Days during the applicable
Pricing Period of such Fixed Request with respect to which Shares are required
to be purchased by the Investor under this Agreement, calculated in accordance
with Section 3.3, less (ii) the number of Shares purchased by the Investor on
the First Settlement Date of such Fixed Request, if any, by crediting the
Investor’s or its designees’ account (provided the Investor shall have given the
Company written notice of such designee prior to such Settlement Date) at DTC
through its Deposit/Withdrawal at Custodian (DWAC) system, which Shares shall be
freely tradable and transferable and without restriction on resale pursuant to
the Registration Statement, against simultaneous payment therefor to the
Company’s designated account by wire transfer of immediately available funds in
an amount equal to (A) the product of (1) the total number of Shares to be
purchased by the Investor in respect of all Trading Days during the applicable
Pricing Period of such Fixed Request with respect to which Shares are required
to be purchased by the Investor under this Agreement, calculated in accordance
with Section 3.3, and (2) the applicable Discount Price per Share at which
Shares issuable to the Investor in respect of the applicable Fixed Request are
to be purchased by the Investor, less (B) the aggregate amount paid by the
Investor for the Shares issued to the Investor on the First Settlement Date, if
any; provided that if such Shares are received by the Investor later than 1:00
p.m., New York City time, payment therefor shall be made with next day funds. As
set forth in Section 3.9, any failure by the Company or its transfer agent (if
applicable) to deliver any Shares on the applicable Settlement Date shall result
in the payment of partial damages by the Company to the Investor.

 

 
6

--------------------------------------------------------------------------------

 

 

Section 3.8.     Reduction of Pricing Period; End of Pricing Period If
Alternative Fixed Amount Requested.

 

(a)     If during a Pricing Period the Company elects to reduce the number of
Trading Days in such Pricing Period, the Company shall so notify the Investor
before 9:00 a.m. (New York City time) on any Trading Day during a Pricing Period
(a “Reduction Notice”) and the last Trading Day of such Pricing Period shall be
the Trading Day immediately preceding the Trading Day on which the Investor
received such Reduction Notice; provided, however, that (i) the Company may not
elect to reduce the number of Trading Days in any such Pricing Period to less
than two Trading Days and (ii) if the Company delivers the Reduction Notice
later than 9:00 a.m. (New York City time) on a Trading Day during a Pricing
Period, then the last Trading Day of such Pricing Period instead shall be the
Trading Day on which the Investor received such Reduction Notice. Upon receipt
of a Reduction Notice hereunder, the Investor shall purchase the Shares issuable
to the Investor pursuant to the applicable Fixed Request on the Trading Day
immediately following the last Trading Day of such reduced Pricing Period in
accordance with Sections 3.3 and 3.7 hereof.

 

 
7

--------------------------------------------------------------------------------

 

 

(b)     If, with respect to any Fixed Request Notice, an election by the Company
of the Alternative Fixed Amount Requested in accordance with the provisions of
Section 3.2 hereof is then in effect, the last Trading Day of the applicable
Pricing Period shall be the earliest of: (i) the Trading Day on which the
Alternative Fixed Amount Requested (calculated in accordance with Section 3.2
hereof) shall have reached the number of Shares cap therefor specified by the
Company in the applicable Fixed Request Notice, (ii) the last Trading Day of the
Pricing Period, if such Pricing Period is reduced by the Company pursuant to
clause (a) of this Section 3.8, and (iii) the fifth (5th) Trading Day of the
Pricing Period. Upon receipt of a Reduction Notice hereunder, the Investor shall
purchase the Shares issuable to the Investor pursuant to the applicable Fixed
Request on the Trading Day immediately following the last Trading Day of such
reduced Pricing Period in accordance with Sections 3.3 and 3.7 hereof.

  

Section 3.9.     Failure to Deliver Shares. If the Company issues a Fixed
Request Notice and fails to deliver the Shares to the Investor on the applicable
Settlement Dates and such failure continues for 10 Trading Days, the Company
shall pay the Investor, in cash, in addition to all other remedies available to
the Investor, as partial damages for such failure and not as a penalty, an
amount equal to 2.0% of the payment required to be paid by the Investor on the
applicable Settlement Date for the initial 30 days following such Settlement
Date until the Shares have been delivered, and an additional 2.0% for each
additional 30-day period thereafter until the Shares have been delivered, which
amount shall be prorated for such periods less than 30 days (the “Make Whole
Amount”). If the Make Whole Amount is not paid within two Trading Days following
a demand therefor from the Investor, the Make Whole Amount shall accrue annual
interest (on the basis of the 365 day year) compounded daily at a rate equal to
the greater of (i) the prime rate of interest then in effect as published by the
Wall Street Journal plus 3.0% and (ii) 10.0%, up to and including the date on
which the Make Whole Amount is actually paid. The Company shall not issue a
Fixed Request Notice to the Investor until the Make Whole Amount, plus all
accrued interest, has been paid to the Investor in full.

 

 
8

--------------------------------------------------------------------------------

 

 

Section 3.10.     Certain Limitations. Notwithstanding anything to the contrary
contained in this Agreement, in no event may the Company issue a Fixed Request
Notice to the extent that (i) the Fixed Amount Requested in such Fixed Request
Notice exceeds the Maximum Fixed Amount Requested determined in accordance with
Section 3.2 (if the Company has not elected the Alternative Fixed Amount
Requested in accordance with the provisions of Section 3.2 hereof), (ii) the
sale of Shares pursuant to such Fixed Request Notice would cause the Company to
issue or sell or the Investor to acquire or purchase (A) a dollar value of
shares of Common Stock (based on the prices actually paid by the Investor to the
Company for Shares) which, when aggregated with all Fixed Request Amounts paid
by the Investor pursuant to all prior Fixed Request Notices issued under this
Agreement, would exceed the Total Commitment, (B) a number of shares of Common
Stock which, when aggregated with all Shares purchased or acquired by the
Investor pursuant to all prior Fixed Request Notices issued under this
Agreement, would exceed the Aggregate Limit, or (C) a number of shares of Common
Stock that would exceed the Single Fixed Request Limit (taking into account all
shares of Common Stock issued or issuable pursuant to any transaction or series
of transactions that may be aggregated with the transactions contemplated by
such Fixed Request Notice under applicable rules of the NASDAQ Stock Market), or
(iii) the sale of Shares pursuant to such Fixed Request Notice would cause the
aggregate number of shares of Common Stock then beneficially owned (as
calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3
promulgated thereunder) by the Investor and its Affiliates to exceed the
Ownership Limitation. Notwithstanding anything in this Agreement to the
contrary, neither the Exchange Cap nor the Single Fixed Request Limit shall be
applicable for any purposes of this Agreement or the transactions contemplated
hereby if the stockholders of the Company have approved the issuance of Common
Stock as contemplated by this Agreement in accordance with the applicable rules
and regulations of the NASDAQ Stock Market and the Charter and Bylaws of the
Company. If the Company issues a Fixed Request Notice in which the Fixed Amount
Requested exceeds the Maximum Fixed Amount Requested determined in accordance
with Section 3.2 (if the Company has not elected the Alternative Fixed Amount
Requested in accordance with the provisions of Section 3.2 hereof), such Fixed
Request Notice shall be void ab initio but only to the extent the Fixed Amount
Requested exceeds the Maximum Fixed Amount Requested. If the Company issues a
Fixed Request Notice that otherwise would require the Investor to purchase
shares of Common Stock which would cause the aggregate purchases of Common Stock
by the Investor under this Agreement to exceed the Aggregate Limit, such Fixed
Request Notice shall be void ab initio to the extent of (x) the amount by which
the dollar value of shares of Common Stock (based on the prices actually paid by
the Investor to the Company for Shares) otherwise issuable pursuant to such
Fixed Request Notice, together with all Fixed Request Amounts paid by the
Investor pursuant to all prior Fixed Request Notices issued under this
Agreement, would exceed the Total Commitment, or (y) the amount by which the
number of shares of Common Stock otherwise issuable pursuant to such Fixed
Request Notice, together with all Shares purchased by the Investor pursuant to
all prior Fixed Request Notices issued under this Agreement, would exceed the
Aggregate Limit, as the case may be. If the Company issues a Fixed Request
Notice that would cause the aggregate number of shares of Common Stock then
beneficially owned (as calculated pursuant to Section 13(d) of the Exchange Act
and Rule 13d-3 promulgated thereunder) by the Investor and its Affiliates to
exceed the Ownership Limitation, such Fixed Request Notice shall be void ab
initio to the extent of the amount by which the number of shares of Common Stock
otherwise issuable pursuant to such Fixed Request Notice, together with all
shares of Common Stock then beneficially owned (as calculated pursuant to
Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) by the
Investor and its Affiliates, would exceed the Ownership Limitation. If the
Company issues a Fixed Request Notice that otherwise would require the Investor
to purchase shares of Common Stock which when aggregated with all other shares
of Common Stock issued or sold pursuant to any transaction or series of
transactions that would be aggregated for purposes of determining whether
approval of the Company’s stockholders is required under any bylaw, listed
securities maintenance standards or other rules of the NASDAQ Stock Market would
exceed the Single Fixed Request Limit, such Fixed Request Notice shall be void
ab initio but only to the extent of the amount by which the number of shares of
Common Stock otherwise issuable pursuant to such Fixed Request Notice, together
with all shares of Common Stock issued pursuant to all such other aggregated
transactions, would exceed the Single Fixed Request Limit.

 

 
9

--------------------------------------------------------------------------------

 

 

Section 3.11.     Blackout Periods.  Notwithstanding any other provision of this
Agreement, the Company shall not deliver any Fixed Request Notice or otherwise
offer or sell Shares to the Investor, and the Investor shall not be obligated to
purchase any Shares pursuant to this Agreement, (i) during any period in which
the Company is, or may be deemed to be, in possession of material non-public
information, or (ii) except as expressly provided in this Section 3.11, at any
time from and including the date (each, an “Announcement Date”) on which the
Company shall issue a press release containing, or shall otherwise publicly
announce, its earnings, revenues or other results of operations (each, an
“Earnings Announcement”) through and including the time that is 24 hours after
the time that the Company files (a “Filing Time”) a Quarterly Report on Form
10-Q or an Annual Report on Form 10-K that includes consolidated financial
statements as of and for the same period or periods, as the case may be, covered
by such Earnings Announcement. If the Company wishes to deliver any Fixed
Request Notice or otherwise offer, sell or deliver Shares to the Investor at any
time during the period from and including an Announcement Date through and
including the time that is 24 hours after the corresponding Filing Time, the
Company shall, as conditions thereto, (1) prepare and deliver to the Investor
(with a copy to counsel to the Investor) a report on Form 8-K which shall
include substantially the same financial and related information as was set
forth in the relevant Earnings Announcement (other than any earnings or other
projections, similar forward-looking data and officers’ quotations) (each, an
“Earnings 8-K”), and (2) file such Earnings 8-K with the Commission (so that it
is deemed “filed” for purposes of Section 18 of the Exchange Act), on or prior
to the date of such Fixed Request Notice. The provisions of clause (ii) of this
Section 3.11 shall not be applicable for the period from and after the time at
which all of the conditions set forth in the immediately preceding sentence
shall have been satisfied (or, if later, the time that is 24 hours after the
time that the relevant Earnings Announcement was first publicly released)
through and including the time that is 24 hours after the Filing Time of the
relevant Quarterly Report on Form 10-Q or Annual Report on Form 10-K, as the
case may be.

 

ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR

 

The Investor hereby makes the following representations, warranties and
covenants to the Company:

 

Section 4.1.     Organization and Standing of the Investor. The Investor is a
company duly organized, validly existing and in good standing under the laws of
the British Virgin Islands.

 

Section 4.2.     Authorization and Power. The Investor has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and the Registration Rights Agreement and to purchase or acquire
the Securities in accordance with the terms hereof. The execution, delivery and
performance by the Investor of this Agreement and the Registration Rights
Agreement and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action, and no
further consent or authorization of the Investor, its Board of Directors or its
stockholders is required. Each of this Agreement and the Registration Rights
Agreement has been duly executed and delivered by the Investor and constitutes a
valid and binding obligation of the Investor enforceable against it in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership, or similar laws relating to, or affecting
generally the enforcement of, creditor’s rights and remedies or by other
equitable principles of general application (including any limitation of
equitable remedies).

 

 
10

--------------------------------------------------------------------------------

 

 

Section 4.3.     No Conflicts. The execution, delivery and performance by the
Investor of this Agreement and the Registration Rights Agreement and the
consummation by the Investor of the transactions contemplated hereby and thereby
do not and shall not (i) result in a violation of such Investor’s charter
documents, bylaws or other applicable organizational instruments, (ii) conflict
with, constitute a default (or an event which, with notice or lapse of time or
both, would become a default) under, or give rise to any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Investor is a party or is bound, (iii) create or impose
any lien, charge or encumbrance on any property of the Investor under any
agreement or any commitment to which the Investor is party or under which the
Investor is bound or under which any of its properties or assets are bound, or
(iv) result in a violation of any federal, state, local or foreign statute,
rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to the Investor or by which any of its properties
or assets are bound or affected, except, in the case of clauses (ii), (iii) and
(iv), for such conflicts, defaults, terminations, amendments, acceleration,
cancellations and violations as would not, individually or in the aggregate,
prohibit or otherwise interfere with, in any material respect, the ability of
the Investor to enter into and perform its obligations under this Agreement and
the Registration Rights Agreement. The Investor is not required under any
applicable federal, state, local or foreign law, rule or regulation to obtain
any consent, authorization or order of, or make any filing or registration with,
any court or governmental agency in order for it to execute, deliver or perform
any of its obligations under this Agreement and the Registration Rights
Agreement or to purchase or acquire the Securities in accordance with the terms
hereof; provided, however, that for purposes of the representation made in this
sentence, the Investor is assuming and relying upon the accuracy of the relevant
representations and warranties and the compliance with the relevant covenants
and agreements of the Company in the Transaction Documents to which it is a
party.

 

Section 4.4.     Investment Purpose. The Investor is acquiring the Securities
for its own account, for investment purposes and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered under or exempt from the registration requirements
of the Securities Act; provided, however, that by making the representations
herein, the Investor does not agree, or make any representation or warranty, to
hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption under the Securities Act.
The Investor does not presently have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities.

 

Section 4.5.     Accredited Investor Status. The Investor is an “accredited
investor” as that term is defined in Rule 501(a) of Regulation D.

 

Section 4.6.     Reliance on Exemptions. The Investor understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of U.S. federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and the
Investor’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Investor to acquire the Securities.

 

 
11

--------------------------------------------------------------------------------

 

 

Section 4.7.     Information. All materials relating to the business, financial
condition, management and operations of the Company and materials relating to
the offer and sale of the Securities which have been requested by the Investor
have been furnished or otherwise made available to the Investor or its advisors,
including, without limitation, the Commission Documents. The Investor
understands that its investment in the Securities involves a high degree of
risk. The Investor is able to bear the economic risk of an investment in the
Securities and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of a proposed
investment in the Securities. The Investor and its advisors have been afforded
the opportunity to ask questions of and has received satisfactory answers from
representatives of the Company concerning the financial condition and business
of the Company and other matters relating to an investment in the Securities.
Neither such inquiries nor any other due diligence investigations conducted by
the Investor or its advisors, if any, or its representatives shall modify, amend
or affect the Investor’s right to rely on the Company’s representations and
warranties contained in this Agreement or in any other Transaction Document to
which the Company is a party or the Investor’s right to rely on any other
document or instrument executed and/or delivered in connection with this
Agreement or the consummation of the transaction contemplated hereby (including,
without limitation, the opinions of the Company’s counsel delivered pursuant to
Sections 7.1(iv) and 7.2(xv)). The Investor has sought such accounting, legal
and tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities. The Investor
understands that it (and not the Company) shall be responsible for its own tax
liabilities that may arise as a result of this investment or the transactions
contemplated by this Agreement.

 

Section 4.8.     No Governmental Review. The Investor understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

 

Section 4.9.     No General Solicitation. The Investor is not purchasing or
acquiring the Securities as a result of any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with the
offer or sale of the Securities.

 

Section 4.10.     Not an Affiliate. The Investor is not an officer, director or
an Affiliate of the Company. As of the date of this Agreement, the Investor owns
no shares of Common Stock and no securities exercisable for or convertible into
shares of Common Stock and during the Restricted Period will not acquire any
shares of the Company’s capital stock (including shares of Common Stock or
securities exercisable for or convertible into shares of Common Stock) other
than pursuant to this Agreement; provided, however, that nothing in this
Agreement shall prohibit or be deemed to prohibit the Investor from purchasing,
in an open market transaction or otherwise, shares of Common Stock necessary to
make delivery by the Investor in satisfaction of a sale by the Investor of
Shares that the Investor anticipated receiving from the Company in connection
with the settlement of a Fixed Request, if the Company or its transfer agent
shall have failed for any reason or for no reason to electronically transfer all
of the Shares subject to such Fixed Request to the Investor on the applicable
Settlement Date by crediting the Investor’s or its designees’ account at DTC
through its Deposit/Withdrawal at Custodian (DWAC) system in compliance with
Section 3.7 of this Agreement.

 

Section 4.11.     Statutory Underwriter Status. The Investor acknowledges that
it will be disclosed as an “underwriter” and a “selling stockholder” in the
Registration Statement and in any Prospectus contained therein to the extent
required by applicable law and to the extent the Prospectus is related to the
resale of Registrable Securities.

 

 
12

--------------------------------------------------------------------------------

 

 

Section 4.12.     Resales of Securities. The Investor represents, warrants and
covenants that it will resell such Securities only pursuant to the Registration
Statement, in a manner described under the caption “Plan of Distribution” in the
Registration Statement, and in a manner in compliance with all applicable U.S.
federal and state securities laws, rules and regulations, including, without
limitation, any applicable prospectus delivery requirements of the Securities
Act.

 

ARTICLE V     
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY

 

Except as set forth in the disclosure schedule delivered by the Company to the
Investor (which is hereby incorporated by reference in, and constitutes an
integral part of, this Agreement) (the “Disclosure Schedule”), the Company
hereby makes the following representations, warranties and covenants to the
Investor:

 

Section 5.1.     Organization, Good Standing and Power. The Company and each of
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to own, lease and operate its properties
and assets and to conduct its business as it is now being conducted and as
presently proposed to be conducted. The Company and each Subsidiary is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except for any jurisdiction in
which the failure to be so qualified would not have a Material Adverse Effect.

 

Section 5.2.     Authorization, Enforcement. The Company has the requisite
corporate power and authority to enter into and perform its obligations under
each of the Transaction Documents to which it is a party and to issue the
Securities in accordance with the terms hereof and thereof. Except for approvals
of the Company’s Board of Directors or a committee thereof as may be required in
connection with any issuance and sale of Securities to the Investor hereunder
(which approvals shall be obtained prior to the delivery of any Fixed Request
Notice), the execution, delivery and performance by the Company of each of the
Transaction Documents to which it is a party and the consummation by it of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action, and no further consent or
authorization of the Company, its Board of Directors or its stockholders is
required. Each of the Transaction Documents to which the Company is a party has
been duly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor’s rights and remedies or by other
equitable principles of general application (including any limitation of
equitable remedies).

 

 
13

--------------------------------------------------------------------------------

 

 

Section 5.3.     Capitalization. The authorized capital stock of the Company and
the shares thereof issued and outstanding were as set forth in the Commission
Documents as of the dates reflected therein. All of the outstanding shares of
Common Stock have been duly authorized and validly issued, and are fully paid
and nonassessable. Except as set forth in the Commission Documents, this
Agreement and the Registration Rights Agreement, there are no agreements or
arrangements under which the Company is obligated to register the sale of any
securities under the Securities Act. Except as set forth in the Commission
Documents, no shares of Common Stock are entitled to preemptive rights and there
are no outstanding debt securities and no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, any shares of capital stock of the Company other than those issued or
granted in the ordinary course of business pursuant to the Company’s equity
incentive and/or compensatory plans or arrangements. Except for customary
transfer restrictions contained in agreements entered into by the Company to
sell restricted securities or as set forth in the Commission Documents, the
Company is not a party to, and it has no Knowledge of, any agreement restricting
the voting or transfer of any shares of the capital stock of the Company. Except
as set forth in the Commission Documents, the offer and sale of all capital
stock, convertible or exchangeable securities, rights, warrants or options of
the Company issued prior to the Closing Date complied with all applicable
federal and state securities laws, and no stockholder has any right of
rescission or damages or any “put” or similar right with respect thereto that
would have a Material Adverse Effect. Except as set forth in the Commission
Documents, there are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by this Agreement or any of the other
Transaction Documents or the consummation of the transactions described herein
or therein. The Company has furnished or made available to the Investor via
EDGAR true and correct copies of the Company’s Certificate of Incorporation as
in effect on the Closing Date (the “Charter”), and the Company’s Bylaws as in
effect on the Closing Date (the “Bylaws”).

 

Section 5.4.     Issuance of Securities. The Commitment Shares have been, and
the Shares to be issued under this Agreement have been or will be (prior to the
delivery of any Fixed Request Notice to the Investor hereunder), duly authorized
by all necessary corporate action on the part of the Company. The Commitment
Shares, when issued in accordance with the terms of this Agreement, and the
Shares, when paid for in accordance with the terms of this Agreement, shall be
validly issued and outstanding, fully paid and nonassessable and free from all
liens, charges, taxes, security interests, encumbrances, rights of first
refusal, preemptive or similar rights and other encumbrances with respect to the
issue thereof.

 

 
14

--------------------------------------------------------------------------------

 

 

Section 5.5.     No Conflicts. The execution, delivery and performance by the
Company of each of the Transaction Documents to which it is a party and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and shall not (i) result in a violation of any provision of the Company’s
Charter or Bylaws, (ii) conflict with or result in a breach or violation of any
of the terms or provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would become a default) under, or give rise to
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company or any of its
Significant Subsidiaries is a party or is bound, (iii) create or impose a lien,
charge or encumbrance on any property or assets of the Company or any of its
Significant Subsidiaries under any agreement or any commitment to which the
Company or any of its Significant Subsidiaries is a party or by which the
Company or any of its Significant Subsidiaries is bound or to which any of their
respective properties or assets is subject, or (iv) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment or
decree applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries are bound or
affected (including federal and state securities laws and regulations and the
rules and regulations of the Trading Market), except, in the case of clauses
(ii), (iii) and (iv), for such conflicts, defaults, terminations, amendments,
acceleration, cancellations, liens, charges, encumbrances and violations as
would not, individually or in the aggregate, have a Material Adverse Effect.
Except as specifically contemplated by this Agreement or the Registration Rights
Agreement and as required under the Securities Act and any applicable state
securities laws, the Company is not required under any federal, state, local or
foreign law, rule or regulation to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental agency
(including, without limitation, the Trading Market) in order for it to execute,
deliver or perform any of its obligations under the Transaction Documents to
which it is a party, or to issue the Securities to the Investor in accordance
with the terms hereof and thereof (other than such consents, authorizations,
orders, filings or registrations as have been obtained or made prior to the
Closing Date); provided, however, that, for purposes of the representation made
in this sentence, the Company is assuming and relying upon the accuracy of the
representations and warranties of the Investor in this Agreement and the
compliance by it with its covenants and agreements contained in this Agreement
and the Registration Rights Agreement.

 

Section 5.6.     Commission Documents, Financial Statements. (a) The Company has
timely filed (giving effect to permissible extensions in accordance with Rule
12b-25 under the Exchange Act) all Commission Documents. The Company has
delivered or made available to the Investor via EDGAR or otherwise true and
complete copies of the Commission Documents filed with or furnished to the
Commission prior to the Closing Date (including, without limitation, the 2016
Form 10-K). No Subsidiary of the Company is required to file or furnish any
report, schedule, registration, form, statement, information or other document
with the Commission. As of its filing date, each Commission Document filed with
or furnished to the Commission prior to the Closing Date (including, without
limitation, the 2016 Form 10-K) complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as applicable, and other
federal, state and local laws, rules and regulations applicable to it, and, as
of its filing date (or, if amended or superseded by a filing prior to the
Closing Date, on the date of such amended or superseded filing), such Commission
Document did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The Registration Statement, on the date it is filed with
the Commission, on the date it is declared effective by the Commission, on each
Fixed Request Exercise Date and on each Settlement Date, shall comply in all
material respects with the requirements of the Securities Act (including,
without limitation, Rule 415 under the Securities Act) and shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein not
misleading, except that this representation and warranty shall not apply to
statements in or omissions from the Registration Statement made in reliance upon
and in conformity with information relating to the Investor furnished to the
Company in writing by or on behalf of the Investor expressly for use therein.
The Prospectus and each Prospectus Supplement required to be filed pursuant to
this Agreement or the Registration Rights Agreement after the Closing Date, when
taken together, on its date, on each Fixed Request Exercise Date and on each
Settlement Date, shall comply in all material respects with the requirements of
the Securities Act (including, without limitation, Rule 424(b) under the
Securities Act) and shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except that this representation and warranty
shall not apply to statements in or omissions from the Prospectus or any
Prospectus Supplement made in reliance upon and in conformity with information
relating to the Investor furnished to the Company in writing by or on behalf of
the Investor expressly for use therein. Each Commission Document (other than the
Registration Statement, the Prospectus or any Prospectus Supplement) to be filed
with or furnished to the Commission after the Closing Date and incorporated by
reference in the Registration Statement, the Prospectus or any Prospectus
Supplement required to be filed pursuant to this Agreement or the Registration
Rights Agreement (including, without limitation, the Current Report), when such
document is filed with or furnished to the Commission and, if applicable, when
such document becomes effective, as the case may be, shall comply in all
material respects with the requirements of the Securities Act or the Exchange
Act, as applicable, and other federal, state and local laws, rules and
regulations applicable to it, and shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Company has delivered or made
available to the Investor via EDGAR or otherwise true and complete copies of all
comment letters and substantive correspondence received by the Company from the
Commission relating to the Commission Documents filed with or furnished to the
Commission as of the Closing Date, together with all written responses of the
Company thereto in the form such responses were filed via EDGAR. There are no
outstanding or unresolved comments or undertakings in such comment letters
received by the Company from the Commission. The Commission has not issued any
stop order or other order suspending the effectiveness of any registration
statement filed by the Company under the Securities Act or the Exchange Act.

 

 
15

--------------------------------------------------------------------------------

 

 

(b)     The financial statements, together with the related notes and schedules,
of the Company included in the Commission Documents comply as to form in all
material respects with all applicable accounting requirements and the published
rules and regulations of the Commission and all other applicable rules and
regulations with respect thereto. Such financial statements, together with the
related notes and schedules, have been prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial condition of the Company and its consolidated
Subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).

 

(c)     The Company has filed with the Commission and made available to the
Investor via EDGAR or otherwise all certifications and statements required by
(x) Rule 13a-14 or Rule 15d-14 under the Exchange Act or (y) 18 U.S.C. Section
1350 (Section 906 of the Sarbanes-Oxley Act of 2002 (“SOXA”)) with respect to
all relevant Commission Documents. The Company is in compliance in all material
respects with the provisions of SOXA applicable to it as of the date hereof. The
Company maintains disclosure controls and procedures required by Rule 13a-15 or
Rule 15d-15 under the Exchange Act; such controls and procedures are effective
to ensure that all material information concerning the Company and its
Subsidiaries is made known on a timely basis to the individuals responsible for
the timely and accurate preparation of the Company’s Commission filings and
other public disclosure documents. As used in this Section 5.6(c), the term
“file” shall be broadly construed to include any manner in which a document or
information is furnished, supplied or otherwise made available to the
Commission.

 

(d)     Rotenberg Meril Solomon Bertiger & Guttila, P.C., who have expressed
their opinion on the audited financial statements and related schedules to be
included or incorporated by reference in the Registration Statement and the
Prospectus are, with respect to the Company, independent public accountants as
required by the Securities Act and is an independent registered public
accounting firm within the meaning of SOXA as required by the rules of the
Public Company Accounting Oversight Board. Rotenberg Meril Solomon Bertiger &
Guttila, P.C. has not been engaged by the Company to perform any “prohibited
activities” (as defined in Section 10A of the Exchange Act).

 

 
16

--------------------------------------------------------------------------------

 

 

Section 5.7.     Subsidiaries. The 2016 Form 10-K sets forth each Subsidiary of
the Company as of the Closing Date, other than those that may be omitted
pursuant to Item 601 of Regulation S-K, showing its jurisdiction of
incorporation or organization and the percentage of the Company’s ownership of
the outstanding capital stock or other ownership interests of such Subsidiary,
and the Company does not have any other Subsidiaries as of the Closing Date.

 

Section 5.8.     No Material Adverse Effect. Except as disclosed in any
Commission Documents filed since December 31 2016, or which may be deemed to
have resulted from the Company’s continued losses from operations, since
December 31, 2016, the Company has not experienced or suffered any Material
Adverse Effect, and there exists no current state of facts, condition or event
which would have a Material Adverse Effect.

 

Section 5.9.     No Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent
or otherwise) that would be required to be disclosed on a balance sheet of the
Company or any Subsidiary (including the notes thereto) in conformity with GAAP
and are not disclosed in the Commission Documents, other than those incurred in
the ordinary course of the Company’s or its Subsidiaries respective businesses
since December 31, 2016 and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect.

 

Section 5.10.     No Undisclosed Events or Circumstances. No event or
circumstance has occurred or information exists with respect to the Company or
any of its Subsidiaries or its or their business, properties, liabilities,
operations (including results thereof) or conditions (financial or otherwise),
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company at or before the Closing but which has not been so
publicly announced or disclosed, except for events or circumstances which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect.

 

 
17

--------------------------------------------------------------------------------

 

 

Section 5.11.     Indebtedness; Solvency. The Company’s Annual Report on Form
10-K for the year ended December 31, 2016 sets forth, as of December 31, 2016,
all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments through
such date. For the purposes of this Agreement, “Indebtedness” shall mean (a) any
liabilities for borrowed money or amounts owed in excess of $100,000 (other than
trade accounts payable incurred in the ordinary course of business), (b) all
guaranties, endorsements, indemnities and other contingent obligations in
respect of Indebtedness of others in excess of $100,000, whether or not the same
are or should be reflected in the Company’s balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $100,000 due under
leases required to be capitalized in accordance with GAAP. There is no existing
or continuing default or event of default in respect of any Indebtedness of the
Company or any of its Subsidiaries. The Company has not taken any steps, and
does not currently expect to take any steps, to seek protection pursuant to
Title 11 of the United States Code or any similar federal or state bankruptcy
law or law for the relief of debtors, nor does the Company have any Knowledge
that its creditors intend to initiate involuntary bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings for relief under
Title 11 of the United States Code or any other federal or state bankruptcy law
or any law for the relief of debtors. The Company is financially solvent and is
generally able to pay its debts as they become due.

 

Section 5.12.     Title To Assets. Each of the Company and its Subsidiaries has
good and valid title to, or has valid rights to lease or otherwise use, all of
their respective real and personal property reflected in the Commission
Documents, free of mortgages, pledges, charges, liens, security interests or
other encumbrances, except for those indicated in the Commission Documents and
those that would not have a Material Adverse Effect. All real property and
facilities held under lease by the Company or any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company or any of its Subsidiaries.

 

Section 5.13.     Actions Pending. There is no action, suit, claim,
investigation or proceeding pending, or, to the Knowledge of the Company,
threatened, against the Company or any Subsidiary which questions the validity
of the Transaction Documents or the transactions contemplated thereby or any
action taken or to be taken pursuant thereto. Except as set forth in the
Commission Documents, there is no action, suit, claim, investigation or
proceeding pending, or to the Knowledge of the Company threatened, against or
involving the Company, any Subsidiary or any of their respective properties or
assets, or involving any officers or directors of the Company or any of its
Subsidiaries, including, without limitation, any securities class action lawsuit
or stockholder derivative lawsuit related to the Company, in each case which, if
determined adversely to the Company, its Subsidiary or any officer or director
of the Company or its Subsidiaries, would have a Material Adverse Effect. Except
as set forth in the Commission Documents, no judgment, order, writ, injunction
or decree or award has been issued by or, to the Knowledge of the Company,
requested of any court, arbitrator or governmental agency which would be
reasonably expected to result in a Material Adverse Effect.

 

 
18

--------------------------------------------------------------------------------

 

 

Section 5.14.     Compliance With Law. The business of the Company and the
Subsidiaries has been and is presently being conducted in compliance with all
applicable federal, state, local and foreign governmental laws, rules,
regulations and ordinances, except as set forth in the Commission Documents and
except for such non-compliance which, individually or in the aggregate, would
not have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is in violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
its business in violation of any of the foregoing, except in all cases for any
such violations which could not, individually or in the aggregate, have a
Material Adverse Effect. Without limiting the generality of the foregoing, the
Company has maintained all requirements for the continued listing or quotation
of its Common Stock on the Trading Market, and the Company is not in violation
of any of the rules, regulations or requirements of the Trading Market and has
no Knowledge of any facts or circumstances that could reasonably lead to
delisting or suspension of the Common Stock by the Trading Market in the
foreseeable future.

 

Section 5.15.     Certain Fees. Except as set forth on Schedule 5.15, no
brokers, finders or financial advisory fees or commissions are or shall be
payable by the Company or any Subsidiary (or any of their respective Affiliates)
with respect to the transactions contemplated by the Transaction Documents.

 

Section 5.16.     Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided the Investor or any of its agents,
advisors or counsel with any information that constitutes or could reasonably be
expected to constitute material, nonpublic information concerning the Company or
any of its Subsidiaries, other than the existence of the transactions
contemplated by the Transaction Documents. The Company understands and confirms
that the Investor will rely on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to Investor
regarding the Company and its Subsidiaries, their businesses and the
transactions contemplated by the Transaction Documents (including, without
limitation, the representations and warranties of the Company contained in the
Transaction Documents to which it is a party (as modified by the Disclosure
Schedule)) furnished by or on behalf of the Company or any of its Subsidiaries,
taken together, is true and correct and does not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. Each press release issued by the Company or any of
its Subsidiaries during the 12 months preceding the Closing Date did not at the
time of release (or, if amended or superseded by a later dated press release
issued by the Company or any of its Subsidiaries prior to the Closing Date or by
a later dated Commission Document filed with or furnished to the Commission by
the Company prior to the Closing Date, at the time of issuance of such later
dated press release or filing or furnishing of such Commission Document, as
applicable) 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 are made,
not misleading.

 

Section 5.17.     Operation of Business. (a) The Company or one or more of its
Subsidiaries possesses such permits, licenses, approvals, consents and other
authorizations (including licenses, accreditation and other similar
documentation or approvals of any local health departments) issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies as
are necessary to conduct the business now operated by it (collectively,
“Governmental Licenses”), except where the failure to possess such Governmental
Licenses, individually or in the aggregate, would not have a Material Adverse
Effect. All of the Governmental Licenses are valid and in full force and effect,
except where the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect, individually or in the
aggregate, would not have a Material Adverse Effect or except as otherwise
disclosed in the Commission Documents. This Section 5.17 does not relate to
environmental matters, such items being the subject of Section 5.18.

 

 
19

--------------------------------------------------------------------------------

 

 

(b)     The Company or one or more of its Subsidiaries owns or possesses
adequate patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks,
trade names, trade dress, logos, copyrights and other intellectual property,
including, without limitation, all of the intellectual property described in the
Commission Documents as being owned or licensed by the Company (collectively,
“Intellectual Property”), necessary to carry on the business now operated by it.
Except as set forth in the Commission Documents, there are no actions, suits or
judicial proceedings pending, or to the Company’s Knowledge threatened, relating
to patents or proprietary information to which the Company or any of its
Subsidiaries is a party or of which any property of the Company or any of its
Subsidiaries is subject, and neither the Company nor any of its Subsidiaries has
received any notice or is otherwise aware of any infringement of or conflict
with asserted rights of others with respect to any Intellectual Property or of
any facts or circumstances which could render any Intellectual Property invalid
or inadequate to protect the interest of the Company and its Subsidiaries
therein, and which infringement or conflict (if the subject of any unfavorable
decision, ruling or finding) or invalidity or inadequacy, individually or in the
aggregate, would have a Material Adverse Effect.

 

Section 5.18.     Environmental Compliance. Except as disclosed in the
Commission Documents, the Company and each of its Subsidiaries have obtained all
material approvals, authorization, certificates, consents, licenses, orders and
permits or other similar authorizations of all governmental authorities, or from
any other person, that are required under any Environmental Laws, except for any
approvals, authorization, certificates, consents, licenses, orders and permits
or other similar authorizations the failure of which to obtain does not or would
not have a Material Adverse Effect. “Environmental Laws” shall mean all
applicable laws relating to the protection of the environment including, without
limitation, all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened releases of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. Except for such instances as would not, individually or in
the aggregate, have a Material Adverse Effect, to the Company’s Knowledge, there
are no past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company or its Subsidiaries
that violate or could reasonably be expected to violate any Environmental Law
after the Closing Date or that could reasonably be expected to give rise to any
environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.

 

 
20

--------------------------------------------------------------------------------

 

 

Section 5.19.     Material Agreements. Except as set forth in the Commission
Documents, neither the Company nor any Subsidiary of the Company is a party to
any written or oral contract, instrument, agreement commitment, obligation, plan
or arrangement, a copy of which would be required to be filed with the
Commission as an exhibit to an annual report on Form 10-K (collectively,
“Material Agreements”). Except as set forth in the Commission Documents, the
Company and each of its Subsidiaries have performed in all material respects all
the obligations then required to be performed by them under the Material
Agreements, have received no notice of default or an event of default by the
Company or any of its Subsidiaries thereunder and are not aware of any basis for
the assertion thereof, and neither the Company or any of its Subsidiaries nor,
to the Knowledge of the Company, any other contracting party thereto are in
default under any Material Agreement now in effect, the result of which would
have a Material Adverse Effect. Except as set forth in the Commission Documents,
each of the Material Agreements is in full force and effect, and constitutes a
legal, valid and binding obligation enforceable in accordance with its terms
against the Company and/or any of its Subsidiaries and, to the Knowledge of the
Company, each other contracting party thereto, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor’s rights and remedies or by
other equitable principles of general application.

 

Section 5.20.     Transactions With Affiliates. Except as set forth in the
Commission Documents, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts, service arrangements or other continuing
transactions exceeding $120,000 between (a) the Company or any Subsidiary, on
the one hand, and (b) any person or entity who would be covered by Item 404(a)
of Regulation S-K, on the other hand. Except as disclosed in the Commission
Documents, there are no outstanding amounts payable to or receivable from, or
advances by the Company or any of its Subsidiaries to, and neither the Company
nor any of its Subsidiaries is otherwise a creditor of or debtor to, any
beneficial owner of more than 5% of the outstanding shares of Common Stock, or
any director, employee or affiliate of the Company or any of its Subsidiaries,
other than (i) reimbursement for reasonable expenses incurred on behalf of the
Company or any of its Subsidiaries or (ii) as part of the normal and customary
terms of such person’s employment or service as a director with the Company or
any of its Subsidiaries.

 

Section 5.21.     Employees. Neither the Company nor any Subsidiary of the
Company has any collective bargaining arrangements or agreements covering any of
its employees, except as set forth in the Commission Documents. Except as
disclosed in the Commission Documents, no officer, consultant or key employee of
the Company or any Subsidiary whose termination, either individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect, has
terminated or, to the Knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or any
Subsidiary.

 

Section 5.22.     Use of Proceeds. The proceeds from the sale of the Shares
shall be used by the Company and its Subsidiaries as set forth in the Prospectus
and any Prospectus Supplement filed pursuant to Section 2.3 of this Agreement
and pursuant to the Registration Rights Agreement.

 

 
21

--------------------------------------------------------------------------------

 

  

Section 5.23.     Investment Company Act Status. The Company is not, and as a
result of the consummation of the transactions contemplated by the Transaction
Documents and the application of the proceeds from the sale of the Shares as set
forth in the Prospectus and any Prospectus Supplement shall not be required to
be registered as, an “investment company” or a company “controlled” by an
“investment company,” within the meaning of the Investment Company Act of 1940,
as amended.

 

Section 5.24.     ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company or any of
its Subsidiaries which has had or would have a Material Adverse Effect. No
“prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of
the Code) or “accumulated funding deficiency” (as defined in Section 302 of
ERISA) or any of the events set forth in Section 4043(b) of ERISA has occurred
with respect to any Plan which has had or would have a Material Adverse Effect,
and the execution and delivery of this Agreement and the issuance and sale of
the Securities hereunder shall not result in any of the foregoing events. Each
Plan is in compliance in all material respects with applicable law, including
ERISA and the Code; the Company has not incurred and does not expect to incur
liability under Title IV of ERISA with respect to the termination of, or
withdrawal from, any Plan; and each Plan for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code is
so qualified in all material respects and nothing has occurred, whether by
action or failure to act, which would cause the loss of such qualifications. As
used in this Section 5.24, the term “Plan” shall mean an “employee pension
benefit plan” (as defined in Section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have been made, by
the Company or any Subsidiary or by any trade or business, whether or not
incorporated, which, together with the Company or any Subsidiary, is under
common control, as described in Section 414(b) or (c) of the Code.

 

Section 5.25.     Taxes. The Company and each of its Subsidiaries (i) has filed
all necessary federal, state and foreign income and franchise tax returns or has
duly requested extensions thereof, except for those the failure of which to file
would not have a Material Adverse Effect, (ii) has paid all federal, state,
local and foreign taxes due and payable for which it is liable, except to the
extent that any such taxes are being contested in good faith and by appropriate
proceedings, except for such taxes the failure of which to pay would not have a
Material Adverse Effect, and (iii) does not have any tax deficiency or claims
outstanding or assessed or, to the Company’s Knowledge, proposed against it
which would have a Material Adverse Effect. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company and its Subsidiaries know of no basis for any
such claim. The Company is not operated in such a manner as to qualify as a
passive foreign investment company, as defined in Section 1297 of the Code.

 

Section 5.26.     Insurance. The Company and its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for, and neither the Company nor any such
Subsidiary has any reason to believe that it will be unable to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.

 

 
22

--------------------------------------------------------------------------------

 

 

Section 5.27.     U.S. Real Property Holding Corporation. Neither the Company
nor any of its Subsidiaries is, or has ever been, and so long as any of the
Securities are held by the Investor, shall become a U.S. real property holding
corporation within the meaning of Section 897 of the Code.

 

Section 5.28.     Exemption from Registration; Valid Issuances. Subject to, and
in reliance on, the representations, warranties and covenants made herein by the
Investor, the offer and sale of the Securities in accordance with the terms and
conditions of this Agreement is exempt from the registration requirements of the
Securities Act pursuant to Section 4(a)(2) and Rule 506 of Regulation D;
provided, however, that at the request of and with the express agreement of the
Investor, the Securities will be delivered to the Investor via book entry
through DTC and will not bear legends noting restrictions as to resale of such
securities under federal or state securities laws, nor will any such securities
be subject to stop transfer instructions. Neither the offer or sale of the
Securities pursuant to, nor the Company’s performance of its obligations under,
the Transaction Documents to which it is a party shall (i) result in the
creation or imposition of any liens, charges, claims or other encumbrances upon
the Securities, or (ii) entitle the holders of any outstanding shares of capital
stock of the Company to preemptive or other rights to subscribe to or acquire
the shares of Common Stock or other securities of the Company.

 

Section 5.29.     No General Solicitation or Advertising. Neither the Company,
nor any of its Subsidiaries or Affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Securities.

 

Section 5.30.     No Integrated Offering. None of the Company, its Subsidiaries
or any of their Affiliates, nor any Person acting on their behalf has, directly
or indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would require registration of the
issuance of any of the Securities under the Securities Act, whether through
integration with prior offerings or otherwise, or cause this offering of the
Securities to require approval of stockholders of the Company under any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of the Trading Market. None of the Company, its
Subsidiaries, their Affiliates nor any Person acting on their behalf will take
any action or steps referred to in the preceding sentence that would require
registration of the issuance of any of the Securities under the Securities Act
or cause the offering of any of the Securities to be integrated with other
offerings.

 

Section 5.31.     Dilutive Effect. The Company is aware and acknowledges that
issuance of the Securities could cause dilution to existing stockholders and
could significantly increase the outstanding number of shares of Common Stock.
The Company further acknowledges that its obligation to issue Shares pursuant to
the terms of a Fixed Request in accordance with this Agreement is, in each case,
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the Company.

 

 
23

--------------------------------------------------------------------------------

 

 

Section 5.32.     Manipulation of Price. Neither the Company nor any of its
officers, directors or Affiliates has, and, to the Knowledge of the Company, no
Person acting on their behalf has, (i) taken, directly or indirectly, any action
designed or intended to cause or to result in the stabilization or manipulation
of the price of any security of the Company, or which caused or resulted in, or
which would in the future reasonably be expected to cause or result in, the
stabilization or manipulation of the price of any security of the Company, in
each case to facilitate the sale or resale of any of the Securities, or (ii)
sold, bid for, purchased, or paid any compensation for soliciting purchases of,
any of the Securities. Neither the Company nor any of its officers, directors or
Affiliates will during the term of this Agreement, and, to the Knowledge of the
Company, no Person acting on their behalf will during the term of this
Agreement, take any of the actions referred to in the immediately preceding
sentence.

 

Section 5.33.     Securities Act. Except as set forth in the Disclosure
Schedule, the Company has complied and shall comply with all applicable federal
and state securities laws in connection with the offer, issuance and sale of the
Securities hereunder, including, without limitation, the applicable requirements
of the Securities Act. The Registration Statement, upon filing with the
Commission and at the time it is declared effective by the Commission, shall
satisfy all of the requirements of the Securities Act to register the resale of
the Registrable Securities by the Investor in accordance with the Registration
Rights Agreement on a delayed or continuous basis under Rule 415 under the
Securities Act at then-prevailing market prices, and not fixed prices. The
Company is not, and has not previously been at any time, an issuer identified
in, or subject to, Rule 144(i).

 

Section 5.34.     Listing and Maintenance Requirements; DTC Eligibility. The
Company’s Common Stock is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, and the Company has taken no action designed to, or which to its
Knowledge is likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act, nor has the Company received any
notification that the Commission is contemplating terminating such registration.
The Company has not, in the 12 months preceding the Closing Date, received
notice from any Trading Market on which the Common Stock is or has been listed
or quoted to the effect that the Company is not in compliance with the listing
or maintenance requirements of such Trading Market. As of the Closing Date, the
Company is in compliance with all such listing and maintenance requirements. The
Common Stock may be issued and transferred electronically to third parties via
DTC through its Deposit/Withdrawal at Custodian (DWAC) system. The Company has
not received notice from DTC to the effect that a suspension of, or restriction
on, accepting additional deposits of the Common Stock, electronic trading or
book-entry services by DTC with respect to the Common Stock is being imposed or
is contemplated.

 

Section 5.35.     Application of Takeover Protections. The Company and its Board
of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s Charter or the laws of its state of
incorporation that is or could become applicable to the Investor as a result of
the Investor and the Company fulfilling their respective obligations or
exercising their respective rights under the Transaction Documents (as
applicable), including, without limitation, as a result of the Company’s
issuance of the Securities and the Investor’s ownership of the Securities.

 

 
24

--------------------------------------------------------------------------------

 

 

Section 5.36.     Foreign Corrupt Practices Act. None of the Company, any
Subsidiary or, to the Knowledge of the Company, any director, officer, agent,
employee, affiliate or other Person acting on behalf of the Company or any of
its Subsidiaries, is aware of or has taken any action, directly or indirectly,
that would result in a violation by such Persons of the Foreign Corrupt
Practices Act of 1977, as amended, and the rules and regulations thereunder
(collectively, the “FCPA”), including, without limitation, making use of the
mails or any means or instrumentality of interstate commerce corruptly in
furtherance of an offer, payment, promise to pay or authorization of the payment
of any money, or other property, gift, promise to give, or authorization of the
giving of anything of value to any “foreign official” (as such term is defined
in the FCPA) or any foreign political party or official thereof or any candidate
for foreign political office, in contravention of the FCPA. The Company and the
Subsidiaries have conducted their respective businesses in compliance with the
FCPA and have instituted and maintain policies and procedures designed to
ensure, and which are reasonably expected to continue to ensure, continued
compliance therewith.

 

Section 5.37.     Money Laundering Laws. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance with
applicable financial recordkeeping and reporting requirements of the Currency
and Foreign Transactions Reporting Act of 1970, as amended, the money laundering
statutes of all jurisdictions, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued, administered or
enforced by any governmental agency (collectively, the “Money Laundering Laws”)
and no action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any of its
Subsidiaries with respect to the Money Laundering Laws is pending or, to the
Knowledge of the Company, threatened.

 

Section 5.38.     OFAC. None of the Company, any Subsidiary or, to the Knowledge
of the Company, any director, officer, agent, employee, affiliate or Person
acting on behalf of the Company or any of its Subsidiaries is currently subject
to any U.S. sanctions administered by the Office of Foreign Assets Control of
the U.S. Treasury Department (“OFAC”); and the Company will not directly or
indirectly use the proceeds of the offering, or lend, contribute or otherwise
make available such proceeds to any subsidiary, joint venture partner or other
Person, for the purpose of financing the activities of any Person currently
subject to any U.S. sanctions administered by OFAC.

 

Section 5.39.     No Disqualification Events. None of the Company, any of its
predecessors, any affiliated issuer, any director, executive officer, other
officer of the Company participating in the offering contemplated hereby, any
beneficial owner of 20% or more of the Company's outstanding voting equity
securities, calculated on the basis of voting power, nor any promoter (as that
term is defined in Rule 405 under the Securities Act) connected with the Company
in any capacity at the time of sale (each, an “Issuer Covered Person”) is
subject to any of the “Bad Actor” disqualifications described in Rule
506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”),
except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) under
the Securities Act. The Company has exercised reasonable care to determine
whether any Issuer Covered Person is subject to a Disqualification Event.

 

 
25

--------------------------------------------------------------------------------

 

 

Section 5.40.     Acknowledgement Regarding Investor’s Acquisition of
Securities. The Company acknowledges and agrees that the Investor is acting
solely in the capacity of an arm’s length purchaser with respect to this
Agreement and the transactions contemplated by the Transaction Documents. The
Company further acknowledges that the Investor is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
this Agreement and the transactions contemplated by the Transaction Documents,
and any advice given by the Investor or any of its representatives or agents in
connection therewith is merely incidental to the Investor’s acquisition of the
Securities. The Company further represents to the Investor that the Company’s
decision to enter into the Transaction Documents to which it is a party has been
based solely on the independent evaluation of the transactions contemplated
thereby by the Company and its representatives. The Company acknowledges and
agrees that the Investor has not made and does not make any representations or
warranties with respect to the transactions contemplated by the Transaction
Documents other than those specifically set forth in Article IV of this
Agreement.

 

ARTICLE VI
ADDITIONAL COVENANTS

 

The Company covenants with the Investor, and the Investor covenants with the
Company, as follows, which covenants of one party are for the benefit of the
other party, during the Investment Period:

 

Section 6.1.     Securities Compliance. The Company shall notify the Commission
and the Trading Market, if and as applicable, in accordance with their
respective rules and regulations, of the transactions contemplated by the
Transaction Documents, and shall take all necessary action, undertake all
proceedings and obtain all registrations, permits, consents and approvals for
the legal and valid issuance of the Securities to the Investor in accordance
with the terms of the Transaction Documents, as applicable.

 

Section 6.2.     Reservation of Common Stock. The Company has available and the
Company shall reserve and keep available at all times, free of preemptive and
other similar rights of stockholders, the requisite aggregate number of
authorized but unissued shares of Common Stock to enable the Company to timely
effect the issuance, sale and delivery in full to the Investor of all Securities
to be issued and delivered in respect of all Fixed Requests under this
Agreement, in any case prior to the issuance to the Investor of such Securities.
The number of shares of Common Stock so reserved from time to time, as
theretofore increased or reduced as hereinafter provided, may be reduced by the
number of shares of Common Stock actually delivered pursuant to this Agreement.

 

 
26

--------------------------------------------------------------------------------

 

 

Section 6.3.     Registration and Listing. The Company shall use its reasonable
best efforts to cause the Common Stock to continue to be registered as a class
of securities under Sections 12(b) or 12(g) of the Exchange Act, and to comply
with its reporting and filing obligations under the Exchange Act, and shall not
take any action or file any document (whether or not permitted by the Securities
Act or the Exchange Act) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein. The Company shall use its
reasonable best efforts to continue the listing and trading of its Common Stock
and the listing of the Securities purchased by the Investor hereunder on the
Trading Market and to comply with the Company’s reporting, filing and other
obligations under the bylaws, listed securities maintenance standards and other
rules and regulations of the Trading Market. The Company shall not take any
action which could be reasonably expected to result in the delisting or
suspension of the Common Stock on the Trading Market. If the Company receives
any final and non-appealable notice that the listing or quotation of the Common
Stock on the Trading Market shall be terminated on a date certain, the Company
shall promptly (and in any case within 48 hours) notify the Investor of such
fact in writing and shall use its reasonable best efforts to cause the Common
Stock to be listed or quoted on another Trading Market prior to such date
certain.

 

Section 6.4.     Compliance with Laws.

 

(i)     The Company shall comply, and cause each Subsidiary to comply, (a) with
all laws, rules, regulations and orders applicable to the business and
operations of the Company and its Subsidiaries, except as would not have a
Material Adverse Effect and (b) with all applicable provisions of the Securities
Act and the Exchange Act and the rules and regulations of the Trading Market.
Without limiting the foregoing, neither the Company, nor any of its
Subsidiaries, nor to the Knowledge of the Company, any of their respective
directors, officers, agents, employees or any other Persons acting on their
behalf shall, in connection with the operation of the Company’s and its
Subsidiaries’ respective businesses, (1) use any corporate funds for unlawful
contributions, payments, gifts or entertainment or to make any unlawful
expenditures relating to political activity to government officials, candidates
or members of political parties or organizations, (2) pay, accept or receive any
unlawful contributions, payments, expenditures or gifts, or (3) violate or
operate in noncompliance with any export restrictions, anti-boycott regulations,
embargo regulations or other applicable domestic or foreign laws and
regulations, including, without limitation, the FCPA and the Money Laundering
Laws.

 

(ii)     The Investor shall comply with all laws, rules, regulations and orders
applicable to the performance by it of its obligations under this Agreement and
its investment in the Securities, except as would not, individually or in the
aggregate, prohibit or otherwise interfere with the ability of the Investor to
enter into and perform its obligations under this Agreement in any material
respect. Without limiting the foregoing, the Investor shall comply with all
applicable provisions of the Securities Act and the Exchange Act, including
Regulation M thereunder, and any applicable securities laws of any non-U.S.
jurisdictions.

 

Section 6.5.     Keeping of Records and Books of Account; Due Diligence.

 

(i)     The Company shall keep and cause each Subsidiary to keep adequate
records and books of account, in which complete entries shall be made in
accordance with GAAP consistently applied, reflecting all financial transactions
of the Company and its Subsidiaries, and in which, for each fiscal year, all
proper reserves for depreciation, depletion, obsolescence, amortization, taxes,
bad debts and other purposes in connection with its business shall be made. The
Company shall maintain a system of internal accounting controls that (a) pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the Company; (b)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of
the Company; and (c) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the Company’s
assets that could have a material effect on the Company’s financial statements
(it being acknowledged and agreed that the identification by the Company and/or
its independent registered public accounting firm of any “significant
deficiencies” or “material weaknesses” (each as defined by the Public Company
Accounting Oversight Board) in the Company’s internal controls over its
financial reporting shall not, in and of itself, constitute a breach of this
Section 6.5(i)).

 

 
27

--------------------------------------------------------------------------------

 

 

(ii)     Subject to the requirements of Section 6.16 of this Agreement, from
time to time from and after the Closing Date, the Company shall make available
for inspection and review by the Investor during normal business hours and after
reasonable notice, customary documentation reasonably requested by the Investor
and/or its appointed counsel or advisors to conduct due diligence; provided,
however, that after the Closing Date, the Investor’s continued due diligence
shall not be a condition to the issuance of any Fixed Request Notice or the
settlement of any Fixed Request.

 

Section 6.6.     Limitations on Holdings and Issuances. Notwithstanding any
other provision of this Agreement, the Investor shall not purchase or acquire,
or be obligated to purchase or acquire, any shares of Common Stock pursuant to
this Agreement which, when aggregated with all other shares of Common Stock then
beneficially owned (as calculated pursuant to Section 13(d) of the Exchange Act
and Rule 13d-3 promulgated thereunder) by the Investor and its Affiliates, would
result in the beneficial ownership by the Investor of more than 9.99% of the
then issued and outstanding shares of Common Stock (the “Ownership Limitation”).
Upon the written or oral request of the Investor, the Company shall promptly
(but not later than the next Trading Day) confirm orally or in writing to the
Investor the number of shares of Common Stock then outstanding. The Investor and
the Company shall each cooperate in good faith in the determinations required
hereby and the application hereof. The Investor’s written certification to the
Company of the applicability of the Ownership Limitation, and the resulting
effect thereof hereunder at any time, shall be conclusive with respect to the
applicability thereof and such result absent manifest error. The provisions of
this Section 6.6 shall be construed and implemented in a manner otherwise than
in strict conformity with the terms of this Section 6.6 to the extent necessary
to properly give effect to the limitations contained in this Section 6.6. The
limitations contained in this Section 6.6 may not be waived by the Company or
the Investor.

 

Section 6.7.     Other Agreements and Alternate Transactions.

 

(i)     The Company shall not enter into, announce or recommend to its
stockholders any agreement, plan, arrangement or transaction in or of which the
terms thereof would restrict, materially delay, conflict with or impair the
ability or right of the Company to perform its obligations under the Transaction
Documents to which it is a party, including, without limitation, the obligation
of the Company to deliver (i) the Commitment Shares to the Investor not later
than 4:00 p.m. (New York time) on the second Trading Day immediately following
the Closing Date, and (ii) the Shares to the Investor in respect of a Fixed
Request on the applicable Settlement Date. For the avoidance of doubt, nothing
in this Section 6.7(i) shall in any way limit the Company’s right to terminate
this Agreement in accordance with Section 8.1 (subject in all cases to Section
8.3).

 

 
28

--------------------------------------------------------------------------------

 

 

(ii)     If the Company enters into any agreement, plan, arrangement or
transaction with a third party or seeks to utilize any existing agreement, plan
or arrangement with a third party, in each case the principal purpose of which
is to implement, effect or consummate, at any time during the period beginning
on the first Trading Day of any Pricing Period and ending on the second Trading
Day next following the applicable Settlement Date (the “Reference Period”), an
Alternate Transaction that does not constitute an Acceptable Transaction, the
Company shall provide prompt notice thereof (an “Alternate Transaction Notice”)
to the Investor; provided, however, that such Alternate Transaction Notice must
be received by the Investor not later than the earlier of (a) 48 hours after the
Company’s execution of any agreement, plan, arrangement or transaction relating
to such Alternate Transaction (or, with respect to any existing agreement, plan
or arrangement, 48 hours after the Company has determined to utilize any such
existing agreement, plan or arrangement to implement, effect or consummate such
Other Financing) and (b) the second Trading Day immediately preceding the
applicable Settlement Date with respect to the applicable Fixed Request Notice.
If required under applicable law, including, without limitation, Regulation FD
promulgated by the Commission, or under the applicable rules and regulations of
the Trading Market, the Company shall simultaneously publicly disclose the
information included in any Alternate Transaction Notice in accordance with
Regulation FD and the applicable rules and regulations of the Trading Market.
For purposes of this Section 6.7(ii), any press release issued by, or Commission
Document filed by, the Company shall constitute sufficient notice, provided that
it is issued or filed, as the case may be, within the time requirements set
forth in the first sentence (including the provisos thereto) of this Section
6.7(ii) for an Alternate Transaction Notice. With respect to any Reference
Period for which the Company is required to provide an Alternate Transaction
Notice pursuant to the first sentence of this Section 6.7(ii), the Investor
shall purchase the Shares subject to the applicable Fixed Request at the lower
of (x) the price therefor in accordance with the terms of this Agreement or (y)
the third party’s per share purchase price (or exercise or conversion price, as
the case may be) in connection with the Alternate Transaction, net of such third
party’s discounts, Warrant Value and fees.

 

 
29

--------------------------------------------------------------------------------

 

 

(iii)     For all purposes of this Agreement, an “Alternate Transaction” shall
mean (w) the issuance of Common Stock for a purchase price less than, or the
issuance of securities convertible into or exchangeable for Common Stock at an
exercise or conversion price (as the case may be) less than, the then Current
Market Price of the Common Stock (including, without limitation, pursuant to any
“equity line” or other financing that is substantially similar to the financing
provided for under this Agreement, or pursuant to any other transaction in which
the purchase, conversion or exchange price for such Common Stock is determined
using a floating discount or other post-issuance adjustable discount to the then
Current Market Price (any such transaction, a “Similar Financing”)), in each
case, after all fees, discounts, and commissions associated with the transaction
(a “Below Market Offering”); (x) an “at-the-market” offering of Common Stock or
securities convertible into or exchangeable for Common Stock pursuant to Rule
415(a)(4) under the Securities Act (an “ATM”); (y) the implementation by the
Company of any mechanism in respect of any securities convertible into or
exchangeable for Common Stock for the reset of the purchase price of the Common
Stock to below the then Current Market Price of the Common Stock (including,
without limitation, any antidilution or similar adjustment provisions in respect
of any Company securities, but specifically excluding customary antidilution
adjustments for stock splits, stock dividends, stock combinations,
recapitalizations, reclassifications and similar events) (a “Price Reset
Provision”); or (z) the issuance of options, warrants or similar rights of
subscription or the issuance of convertible equity or debt securities, in each
case not constituting an Acceptable Transaction. For all purposes of this
Agreement, an “Acceptable Transaction” shall mean the issuance by the Company
of: (1) debt securities or any class or series of preferred stock of the
Company, in each case that are not convertible into or exchangeable for Common
Stock or securities convertible into or exchangeable for Common Stock; (2)
shares of Common Stock or securities convertible into or exchangeable for Common
Stock other than in connection with a Below Market Offering or an ATM, and the
issuance of shares of Common Stock upon the conversion, exercise or exchange
thereof; (3) shares of Common Stock or securities convertible into or
exchangeable for Common Stock in connection with an underwritten public offering
of equity securities of the Company or a registered direct public offering of
equity securities of the Company, in each case where the price per share of such
Common Stock (or the conversion or exercise price of such securities, as
applicable) is fixed concurrently with the execution of definitive documentation
relating to such offering, and the issuance of shares of Common Stock upon the
conversion, exercise or exchange thereof; (4) shares of Common Stock or
securities convertible into or exchangeable for Common Stock in connection with
awards under the Company’s benefit and equity plans and arrangements or
shareholder rights plan (as applicable), and the issuance of shares of Common
Stock upon the conversion, exercise or exchange thereof; (5) shares of Common
Stock issuable upon the conversion, exercise or exchange of equity awards or
convertible, exercisable or exchangeable securities outstanding as of the
Closing Date; (6) shares of Common Stock in connection with stock splits, stock
dividends, stock combinations, recapitalizations, reclassifications and similar
events; (7) shares of Common Stock or securities convertible into or exercisable
or exchangeable for Common Stock issued in connection with the acquisition,
license or sale of one or more other companies, equipment, technologies, other
assets or lines of business, and the issuance of shares of Common Stock upon the
conversion, exercise or exchange thereof; (8) shares of Common Stock or
securities convertible into or exercisable or exchangeable for Common Stock or
similar rights to subscribe for the purchase of shares of Common Stock in
connection with technology sharing, collaboration, partnering, licensing,
research and joint development agreements (or amendments thereto) with third
parties, and the issuance of shares of Common Stock upon the conversion,
exercise or exchange thereof; (9) shares of Common Stock or securities
convertible into or exchangeable for Common Stock to employees, directors,
consultants and/or advisors as consideration for services rendered or to be
rendered, and the issuance of shares of Common Stock upon the conversion,
exercise or exchange thereof; and (10) shares of Common Stock or securities
convertible into or exchangeable for Common Stock issued in connection with
capital or equipment financings and/or real property lease arrangements, and the
issuance of shares of Common Stock upon the conversion, exercise or exchange
thereof.

 

Section 6.8.     Corporate Existence. The Company shall take all steps necessary
to preserve and continue the corporate existence of the Company; provided,
however, that, except as provided in Section 6.9, nothing in this Agreement
shall be deemed to prohibit the Company from engaging in any Fundamental
Transaction with another Person. For the avoidance of doubt, nothing in this
Section 6.8 shall in any way limit the Company’s right to terminate this
Agreement in accordance with Section 8.1 (subject in all cases to Section 8.3).

 

 
30

--------------------------------------------------------------------------------

 

 

Section 6.9.     Fundamental Transaction. If a Fixed Request Notice has been
delivered to the Investor and the transactions contemplated therein have not yet
been fully settled in accordance with the terms and conditions of this
Agreement, the Company shall not effect any Fundamental Transaction until the
expiration of five Trading Days following the Settlement Date with respect to
such Fixed Request Notice.

 

Section 6.10.     Delivery of Registration Statement and Prospectus; Subsequent
Changes. In accordance with the Registration Rights Agreement, the Company shall
deliver or make available to the Investor and its counsel, without charge, an
electronic copy of the Registration Statement, the Prospectus and all amendments
and supplements to the Registration Statement or Prospectus that are filed with
the Commission during any period in which a Prospectus (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 the Registrable
Securities, in each case as soon as reasonably practicable after the filing
thereof with the Commission. The Company shall provide the Investor a reasonable
opportunity to comment on a draft of each such document and shall give due
consideration to all such comments. The Company consents to the use of the
Prospectus (and of any Prospectus Supplement thereto) 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 the Prospectus (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 the Registrable
Securities. If during such period of time any event shall occur that in the
reasonable judgment of the Company and its counsel is required to be set forth
in the Registration Statement, the Prospectus or any Prospectus Supplement or
should be set forth therein in order to make the statements made therein (in the
case of the Prospectus or any Prospectus Supplement, in light of the
circumstances under which they were made) not misleading, or if it is necessary
to amend the Registration Statement or supplement or amend the Prospectus or any
Prospectus Supplement to comply with the Securities Act or any other applicable
law or regulation, the Company shall forthwith (i) notify the Investor to
suspend the resale of Registrable Securities during such period and (ii) prepare
and file with the Commission an appropriate amendment to the Registration
Statement or Prospectus Supplement to the Prospectus, and shall expeditiously
furnish or make available to the Investor an electronic copy thereof, so as to
correct such statement or omission or effect such compliance.

 

Section 6.11.     Amendments to the Registration Statement; Prospectus
Supplements. Except as provided in this Agreement and other than periodic
reports required to be filed pursuant to the Exchange Act, the Company shall not
file with the Commission any amendment to the Registration Statement that
relates to the Investor, the Transaction Documents or the transactions
contemplated thereby or file with the Commission any Prospectus Supplement that
relates to the Investor, the Transaction Documents or the transactions
contemplated thereby with respect to which (a) the Investor shall not previously
have been advised, or (b) the Company shall not have given due consideration to
any comments thereon received from the Investor or its counsel, unless it is
necessary to amend the Registration Statement or make any supplement to the
Prospectus to comply with the Securities Act or any other applicable law or
regulation, in which case the Company shall promptly so inform the Investor, the
Investor shall be provided with a reasonable opportunity to review and comment
upon any disclosure relating to the Investor and the Company shall expeditiously
furnish to the Investor an electronic copy thereof. In addition, for so long as,
in the reasonable opinion of counsel for the Investor, the Prospectus (or in
lieu thereof, the notice referred to in Rule 173(a) under the Securities Act) is
required to be delivered in connection with any sales of Registrable Securities
by the Investor, the Company shall not file any Prospectus Supplement without
delivering or making available a copy of such Prospectus Supplement to the
Investor promptly.

 

 
31

--------------------------------------------------------------------------------

 

 

Section 6.12.     Stop Orders. The Company shall notify the Investor as soon as
possible (but in no event later than 24 hours), and confirm in writing, upon its
becoming aware of the occurrence of any of the following events in respect of
the Registration Statement or related Prospectus or Prospectus Supplement
relating to an offering of Registrable Securities: (i) receipt of any request by
the Commission or any other federal or state governmental authority for any
additional information relating to the Registration Statement, the Prospectus or
any Prospectus Supplement, or for any amendment of or supplement to the
Registration Statement, the Prospectus, or any Prospectus Supplement; (ii) the
issuance by the Commission or any other federal or state governmental authority
of any stop order suspending the effectiveness of the Registration Statement or
prohibiting or suspending the use of the Prospectus or any Prospectus
Supplement, or of the suspension of qualification or exemption from
qualification of the Securities for offering or sale in any jurisdiction, or the
initiation or contemplated initiation of any proceeding for such purpose; and
(iii) any event or the existence of any condition or state of facts, which makes
any statement of a material fact made in the Registration Statement, the
Prospectus or any Prospectus Supplement untrue or which requires the making of
any additions to or changes to the statements then made in the Registration
Statement, the Prospectus or any Prospectus Supplement in order to state a
material fact required by the Securities Act to be stated therein or necessary
in order to make the statements then made therein (in the case of the Prospectus
or any Prospectus Supplement, in light of the circumstances under which they
were made) not misleading, or which requires an amendment to the Registration
Statement or a supplement to the Prospectus or any Prospectus Supplement to
comply with the Securities Act or any other law (other than the transactions
contemplated by any Fixed Request Notice and the settlement thereof). The
Company shall not be required to disclose to the Investor the substance or
specific reasons of any of the events set forth in clauses (i) through (iii) of
the immediately preceding sentence, but rather, shall only be required to
disclose that the event has occurred. The Company shall not issue any Fixed
Request during the continuation of any of the foregoing events. If at any time
the Commission or any other federal or state governmental authority shall issue
any stop order suspending the effectiveness of the Registration Statement or
prohibiting or suspending the use of the Prospectus or any Prospectus
Supplement, the Company shall use commercially reasonable efforts to obtain the
withdrawal of such order at the earliest possible time.

 

 
32

--------------------------------------------------------------------------------

 

 

Section 6.13.     Selling Restrictions.

 

(i)     Except as expressly set forth below, the Investor covenants that from
and after the Closing Date through and including the Trading Day next following
the expiration or termination of this Agreement (the “Restricted Period”),
neither the Investor nor any of its Affiliates nor any entity managed or
controlled by the Investor (collectively, the “Restricted Persons” and each of
the foregoing is referred to herein as a “Restricted Person”) shall, directly or
indirectly, (x) engage in any Short Sales involving the Company’s securities or
(y) grant any option to purchase, or acquire any right to dispose of or
otherwise dispose for value of, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for any shares of Common Stock,
or enter into any swap, hedge or other similar agreement that transfers, in
whole or in part, the economic risk of ownership of the Common Stock.
Notwithstanding the foregoing, it is expressly understood and agreed that
nothing contained herein shall (without implication that the contrary would
otherwise be true) prohibit any Restricted Person during the Restricted Period
from: (1) selling “long” (as defined under Rule 200 promulgated under Regulation
SHO) the Securities; or (2) selling a number of shares of Common Stock equal to
the number of Shares that such Restricted Person is or may be obligated to
purchase under a pending Fixed Request Notice but has not yet taken possession
of so long as such Restricted Person (or the Broker-Dealer, as applicable)
delivers the Shares purchased pursuant to such Fixed Request Notice to the
purchaser thereof or the applicable Broker-Dealer; provided, however, such
Restricted Person (or the applicable Broker-Dealer, as applicable) shall not be
required to so deliver any such Shares subject to such Fixed Request Notice if
the Company fails for any reason to deliver such Shares to the Investor on the
applicable Settlement Date upon the terms and subject to the provisions of this
Agreement.

 

(ii)     In addition to the foregoing, in connection with any sale of Securities
(including any sale permitted by paragraph (i) above), the Investor shall comply
in all respects with all applicable laws, rules, regulations and orders,
including, without limitation, the requirements of the Securities Act and the
Exchange Act.

 

Section 6.14.     Effective Registration Statement. During the Investment
Period, the Company shall use its commercially reasonable efforts to maintain
the continuous effectiveness of the Registration Statement under the Securities
Act.

 

Section 6.15.     Blue Sky. The Company shall take such action, if any, as is
necessary in order to obtain an exemption for or to qualify the Securities for
sale to the Investor pursuant to the Transaction Documents, at the request of
the Investor, and the subsequent resale of Registrable Securities by the
Investor, in each case, under applicable state securities or “Blue Sky” laws and
shall provide evidence of any such action so taken to the Investor from time to
time following the Closing Date; provided, however, that 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 6.15, (y) subject itself to general taxation in any
such jurisdiction, or (z) file a general consent to service of process in any
such jurisdiction.

 

Section 6.16.     Non-Public Information. Neither the Company or any of its
Subsidiaries, nor any of their respective directors, officers, employees or
agents shall disclose any material non-public information about the Company to
the Investor, unless a simultaneous public announcement thereof is made by the
Company in the manner contemplated by Regulation FD. In the event of a breach of
the foregoing covenant by the Company or any of its Subsidiaries, or any of
their respective directors, officers, employees and agents (as determined in the
reasonable good faith judgment of the Investor), (i) the Investor shall promptly
provide written notice of such breach to the Company and (ii) after such notice
has been provided to the Company and, provided that the Company shall have
failed to publicly disclose such material, non-public information within 24
hours following demand therefor by the Investor, in addition to any other remedy
provided herein or in the other Transaction Documents, the Investor shall have
the right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, non-public information without the
prior approval by the Company, any of its Subsidiaries, or any of their
respective directors, officers, employees or agents. The Investor shall not have
any liability to the Company, any of its Subsidiaries, or any of their
respective directors, officers, employees, stockholders or agents, for any such
disclosure.

 

 
33

--------------------------------------------------------------------------------

 

 

Section 6.17.     Broker/Dealer. The Investor shall use one or more
broker-dealers to effectuate all sales, if any, of Securities that it may
purchase or otherwise acquire from the Company pursuant to the Transaction
Documents, as applicable, which (or whom) shall be unaffiliated with the
Investor and not then currently engaged or used by the Company (collectively,
the “Broker-Dealer”). The Investor shall, from time to time, provide the Company
with all information regarding the Broker-Dealer reasonably requested by the
Company. The Investor shall be solely responsible for all fees and commissions
of the Broker-Dealer, which shall not exceed customary brokerage fees and
commissions.

 

Section 6.18.     Disclosure Schedule.

 

(i)     The Company may, from time to time, update the Disclosure Schedule as
may be required to satisfy the condition set forth in Section 7.2(i). For
purposes of this Section 6.18, any disclosure made in a schedule to the
Compliance Certificate substantially in the form attached hereto as Exhibit D
shall be deemed to be an update of the Disclosure Schedule. Notwithstanding
anything in this Agreement to the contrary, no update to the Disclosure Schedule
pursuant to this Section 6.18 shall cure any breach of a representation or
warranty of the Company contained in this Agreement and made prior to the update
and shall not affect any of the Investor’s rights or remedies with respect
thereto.

 

(ii)     Notwithstanding anything to the contrary contained in the Disclosure
Schedule or in this Agreement, the information and disclosure contained in any
Schedule of the Disclosure Schedule shall be deemed to be disclosed and
incorporated by reference in any other Schedule of the Disclosure Schedule as
though fully set forth in such Schedule for which applicability of such
information and disclosure is readily apparent on its face. The fact that any
item of information is disclosed in the Disclosure Schedule shall not be
construed to mean that such information is required to be disclosed by this
Agreement. Except as expressly set forth in this Agreement, such information and
the thresholds (whether based on quantity, qualitative characterization, dollar
amounts or otherwise) set forth herein shall not be used as a basis for
interpreting the terms “material” or “Material Adverse Effect” or other similar
terms in this Agreement.

 

Section 6.19.     Bring Down Opinions. Within five (5) Trading Days following
the effective date of any post-effective amendment to the Registration
Statement, the Company shall cause to be furnished to the Investor an opinion
“bring down” from outside counsel to the Company substantially in the form
previously agreed between the Company and the Investor, modified, as necessary,
to relate to the Registration Statement and the Prospectus as then amended or
supplemented (each such opinion, a “Bring Down Opinion”).

 

 
34

--------------------------------------------------------------------------------

 

 

ARTICLE VII
CONDITIONS TO CLOSING AND CONDITIONS TO THE SALE AND
PURCHASE OF THE SHARES

 

Section 7.1.     Conditions Precedent to Closing. The Closing is subject to the
satisfaction of each of the conditions set forth in this Section 7.1.

 

(i)     Accuracy of the Investor’s Representations and Warranties. The
representations and warranties of the Investor contained in this Agreement (a)
that are not qualified by “materiality” shall be true and correct in all
material respects as of the Closing Date, except to the extent such
representations and warranties are as of another date, in which case, such
representations and warranties shall be true and correct in all material
respects as of such other date and (b) that are qualified by “materiality” shall
be true and correct as of the Closing Date, except to the extent such
representations and warranties are as of another date, in which case, such
representations and warranties shall be true and correct as of such other date.

 

(ii)     Accuracy of the Company’s Representations and Warranties. The
representations and warranties of the Company contained in this Agreement (a)
that are not qualified by “materiality” or “Material Adverse Effect” shall be
true and correct in all material respects as of the Closing Date, except to the
extent such representations and warranties are as of another date, in which
case, such representations and warranties shall be true and correct in all
material respects as of such other date and (b) that are qualified by
“materiality” or “Material Adverse Effect” shall be true and correct as of the
Closing Date, except to the extent such representations and warranties are as of
another date, in which case, such representations and warranties shall be true
and correct as of such other date.

 

(iii)     Payment of Document Preparation Fee; Issuance of Commitment Shares. On
or prior to the Closing Date, the Company shall have paid by wire transfer of
immediately available funds to an account designated by the Investor’s counsel,
the Document Preparation Fee in accordance with Section 10.1(i) hereof, all of
which Document Preparation Fee shall be non-refundable, regardless of whether
any Fixed Requests are issued by the Company or settled hereunder or any
termination of this Agreement. On the Closing Date, the Company shall deliver
irrevocable instructions to its transfer agent to issue to the Investor, not
later than 4:00 p.m. (New York City time) on the second Trading Day immediately
following the Closing Date, a certificate representing the Commitment Shares in
the name of the Investor or its designee (in which case such designee name shall
have been provided to the Company prior to the Closing Date), in consideration
for the Investor’s execution and delivery of this Agreement. Such certificate
shall be delivered to the Investor by overnight courier at its address set forth
in Section 10.4 hereof. For the avoidance of doubt, all of the Commitment Shares
shall be fully earned as of the Closing Date regardless of whether any Fixed
Requests are issued by the Company or settled hereunder or any termination of
this Agreement.

 

(iv)     Closing Deliverables. At the Closing, counterpart signature pages of
this Agreement and the Registration Rights Agreement executed by each of the
parties hereto shall be delivered as provided in Section 2.2. Simultaneously
with the execution and delivery of this Agreement and the Registration Rights
Agreement, the Investor’s counsel shall have received (a) an opinion of outside
counsel to the Company, dated the Closing Date, in the form mutually agreed to
by the parties hereto prior to the date hereof, (b) a certificate from the
Company, dated the Closing Date, in the form of Exhibit C hereto, and (c) a copy
of the irrevocable instructions to the Company’s transfer agent regarding the
issuance to the Investor of the certificate representing the Commitment Shares.

 

 
35

--------------------------------------------------------------------------------

 

 

Section 7.2.     Conditions Precedent to a Fixed Request. The right of the
Company to deliver a Fixed Request Notice and the obligation of the Investor to
accept a Fixed Request Notice and to acquire and pay for the Shares in
accordance therewith is subject to the satisfaction, at each Fixed Request
Exercise Date, of each of the conditions set forth in this Section 7.2.

 

(i)     Accuracy of the Company’s Representations and Warranties. The
representations and warranties of the Company contained in this Agreement (a)
that are not qualified by “materiality” or “Material Adverse Effect” shall have
been true and correct in all material respects when made and shall be true and
correct in all material respects as of the applicable Fixed Request Exercise
Date with the same force and effect as if made on such date, except to the
extent such representations and warranties are as of another date, in which
case, such representations and warranties shall be true and correct in all
material respects as of such other date and (b) that are qualified by
“materiality” or “Material Adverse Effect” shall have been true and correct when
made and shall be true and correct as of the applicable Fixed Request Exercise
Date with the same force and effect as if made on such date, except to the
extent such representations and warranties are as of another date, in which
case, such representations and warranties shall be true and correct as of such
other date.

 

(ii)     Performance of the Company. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement and the Registration Rights Agreement to
be performed, satisfied or complied with by the Company at or prior to the
applicable Fixed Request Exercise Date. The Company shall deliver to the
Investor on the applicable Settlement Date the Compliance Certificate
substantially in the form attached hereto as Exhibit D.

 

(iii)     Registration Statement Effective. The Registration Statement covering
the resale by the Investor of the Registrable Securities shall have been
declared effective under the Securities Act by the Commission and shall remain
effective, and the Investor shall be permitted to utilize the Prospectus therein
to resell (a) all of the Commitment Shares, (b) all of the Shares issued
pursuant to all prior Fixed Request Notices and (c) all of the Shares issuable
pursuant to the applicable Fixed Request Notice.

 

 
36

--------------------------------------------------------------------------------

 

 

(iv)     No Material Notices. None of the following events shall have occurred
and be continuing: (a) receipt of any request by the Commission or any other
federal or state governmental authority for any additional information relating
to the Registration Statement, the Prospectus or any Prospectus Supplement, or
for any amendment of or supplement to the Registration Statement, the
Prospectus, or any Prospectus Supplement; (b) the issuance by the Commission or
any other federal or state governmental authority of any stop order suspending
the effectiveness of the Registration Statement or prohibiting or suspending the
use of the Prospectus or any Prospectus Supplement, or of the suspension of
qualification or exemption from qualification of the Securities for offering or
sale in any jurisdiction, or the initiation or contemplated initiation of any
proceeding for such purpose; or (c) the occurrence of any event or the existence
of any condition or state of facts, which makes any statement of a material fact
made in the Registration Statement, the Prospectus or any Prospectus Supplement
untrue or which requires the making of any additions to or changes to the
statements then made in the Registration Statement, the Prospectus or any
Prospectus Supplement in order to state a material fact required by the
Securities Act to be stated therein or necessary in order to make the statements
then made therein (in the case of the Prospectus or any Prospectus Supplement,
in light of the circumstances under which they were made) not misleading, or
which requires an amendment to the Registration Statement or a supplement to the
Prospectus or any Prospectus Supplement to comply with the Securities Act or any
other law (other than the transactions contemplated by the applicable Fixed
Request Notice and the settlement thereof). The Company shall have no Knowledge
of any event that could reasonably be expected to have the effect of causing the
suspension of the effectiveness of the Registration Statement or the prohibition
or suspension of the use of the Prospectus or any Prospectus Supplement in
connection with the resale of the Registrable Securities by the Investor.

 

(v)     Other Commission Filings. The Current Report and the Form D shall have
been filed with the Commission as required pursuant to Section 2.3, and the
final Prospectus and all other Prospectus Supplements required to have been
filed with the Commission pursuant to Section 2.3 and pursuant to the
Registration Rights Agreement shall have been filed with the Commission in
accordance with Section 2.3 and the Registration Rights Agreement. All reports,
schedules, registrations, forms, statements, information and other documents
required to have been filed by the Company with the Commission pursuant to the
reporting requirements of the Exchange Act, including all material required to
have been filed pursuant to Section 13(a) or 15(d) of the Exchange Act, shall
have been filed with the Commission and, if any Registrable Securities are
covered by a Registration Statement on Form S-1, such filings shall have been
made within the applicable time period prescribed for such filing under the
Exchange Act.

 

(vi)     No Suspension of Trading in or Notice of Delisting of Common Stock.
Trading in the Common Stock shall not have been suspended by the Commission, the
Trading Market or the FINRA (except for any suspension of trading of limited
duration agreed to by the Company, which suspension shall be terminated prior to
the applicable Fixed Request Exercise Date), the Company shall not have received
any final and non-appealable notice that the listing or quotation of the Common
Stock on the Trading Market shall be terminated on a date certain (unless, prior
to such date certain, the Common Stock is listed or quoted on any other Trading
Market), nor shall there have been imposed any suspension of, or restriction on,
accepting additional deposits of the Common Stock, electronic trading or
book-entry services by DTC with respect to the Common Stock that is continuing,
the Company shall not have received any notice from DTC to the effect that a
suspension of, or restriction on, accepting additional deposits of the Common
Stock, electronic trading or book-entry services by DTC with respect to the
Common Stock is being imposed or is contemplated (unless, prior to such
suspension or restriction, DTC shall have notified the Company in writing that
DTC has determined not to impose any such suspension or restriction).

 

 
37

--------------------------------------------------------------------------------

 

 

(vii)     Compliance with Laws. The Company shall have complied with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances in connection with the execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby, including,
without limitation, the Company shall have obtained all permits and
qualifications required by any applicable state securities or “Blue Sky” laws
for the offer and sale of the Securities by the Company to the Investor and the
subsequent resale of the Registrable Securities by the Investor (or shall have
the availability of exemptions therefrom).

 

(viii)     No Injunction. No statute, regulation, order, decree, writ, ruling or
injunction shall have been enacted, entered, promulgated, threatened or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of or which would materially modify or delay any of the
transactions contemplated by the Transaction Documents.

 

(ix)     No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any court or governmental authority shall have been commenced, and
no inquiry or investigation by any governmental authority shall have been
commenced, against the Company or any Subsidiary, or any of the officers,
directors or affiliates of the Company or any Subsidiary, seeking to restrain,
prevent or change the transactions contemplated by the Transaction Documents, or
seeking material damages in connection with such transactions.

 

(x)     Aggregate Limit. The issuance and sale of the Shares issuable pursuant
to such Fixed Request Notice shall not violate Sections 3.10 or 6.6 hereof.

 

(xi)     Securities Authorized and Delivered. The Shares issuable pursuant to
such Fixed Request Notice shall have been duly authorized by all necessary
corporate action of the Company. The Company shall have delivered all Shares
relating to all prior Fixed Request Notices, as applicable.

 

(xii)     Listing of Securities. All of the Securities that may be issued
pursuant to this Agreement shall have been approved for listing or quotation on
the Trading Market as of the Closing Date, subject only to notice of issuance.

 

(xiii)     No Material Adverse Effect. No condition, occurrence, state of facts
or event constituting a Material Adverse Effect shall have occurred and be
continuing.

 

(xiv)     No Restrictive Legends. If requested by the Investor from and after
the Effective Date, the Company shall have either (i) issued and delivered (or
caused to be issued and delivered) to the Investor a certificate representing
the Commitment Shares that is free from all restrictive and other legends or
(ii) caused the Company’s transfer agent to credit the Investor’s or its
designee’s account at DTC through its Deposit/Withdrawal at Custodian (DWAC)
system with a number of shares of Common Stock equal to the number of Commitment
Shares represented by the certificate delivered by the Investor to the Company
in accordance with Section 10.1(iv) of this Agreement.

 

(xv)     Opinion of Counsel; Bring-Down. Prior to the first Fixed Request
Exercise Date, the Investor shall have received (i) an opinion from outside
counsel to the Company, in the form mutually agreed to by the parties hereto
prior to the date hereof and (ii) any Bring Down Opinions for which the Company
was obligated to instruct its outside counsel to deliver prior to such Fixed
Request Exercise Date in accordance with Section 6.19 hereof.

 

 
38

--------------------------------------------------------------------------------

 

 

ARTICLE VIII

TERMINATION

 

Section 8.1.     Termination. Unless earlier terminated as provided hereunder,
this Agreement shall terminate automatically on the earliest to occur of (i) the
first day of the month next following the 36-month anniversary of the Effective
Date (it being hereby acknowledged and agreed that such term may not be extended
by the parties hereto), (ii) the date on which the Investor shall have purchased
or acquired shares of Common Stock pursuant to this Agreement equal to the
Aggregate Limit, and (iii) the date on which the Common Stock shall have failed
to be listed or quoted on a Trading Market. Subject to Section 8.3, the Company
may terminate this Agreement effective upon one Trading Day’s prior written
notice to the Investor in accordance with Section 10.4; provided, however, that
(A) the Company shall have issued all Commitment Shares to the Investor and paid
all fees and amounts to the Investor’s counsel required to be paid pursuant to
Section 10.1 of this Agreement prior to such termination, and (B) prior to
issuing any press release, or making any public statement or announcement, with
respect to such termination, the Company shall consult with the Investor and its
counsel on the form and substance of such press release or other disclosure.
Subject to Section 8.3, this Agreement may be terminated at any time by the
mutual written consent of the parties, effective as of the date of such mutual
written consent unless otherwise provided in such written consent.

 

Section 8.2    Other Termination. Subject to Section 8.3, the Investor shall
have the right to terminate this Agreement effective upon one Trading Day’s
prior written notice to the Company in accordance with Section 10.4, if: (i) any
condition, occurrence, state of facts or event constituting a Material Adverse
Effect has occurred and is continuing; (ii) the Company shall have entered into
any agreement, plan, arrangement or transaction with a third party or shall have
determined to utilize any existing agreement, plan or arrangement with a third
party, in each case the principal purpose of which is to implement, effect or
consummate at any time during the Investment Period a Similar Financing, an ATM
or a Price Reset Provision; (iii) a Fundamental Transaction shall have occurred;
(iv) the Registration Statement is not filed by the Filing Deadline (as defined
in the Registration Rights Agreement) or declared effective by the Effectiveness
Deadline (as defined in the Registration Rights Agreement), or the Company is
otherwise in breach or default in any material respect under any of the other
provisions of the Registration Rights Agreement, and, if such failure, breach or
default is capable of being cured, such failure, breach or default is not cured
within 10 Trading Days after notice of such failure, breach or default is
delivered to the Company pursuant to Section 10.4; (v) while the Registration
Statement is required to be maintained effective pursuant to the terms of the
Registration Rights Agreement and the Investor holds any Registrable Securities,
the effectiveness of the Registration Statement lapses for any reason
(including, without limitation, the issuance of a stop order) or the
Registration Statement, the Prospectus or any Prospectus Supplement is otherwise
unavailable to the Investor for the resale of all of the Registrable Securities
in accordance with the terms of the Registration Rights Agreement, and such
lapse or unavailability continues for a period of 20 consecutive Trading Days or
for more than an aggregate of 60 Trading Days in any 365-day period, other than
due to acts of the Investor; (vi) trading in the Common Stock on the Trading
Market shall have been suspended and such suspension continues for a period of
three consecutive Trading Days; (vii) the Company has filed for and/or is
subject to any bankruptcy, insolvency, reorganization or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any law for the
relief of debtors instituted by or against the Company or (viii) the Company is
in material breach or default of this Agreement, and, if such breach or default
is capable of being cured, such breach or default is not cured within 10 Trading
Days after notice of such breach or default is delivered to the Company pursuant
to Section 10.4. Unless notification thereof is required elsewhere in this
Agreement (in which case such notification shall be provided in accordance with
such other provision), the Company shall promptly (but in no event later than 24
hours) notify the Investor (and, if required under applicable law, including,
without limitation, Regulation FD promulgated by the Commission, or under the
applicable rules and regulations of the Trading Market, the Company shall
publicly disclose such information in accordance with Regulation FD and the
applicable rules and regulations of the Trading Market) upon becoming aware of
any of the events set forth in the immediately preceding sentence.

 

 
39

--------------------------------------------------------------------------------

 

  

Section 8.3.     Effect of Termination. In the event of termination by the
Company or the Investor pursuant to Section 8.1 or 8.2, as applicable, written
notice thereof shall forthwith be given to the other party as provided in
Section 10.4 and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 8.1 or 8.2 herein, this Agreement shall become
void and of no further force and effect, except that (i) the provisions of
Article V (Representations, Warranties and Covenants of the Company), Article IX
(Indemnification), Article X (Miscellaneous) and this Article VIII (Termination)
shall remain in full force and effect indefinitely notwithstanding such
termination, and, (ii) so long as the Investor owns any Securities, the
covenants and agreements of the Company contained in Article VI (Additional
Covenants) shall remain in full force and notwithstanding such termination for a
period of six months following such termination. Notwithstanding anything in
this Agreement to the contrary, no termination of this Agreement by any party
shall (i) become effective prior to the first Trading Day immediately following
the last Settlement Date related to any pending Fixed Request Notice that has
not been fully settled in accordance with the terms and conditions of this
Agreement (it being hereby acknowledged and agreed that no termination of this
Agreement shall limit, alter, modify, change or otherwise affect any of the
Company’s or the Investor’s rights or obligations under the Transaction
Documents with respect to any pending Fixed Request, and that the parties shall
fully perform their respective obligations with respect to any such pending
Fixed Request under the Transaction Documents, provided all of the conditions to
the settlement thereof set forth in Article VII are timely satisfied), (ii)
limit, alter, modify, change or otherwise affect the Company’s or the Investor’s
rights or obligations under the Registration Rights Agreement, all of which
shall survive any such termination, (iii) affect any Commitment Shares
previously issued or delivered, or any rights of any holder thereof (it being
hereby acknowledged and agreed that all of the Commitment Shares shall be fully
earned as of the Closing Date, regardless of whether any Fixed Requests are
issued by the Company or settled hereunder or any termination of this
Agreement), or (iv) affect any cash fees paid to the Investor’s counsel pursuant
to Section 10.1(i), in each case all of which fees shall be non-refundable when
paid. Nothing in this Section 8.3 shall be deemed to release the Company or the
Investor from any liability for any breach or default under this Agreement or
any of the other Transaction Documents to which it is a party, or to impair the
rights of the Company and the Investor to compel specific performance by the
other party of its obligations under the Transaction Documents to which it is a
party.

 

 
40

--------------------------------------------------------------------------------

 

 

ARTICLE IX

INDEMNIFICATION

 

Section 9.1.     Indemnification of Investor. In consideration of the Investor’s
execution and delivery of this Agreement and acquiring the Shares hereunder and
in addition to all of the Company’s other obligations under the Transaction
Documents to which it is a party, subject to the provisions of this Section 9.1,
the Company shall indemnify and hold harmless the Investor, each of its
directors, officers, shareholders, members, partners, employees,
representatives, agents and advisors (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), each Person, if any, who controls the Investor
(within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act), and the respective directors, officers, shareholders, members,
partners, employees, representatives, agents and advisors (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”), from and against all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses (including all
judgments, amounts paid in settlement, court costs, reasonable attorneys’ fees
and costs of defense and investigation) (collectively, “Damages”) that any
Investor Party may suffer or incur as a result of or relating to (a) any breach
of any of the representations, warranties, covenants or agreements made by the
Company in this Agreement or in the other Transaction Documents to which it is a
party or (b) any action, suit, claim or proceeding (including for these purposes
a derivative action brought on behalf of the Company) instituted against such
Investor Party arising out of or resulting from the execution, delivery,
performance or enforcement of the Transaction Documents, other than claims for
indemnification within the scope of Section 6 of the Registration Rights
Agreement; provided, however, that (x) the foregoing indemnity shall not apply
to any Damages to the extent, but only to the extent, that such Damages resulted
directly and primarily from a breach of any of the Investor’s representations,
warranties, covenants or agreements contained in this Agreement or the
Registration Rights Agreement or any violations by Investor Party of state or
federal securities laws or sales of Securities in a manner that is inconsistent
with the Plan of Distribution, and (y) the Company shall not be liable under
subsection (b) of this Section 9.1 to the extent, but only to the extent, that a
court of competent jurisdiction shall have determined by a final judgment (from
which no further appeals are available) that such Damages resulted directly and
primarily from any acts or failures to act, undertaken or omitted to be taken by
such Investor Party through its fraud, bad faith, gross negligence, or willful
or reckless misconduct. In addition, the Company shall not be liable to Investor
Party for any settlement by Investor effected without the Company’s prior
written consent, which consent shall not be unreasonably withheld or delayed.

 

Subject to Section 9.2, the Company shall reimburse any Investor Party promptly
upon demand (with accompanying presentation of documentary evidence) for all
legal and other costs and expenses reasonably incurred by such Investor Party in
connection with (i) any action, suit, claim or proceeding, whether at law or in
equity, to enforce compliance by the Company with any provision of the
Transaction Documents or (ii) any other any action, suit, claim or proceeding,
whether at law or in equity, with respect to which it is entitled to
indemnification under this Section 9.1; provided that the Investor shall
promptly reimburse the Company for all such legal and other costs and expenses
to the extent a court of competent jurisdiction determines that any Investor
Party was not entitled to such reimbursement.

 

 
41

--------------------------------------------------------------------------------

 

 

An Investor Party’s right to indemnification or other remedies based upon the
representations, warranties, covenants and agreements of the Company set forth
in the Transaction Documents shall not in any way be affected by any
investigation or knowledge of such Investor Party. Such representations,
warranties, covenants and agreements shall not be affected or deemed waived by
reason of the fact that an Investor Party knew or should have known that any
representation or warranty might be inaccurate or that the Company failed to
comply with any agreement or covenant. Any investigation by such Investor Party
shall be for its own protection only and shall not affect or impair any right or
remedy hereunder.

 

To the extent that the foregoing undertakings by the Company set forth in this
Section 9.1 may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Damages
which is permissible under applicable law.

 

Section 9.2.     Indemnification Procedures. Promptly after an Investor Party
receives notice of a claim or the commencement of an action for which the
Investor Party intends to seek indemnification under Section 9.1, the Investor
Party will notify the Company in writing of the claim or commencement of the
action, suit or proceeding; provided, however, that failure to notify the
Company will not relieve the Company from liability under Section 9.1, except to
the extent it has been materially prejudiced by the failure to give notice. The
Company will be entitled to participate in the defense of any claim, action,
suit or proceeding as to which indemnification is being sought, and if the
Company acknowledges in writing the obligation to indemnify the Investor Party
against whom the claim or action is brought, the Company may (but will not be
required to) assume the defense against the claim, action, suit or proceeding
with counsel satisfactory to it. After the Company notifies the Investor Party
that the Company wishes to assume the defense of a claim, action, suit or
proceeding, the Company will not be liable for any further legal or other
expenses incurred by the Investor Party in connection with the defense against
the claim, action, suit or proceeding except that if, in the opinion of counsel
to the Company, it would be inappropriate under the applicable rules of
professional responsibility for the same counsel to represent both the Company
and such Investor Party. In such event, the Company will pay the reasonable fees
and expenses of no more than one separate counsel for all such Investor Parties
promptly as such fees and expenses are incurred. Each Investor Party, as a
condition to receiving indemnification as provided in Section 9.1, will
cooperate in all reasonable respects with the Company in the defense of any
action or claim as to which indemnification is sought. The Company will not be
liable for any settlement of any action effected without its prior written
consent, which consent shall not be unreasonably withheld, delayed or
conditioned. The Company will not, without the prior written consent of the
Investor Party, effect any settlement of a pending or threatened action with
respect to which an Investor Party is, or is informed that it may be, made a
party and for which it would be entitled to indemnification, unless the
settlement includes an unconditional release of the Investor Party from all
liability and claims which are the subject matter of the pending or threatened
action.

 

The remedies provided for in this Article IX are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any Investor
Party at law or in equity.

 

 
42

--------------------------------------------------------------------------------

 

 

ARTICLE X     
MISCELLANEOUS

 

Section 10.1.     Fees and Expenses; Commitment Shares.

 

(i)     Fees and Expenses. Each party shall bear its own fees and expenses
related to the transactions contemplated by this Agreement; provided, however,
that the Company shall have paid on or prior to the Closing Date by wire
transfer of immediately available funds to an account designated by the
Investor’s counsel, a non-accountable and non-refundable document preparation
fee of up to $25,000, exclusive of disbursements and out-of-pocket expenses (the
“Document Preparation Fee”), in connection with the preparation, negotiation,
execution and delivery of the Transaction Documents and legal due diligence of
the Company. For the avoidance of doubt, the Document Preparation Fee shall be
non-refundable, regardless of whether any Fixed Requests are issued by the
Company or settled hereunder or any termination of this Agreement. The Company
shall pay all U.S. federal, state and local stamp and other similar transfer and
other taxes and duties levied in connection with issuance of the Securities
pursuant hereto.

 

(ii)     Commitment Shares. In consideration for the Investor’s execution and
delivery of this Agreement and full payment of the Commitment Fee, concurrently
with the execution and delivery of this Agreement on the Closing Date, the
Company shall deliver irrevocable instructions to its transfer agent to issue to
the Investor, not later than 4:00 p.m. (New York City time) on the second
Trading Day immediately following the Closing Date, a certificate representing
the Commitment Shares in the name of the Investor or its designee (in which case
such designee name shall have been provided to the Company prior to the Closing
Date). Such certificate shall be delivered to the Investor by overnight courier
at its address set forth in Section 10.4 hereof. For the avoidance of doubt, all
of the Commitment Shares shall be fully earned as of the Closing Date regardless
of whether any fixed requests are issued by the Company or settled hereunder or
any termination of this Agreement. Upon issuance, the Commitment Shares shall
constitute “restricted securities” as such term is defined in Rule 144(a)(3)
under the Securities Act and, subject to the provisions of subsection (iv) of
this Section 10.1, the certificate representing the Commitment Shares shall bear
the restrictive legend set forth below in subsection (iii) of this Section 10.1.
The Commitment Shares shall constitute Registrable Securities and shall be
included in the Registration Statement in accordance with the terms of the
Registration Rights Agreement.

 

(iii)     Legends. The certificate(s) representing the Commitment Shares issued
prior to the Effective Date, except as set forth below, shall bear a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of such stock certificate(s)):

 

THE OFFER AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

 

 
43

--------------------------------------------------------------------------------

 

 

Notwithstanding the foregoing and for the avoidance of doubt, all Shares to be
issued in respect of any Fixed Request Notice delivered to the Investor pursuant
to this Agreement shall be issued to the Investor in accordance with Section 3.7
by crediting the Investor’s or its designees’ account at DTC through its
Deposit/Withdrawal at Custodian (DWAC) system, and all such Shares shall be
freely tradable and transferable and without restriction on resale (and no
stop-transfer order shall be placed against transfer thereof), and the Company
shall not take any action or give instructions to any transfer agent of the
Company otherwise.

 

(iv)     Removal of Legend. From and after the Effective Date, the Company
shall, no later than two Trading Days following the delivery by the Investor to
the Company or the Company’s transfer agent (with notice to the Company) of a
legended certificate representing the Commitment Shares (endorsed or with stock
powers attached, signatures guaranteed, and otherwise in form necessary to
affect the reissuance and/or transfer, if applicable), as directed by the
Investor, either: (A) issue and deliver (or cause to be issued and delivered) to
the Investor a certificate representing such Commitment Shares that is free from
all restrictive and other legends or (B) cause the Company’s transfer agent to
credit the Investor’s or its designee’s account at DTC through its
Deposit/Withdrawal at Custodian (DWAC) system with a number of shares of Common
Stock equal to the number of Commitment Shares represented by the certificate so
delivered by the Investor (the date by which such certificate is required to be
delivered to the Investor or such credit is so required to be made to the
account of the Investor or its designee at DTC pursuant to the foregoing is
referred to herein as the “Required Delivery Date”). If the Company fails on or
prior to the Required Delivery Date to either (i) issue and deliver (or cause to
be issued and delivered) to the Investor a certificate representing the
Commitment Shares that is free from all restrictive and other legends or (ii)
cause the Company’s transfer agent to credit the balance account of the Investor
or its designee at DTC through its Deposit/Withdrawal at Custodian (DWAC) system
with a number of shares of Common Stock equal to the number of Commitment Shares
represented by the certificate delivered by the Investor pursuant hereto, then,
in addition to all other remedies available to the Investor, the Company shall
pay in cash to the Investor on each day after the Required Delivery Date that
the issuance or credit of such shares is not timely effected an amount equal to
2.0% of the product of (A) the sum of the number of Commitment Shares not issued
to the Investor on a timely basis and to which the Investor is entitled and (B)
the VWAP for the five Trading Day period immediately preceding the Required
Delivery Date. In addition to the foregoing, if the Company fails to so properly
deliver such unlegended certificates or so properly credit the account of the
Investor or its designee at DTC by the Required Delivery Date, and if on or
after the Required Delivery Date the Investor purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Investor of shares of Common Stock that the Investor anticipated
receiving from the Company without any restrictive legend, then the Company
shall, within three Trading Days after the Investor’s request, pay cash to the
Investor in an amount equal to the Investor’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased, at
which point the Company’s obligation to deliver a certificate or credit such
Investor’s or its designee’s account at DTC for such shares of Common Stock
shall terminate and such shares shall be cancelled.

 

 
44

--------------------------------------------------------------------------------

 

 

Section 10.2.     Specific Enforcement, Consent to Jurisdiction, Waiver of Jury
Trial.

 

(i)     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.

 

(ii)     Each of the Company and the Investor (a) hereby irrevocably submits to
the jurisdiction of the U.S. District Court and other courts of the United
States sitting in the State of New York for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement, and (b) hereby waives,
and agrees not to assert in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and the Investor
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this Section 10.2
shall affect or limit any right to serve process in any other manner permitted
by law.

 

(iii)     EACH OF THE COMPANY AND THE INVESTOR HEREBY WAIVES TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
DISPUTES RELATING HERETO. EACH OF THE COMPANY AND THE INVESTOR (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.2.

 

 
45

--------------------------------------------------------------------------------

 

 

Section 10.3.     Entire Agreement; Amendment. The Transaction Documents set
forth the entire agreement and understanding of the parties with respect to the
subject matter hereof and supersedes all prior and contemporaneous agreements,
negotiations and understandings between the parties, both oral and written, 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. No provision of this Agreement may be
amended by the parties from and after the date that is one Trading Day
immediately preceding the initial filing of the Registration Statement with the
Commission. Subject to the immediately preceding sentence, no provision of this
Agreement may be amended other than by a written instrument signed by both
parties hereto. The Disclosure Schedule and all exhibits to this Agreement are
hereby incorporated by reference in, and made a part of, this Agreement as if
set forth in full herein.

 

Section 10.4.     Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or facsimile (with facsimile
machine confirmation of delivery received) or electronic mail delivery at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The address for such communications shall be:

 

If to the Company:

 

BIO-key International, Inc.

3349 Highway 138, Building A, Suite E

Wall, NJ 07719
Telephone Number: (732) 359-1100

Fax: (732) 456-5691

Email: Michael.DePasquale@bio-key.com

Attention: Michael W. DePasquale, Chairman and CEO

 

With a copy (which shall not constitute notice) to:

 

Fox Rothschild LLP

997 Lenox Drive, Building 3

Lawrenceville, NJ 08648
Telephone Number: (609) 896-3600

Fax: (609) 896-1469

Email: vvietti@foxrothschild.com
Attention: Vincent A. Vietti, Esq.

 

If to the Investor:

 

Xanthe Holdings Ltd.

Palm Grove House

P.O. Box 438

Road Town, Tortola

British Virgin Islands

Facsimile: +350 20077343

E-mail: Eli@hassett.biz

Attention: Eliyahu Hassett

 

 
46

--------------------------------------------------------------------------------

 

 

With a copy (which shall not constitute notice) to:

 

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Chrysler Center

666 Third Avenue

New York, NY 10016

Telephone Number: (212) 935-3000
Fax: (212) 983-3115

Email: ajmarsico@mintz.com
Attention: Anthony J. Marsico, Esq.

 

Either party hereto may from time to time change its address for notices by
giving at least 10 days advance written notice of such changed address to the
other party hereto.

 

Section 10.5.     Waivers. No provision of this Agreement may be 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 Commission. Subject to
the immediately preceding sentence, no provision of this Agreement may be waived
other than in a written instrument signed by the party against whom enforcement
of such waiver is sought. No failure or delay in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercises thereof or of any other right, power or privilege.

 

Section 10.6.     Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof. 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.

 

Section 10.7.     Construction. The parties agree that each of them and their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents. In addition, each and every
reference to share prices (including the Threshold Prices) and shares of Common
Stock in any Transaction Document shall be subject to adjustment for any stock
splits, stock combinations, stock dividends, recapitalizations and other similar
transactions that occur on or after the date of this Agreement. Any reference in
this Agreement to “Dollars” or “$” shall mean the lawful currency of the United
States of America.

 

 
47

--------------------------------------------------------------------------------

 

 

Section 10.8.     Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors. Neither
the Company nor the Investor may assign this Agreement or any of their
respective rights or obligations hereunder to any Person.

 

Section 10.9.     No Third Party Beneficiaries. Except as expressly provided in
Article IX, this Agreement is intended only for the benefit of the parties
hereto and their respective successors, and is not for the benefit of, nor may
any provision hereof be enforced by, any other Person.

 

Section 10.10.     Governing Law. This Agreement shall be governed by and
construed in accordance with the internal procedural and substantive laws of the
State of New York, without giving effect to the choice of law provisions of such
state that would cause the application of the laws of any other jurisdiction.

 

Section 10.11.     Survival. The representations, warranties, covenants and
agreements of the Company and the Investor contained in this Agreement shall
survive the execution and delivery hereof until the termination of this
Agreement; provided, however, that (i) the provisions of Article V
(Representations, Warranties and Covenants of the Company), Article VIII
(Termination), Article IX (Indemnification) and this Article X (Miscellaneous)
shall remain in full force and effect indefinitely notwithstanding such
termination, and, (ii) so long as the Investor owns any Securities, the
covenants and agreements of the Company contained in Article VI (Additional
Covenants), shall remain in full force and effect notwithstanding such
termination for a period of six months following such termination.

 

Section 10.12.     Counterparts. This Agreement may be executed in counterparts,
all of which taken together shall constitute one and the same original and
binding instrument and shall become effective when all counterparts have been
signed by each party and delivered to the other parties hereto, it being
understood that all parties hereto need not sign the same counterpart. In the
event any signature is delivered by facsimile, digital or electronic
transmission, such transmission shall constitute delivery of the manually
executed original and the party using such means of delivery shall thereafter
cause four additional executed signature pages to be physically delivered to the
other parties within five days of the execution and delivery hereof. Failure to
provide or delay in the delivery of such additional executed signature pages
shall not adversely affect the efficacy of the original delivery.

 

Section 10.13.     Publicity. The Company shall afford the Investor and its
counsel with a reasonable opportunity to review and comment upon, shall consult
with the Investor and its counsel on the form and substance of, and shall give
due consideration to all such comments from the Investor or its counsel on, any
press release, Commission filing or any other public disclosure made by or on
behalf of the Company relating to the Investor, its purchases hereunder or any
aspect of the Transaction Documents or the transactions contemplated thereby,
prior to the issuance, filing or public disclosure thereof. For the avoidance of
doubt, the Company shall not be required to submit for review any such
disclosure (i) contained in periodic reports filed with the Commission under the
Exchange Act if it shall have previously provided the same disclosure to the
Investor or its counsel for review in connection with a previous filing or (ii)
any Prospectus Supplement if it contains disclosure that does not reference the
Investor, its purchases hereunder or any aspect of the Transaction Documents or
the transactions contemplated thereby. The Company agrees and acknowledges that
its failure to fully comply with this provision constitutes a Material Adverse
Effect.

 

 
48

--------------------------------------------------------------------------------

 

 

Section 10.14.     Severability. The provisions of this Agreement are severable
and, in the event that any court of competent jurisdiction shall determine that
any one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement, and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.

 

Section 10.15.     Further Assurances. From and after the Closing Date, upon the
request of the Investor or the Company, each of the Company and the Investor
shall execute and deliver such instrument, documents and other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.

 

[Signature Page Follows]

 

 
49

--------------------------------------------------------------------------------

 

 

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

 

BIO-KEY INTERNATIONAL, INC.:

 

 

By: /s/ Cecilia Welch        
Name: Cecilia Welch
Title: Chief Financial Officer

 

XANTHE HOLDINGS LTD.:

 

 

By: /s/ Eliyahu Hassett        
Name: Eliyahu Hassett
Title: Director

 

 

 
50

--------------------------------------------------------------------------------

 

 

ANNEX I TO THE
COMMON STOCK PURCHASE AGREEMENT
DEFINITIONS

 

“Acceptable Transaction” shall have the meaning assigned to such term in Section
6.7(iii) hereof.

 

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with a
Person, as such terms are used in and construed under Rule 144. With respect to
the Investor, without limitation, any Person owning, owned by, or under common
ownership with the Investor, and any investment fund or managed account that is
managed on a discretionary basis by the same investment manager as the Investor
will be deemed to be an Affiliate.

 

“Aggregate Limit” shall have the meaning assigned to such term in Section 2.1
hereof.

 

“Agreement” shall have the meaning assigned to such term in the preamble hereof.

 

“Alternate Transaction” shall have the meaning assigned to such term in Section
6.7(iii) hereof.

 

“Alternate Transaction Notice” shall have the meaning assigned to such term in
Section 6.7(ii) hereof.

 

“Alternative Fixed Amount Requested” shall have the meaning assigned to such
term in Section 3.2 hereof.

 

“Announcement Date” shall have the meaning assigned to such term in Section 3.11
hereof.

 

“ATM” shall have the meaning assigned to such term in Section 6.7(iii) hereof.

 

“Below Market Offering” shall have the meaning assigned to such term in Section
6.7(iii) hereof.

 

“Bring Down Opinion” shall have the meaning assigned to such term in Section
6.19 hereof.

 

“Broker-Dealer” shall have the meaning assigned to such term in Section 6.17
hereof.

 

“Bylaws” shall have the meaning assigned to such term in Section 5.3 hereof.

 

“Charter” shall have the meaning assigned to such term in Section 5.3 hereof.

 

“Closing” shall have the meaning assigned to such term in Section 2.2 hereof.

 

“Closing Date” means the date of this Agreement.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

 
i

--------------------------------------------------------------------------------

 

 

“Commission” means the U.S. Securities and Exchange Commission or any successor
entity.

 

“Commission Documents” shall mean (1) all reports, schedules, registrations,
forms, statements, information and other documents filed with or furnished to
the Commission by the Company pursuant to the reporting requirements of the
Exchange Act, including all material filed or furnished pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act, since December 31, 2016,
including, without limitation, the Annual Report on Form 10-K filed by the
Company for its fiscal year ended December 31, 2016 (the “2016 Form 10-K”), and
which hereafter shall be filed with or furnished to the Commission by the
Company, including, without limitation, the Current Report, (2) the Registration
Statement, as the same may be amended from time to time, the Prospectus and each
Prospectus Supplement and (3) all information contained in such filings and all
documents and disclosures that have been and heretofore shall be incorporated by
reference therein.

 

“Commitment Fee” means $198,000 to be paid to the Investor or its designee at
Closing by issuance and delivery of the Commitment Shares.

 

“Commitment Shares” means 55,000 shares of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock which, concurrently with the
execution and delivery of this Agreement on the Closing Date, the Company has
caused its transfer agent to issue and deliver to the Investor not later than
4:00 p.m. (New York City time) on the second Trading Day immediately following
the Closing Date.

 

“Common Stock” shall have the meaning assigned to such term in the recitals
hereof.

 

“Company” shall have the meaning assigned to such term in the preamble hereof.

 

“Current Market Price” means, with respect to any particular measurement date,
the closing price of a share of Common Stock as reported on the Trading Market
for the Trading Day immediately preceding such measurement date.

 

“Current Report” shall have the meaning assigned to such term in Section 2.3
hereof.

 

“Damages” shall have the meaning assigned to such term in Section 9.1 hereof.

 

“Disclosure Schedule” shall have the meaning assigned to such term in the
preamble to Article V hereof.

 

“Discount Price” means, with respect to any Fixed Request, a price equal to the
product of (i) 0.94 and (ii) the lowest daily VWAP that equals or exceeds the
applicable Threshold Price during the applicable Pricing Period, which shall be
appropriately adjusted for any stock splits, stock combinations, stock
dividends, recapitalizations and other similar transactions; provided, however,
that if an ex-dividend date is established by the Trading Market in respect of
the Common Stock on or between the first Trading Day of the applicable Pricing
Period and the applicable Settlement Date, the Discount Price for each Trading
Day of the applicable Pricing Period on or after such ex-dividend date shall be
reduced by the per share dividend amount.

 

 
ii

--------------------------------------------------------------------------------

 

 

“Disqualification Event” shall have the meaning assigned to such term in Section
5.39 hereof.

 

“Document Preparation Fee” shall have the meaning assigned to such term in
Section 10.1 hereof.

 

“DTC” means The Depository Trust Company, a subsidiary of The Depository Trust &
Clearing Corporation, or any successor thereto.

 

“Earnings Announcement” shall have the meaning assigned to such term in Section
3.11 hereof.

 

“Earnings 8-K” shall have the meaning assigned to such term in Section 3.11
hereof.

 

“EDGAR” means the Commission’s Electronic Data Gathering, Analysis and Retrieval
System.

 

“Effective Date” means the first Trading Day immediately following the date on
which the initial Registration Statement filed pursuant to Section 2(a) of the
Registration Rights Agreement is declared effective by the Commission.

 

“Environmental Laws” shall have the meaning assigned to such term in Section
5.18 hereof.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder.

 

“Exchange Cap” means such total aggregate number of shares of Common Stock
which, when aggregated with all other shares of Common Stock issued or sold
pursuant to any transaction or series of transactions that may be aggregated
with the transactions contemplated by this Agreement under applicable rules of
the NASDAQ Stock Market, the Company may issue pursuant to this Agreement and
the transactions contemplated hereby without (a) breaching the rules and
regulations of the NASDAQ Stock Market applicable to stockholder approval of
certain private placements or (b) obtaining stockholder approval under the
applicable rules and regulations of the NASDAQ Stock Market.

 

“FCPA” shall have the meaning assigned to such term in Section 5.36 hereof.

 

“Filing Time” shall have the meaning assigned to such term in Section 3.11
hereof.

 

“Final Settlement Date” shall have the meaning assigned to such term in Section
3.7 hereof.

 

“FINRA” means the Financial Industry Regulatory Authority.

 

 
iii

--------------------------------------------------------------------------------

 

 

“First Settlement Date” shall have the meaning assigned to such term in Section
3.7 hereof.

 

“First Settlement Discount Price” means, with respect to the First Settlement
Date, if any, for a Fixed Request, a price equal to the product of (i) 0.94 and
(ii) the lowest daily VWAP that equals or exceeds the applicable Threshold Price
during the first (3) Trading Days of the applicable Pricing Period, which shall
be appropriately adjusted for any stock splits, stock combinations, stock
dividends, recapitalizations and other similar transactions; provided, however,
that if an ex-dividend date is established by the Trading Market in respect of
the Common Stock on or between the first Trading Day of the applicable Pricing
Period and the applicable First Settlement Date, the First Settlement Discount
Price shall be reduced by the per share dividend amount.

 

“Fixed Amount Requested” shall mean the specific dollar amount of a Fixed
Request requested by the Company in a Fixed Request Notice delivered pursuant to
Sections 3.1 and 3.2 hereof (assuming the Alternative Fixed Amount Requested is
not applicable to such Fixed Request).

 

“Fixed Request” means the transactions contemplated in Article III of this
Agreement with respect to any Fixed Request Notice delivered by the Company in
accordance with Article III of this Agreement.

 

“Fixed Request Amount” means the actual amount of proceeds received by the
Company pursuant to a Fixed Request under this Agreement.

 

“Fixed Request Exercise Date” shall have the meaning assigned to such term in
Section 3.2 hereof.

 

“Fixed Request Notice” shall have the meaning assigned to such term in Section
3.1 hereof.

 

“Fundamental Transaction” means that (i) the Company shall, directly or
indirectly, in one or more related transactions, (1) consolidate or merge with
or into (whether or not the Company is the surviving corporation) another
Person, with the result that the holders of the Company’s capital stock
immediately prior to such consolidation or merger together beneficially own less
than 50% of the outstanding voting power of the surviving or resulting
corporation, or (2) sell, lease, license, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of the Company
to another Person, or (3) take action to facilitate a purchase, tender or
exchange offer by another Person that is accepted by the holders of more than
50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the Person or Persons making or party to, or associated or
affiliated with the Persons making or party to, such purchase, tender or
exchange offer), or (4) consummate a stock or share purchase agreement or other
business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby
such other Person acquires more than 50% of the outstanding shares of Common
Stock (not including any shares of Common Stock held by the other Person or
other Persons making or party to, or associated or affiliated with the other
Persons making or party to, such stock or share purchase agreement or other
business combination), or (5) reorganize, recapitalize or reclassify its Common
Stock, or (ii) any “person” or “group” (as these terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act) is or shall become the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 50% of the aggregate ordinary voting power represented by issued
and outstanding Common Stock.

 

 
iv

--------------------------------------------------------------------------------

 

 

“GAAP” shall mean generally accepted accounting principles in the United States
of America as applied by the Company.

 

“Governmental Licenses” shall have the meaning assigned to such term in Section
5.17(a) hereof.

 

“Indebtedness” shall have the meaning assigned to such term in Section 5.11
hereof.

 

“Intellectual Property” shall have the meaning assigned to such term in Section
5.17(b) hereof.

 

“Investment Period” means the period commencing on the Effective Date and
expiring on the date this Agreement is terminated pursuant to Article VIII
hereof.

 

“Investor” shall have the meaning assigned to such term in the preamble hereof.

 

“Investor Party” shall have the meaning assigned to such term in Section 9.1
hereof.

 

“Issuer Covered Person” shall have the meaning assigned to such term in Section
5.39 hereof.

 

“Knowledge” means the actual knowledge of the Company’s Chief Executive Officer
or Chief Financial Officer, after reasonable inquiry of all officers, directors
and employees of the Company who could reasonably be expected to have knowledge
or information with respect to the matter in question.

 

“Make Whole Amount” shall have the meaning assigned to such term in Section 3.9
hereof.

 

“Material Adverse Effect” means (i) any condition, occurrence, state of facts or
event having, or insofar as reasonably can be foreseen would likely have, any
material adverse effect on the legality, validity or enforceability of the
Transaction Documents or the transactions contemplated thereby, (ii) any
condition, occurrence, state of facts or event having, or insofar as reasonably
can be foreseen would likely have, any effect on the business, operations,
properties or financial condition of the Company that is material and adverse to
the Company and its Subsidiaries, taken as a whole, and/or (iii) any condition,
occurrence, state of facts or event that would, or insofar as reasonably can be
foreseen would likely, prohibit or otherwise materially interfere with or delay
the ability of the Company to perform any of its obligations under any of the
Transaction Documents to which it is a party; provided, however, that no facts,
circumstances, changes or effects resulting from, relating to or arising out of
the following, individually or in the aggregate, shall be taken into account in
determining whether a Material Adverse Effect has occurred or insofar as
reasonably can be foreseen would likely occur: (a) changes in conditions in the
U.S. or global capital, credit or financial markets generally, including changes
in the availability of capital or currency exchange rates, provided such changes
shall not have affected the Company in a materially disproportionate manner as
compared to other similarly situated companies; (b) changes generally affecting
the industries in which the Company and its Subsidiaries operate, provided such
changes shall not have affected the Company in a materially disproportionate
manner as compared to other similarly situated companies; and (c) any effect of
the announcement of, or the consummation of the transactions contemplated by,
this Agreement and the other Transaction Documents on the Company’s
relationships, contractual or otherwise, with customers, suppliers, vendors,
bank lenders, strategic venture partners or employees.

 

 
v

--------------------------------------------------------------------------------

 

 

“Material Agreements” shall have the meaning assigned to such term in Section
5.19 hereof.

 

“Maximum Fixed Amount Requested” means, with respect to any single Fixed Request
Notice for which the Alternative Fixed Amount Requested is not applicable,
$100,000.

 

“Money Laundering Laws” shall have the meaning assigned to such term in Section
5.37 hereof.

 

“Multiplier” shall have the meaning assigned to such term in Section 3.3(a)
hereof.

 

“OFAC” shall have the meaning assigned to such term in Section 5.38 hereof.

 

“Ownership Limitation” shall have the meaning assigned to such term in Section
6.6 hereof.

 

“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.

 

“Plan” shall have the meaning assigned to such term in Section 5.24 hereof.

 

“Press Release” shall have the meaning assigned to such term in Section 2.3
hereof.

 

“Price Reset Provision” shall have the meaning assigned to such term in Section
6.7(iii) hereof.

 

“Pricing Period” shall mean, with respect to each Fixed Request, a period of
five (5) consecutive Trading Days commencing on the Pricing Period start date
set forth in the Fixed Request Notice (or as provided in Section 3.1), or such
shorter period of Trading Days as determined in accordance with Section 3.8.

 

“Prospectus” means the prospectus in the form included in the Registration
Statement, as supplemented from time to time by any Prospectus Supplement,
including the documents incorporated by reference therein.

 

 
vi

--------------------------------------------------------------------------------

 

 

“Prospectus Supplement” means any prospectus supplement to the Prospectus filed
with the Commission from time to time pursuant to Rule 424(b) under the
Securities Act, including the documents incorporated by reference therein.

 

“Reduction Notice” shall have the meaning assigned to such term in Section
3.8(a) hereof.

 

“Reference Period” shall have the meaning assigned to such term in Section
6.7(ii) hereof.

 

“Registrable Securities” shall have the meaning assigned to such term in the
Registration Rights Agreement.

 

“Registration Rights Agreement” shall have the meaning assigned to such term in
the recitals hereof.

 

“Registration Statement” shall have the meaning assigned to such term in the
Registration Rights Agreement.

 

“Regulation D” shall have the meaning assigned to such term in the recitals
hereof.

 

“Required Delivery Date” shall have the meaning assigned to such term in Section
10.1(iv) hereof.

 

“Restricted Period” shall have the meaning assigned to such term in Section
6.13(i) hereof.

 

“Restricted Person” shall have the meaning assigned to such term in Section
6.13(i) hereof.

 

“Restricted Persons” shall have the meaning assigned to such term in Section
6.13(i) hereof.

 

“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.

 

“Section 4(a)(2)” shall have the meaning assigned to such term in the recitals
hereof.

 

“Securities” means, collectively, the Shares and the Commitment Shares.

 

“Securities Act” shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.

 

“Settlement Date” shall have the meaning assigned to such term in Section 3.7
hereof.

 

“Shares” shall mean the shares of Common Stock that are and/or may be purchased
by the Investor under this Agreement pursuant to one or more Fixed Requests, but
not including the Commitment Shares.

 

 
vii

--------------------------------------------------------------------------------

 

 

“Short Sales” shall mean “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act.

 

“Significant Subsidiary” means any Subsidiary of the Company that would
constitute a Significant Subsidiary of the Company within the meaning of Rule
1-02 of Regulation S-X of the Commission.

 

“Similar Financing” shall have the meaning assigned to such term in Section
6.7(iii) hereof.

 

“Single Fixed Request Limit” means, with respect to any single Fixed Request
Notice, such number of shares of Common Stock which, when aggregated with all
other shares of Common Stock issued or sold pursuant to any transaction or
series of transactions that may be aggregated with the transactions contemplated
by such Fixed Request Notice under applicable rules of the NASDAQ Stock Market,
the Company may issue pursuant to such Fixed Request Notice without (a)
breaching the rules and regulations of the NASDAQ Stock Market applicable to
stockholder approval of certain private placements or (b) obtaining stockholder
approval under the applicable rules and regulations of the NASDAQ Stock Market.

 

“SOXA” shall mean the Sarbanes-Oxley Act of 2002 and the rules and regulations
of the Commission thereunder.

 

“Subsidiary” shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting
power for the election of directors or other persons performing similar
functions are at the time owned directly or indirectly by the Company and/or any
of its other Subsidiaries.

 

“Threshold Price” means the greater of (i) the product of (a) 0.85 and (b) the
VWAP for the Trading Day immediately preceding the applicable Fixed Request
Exercise Date and (ii) $3.83, which amounts shall be appropriately adjusted for
any stock splits, stock combinations, stock dividends, recapitalizations and
other similar transactions.

 

“Total Commitment” shall have the meaning assigned to such term in Section 2.1
hereof.

 

“Trading Day” shall mean a full trading day (beginning at 9:30 a.m., New York
City time, and ending at 4:00 p.m., New York City time) on the Trading Market.

 

“Trading Market” means the NASDAQ Capital Market, the NASDAQ Global Select
Market, the NASDAQ Global Market, the New York Stock Exchange, the NYSE MKT, the
NYSE Arca, the OTC Bulletin Board, or the OTCQX, the OTCQB or the OTC Pink
marketplace operated by OTC Markets Group Inc. (or any successors to any of the
foregoing), whichever is at the time the principal trading exchange or market
for the Common Stock.

 

“Transaction Documents” means, collectively, this Agreement (as qualified by the
Disclosure Schedule) and the exhibits hereto, the Registration Rights Agreement
and each of the other agreements, documents, certificates and instruments
entered into or furnished by the parties hereto in connection with the
transactions contemplated hereby and thereby.

 

 
viii

--------------------------------------------------------------------------------

 

 

“VWAP” means the volume weighted average price (the aggregate sales price of all
trades of Common Stock during a Trading Day divided by the total number of
shares of Common Stock traded during such Trading Day) of the Common Stock
during any Trading Day as reported by Bloomberg L.P. using the AQR function.

 

 
ix

--------------------------------------------------------------------------------

 

 

EXHIBIT A TO THE
COMMON STOCK PURCHASE AGREEMENT
FORM OF REGISTRATION RIGHTS AGREEMENT

 

 

--------------------------------------------------------------------------------

 

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of May [___],
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.

 

 
A-1

--------------------------------------------------------------------------------

 

 

(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.

 

 
A-2

--------------------------------------------------------------------------------

 

 

(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.

 

 
A-3

--------------------------------------------------------------------------------

 

 

(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:

 

 
A-4

--------------------------------------------------------------------------------

 

  

(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.

 

 
A-5

--------------------------------------------------------------------------------

 

 

(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.

 

 
A-6

--------------------------------------------------------------------------------

 

 

(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.

 

 
A-7

--------------------------------------------------------------------------------

 

 

(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).

 

 
A-8

--------------------------------------------------------------------------------

 

 

(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.

 

 
A-9

--------------------------------------------------------------------------------

 

 

(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.

 

 
A-10

--------------------------------------------------------------------------------

 

 

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.

 

 
A-11

--------------------------------------------------------------------------------

 

 

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.

 

 
A-12

--------------------------------------------------------------------------------

 

 

(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.

 

 
A-13

--------------------------------------------------------------------------------

 

 

(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.

 

 
A-14

--------------------------------------------------------------------------------

 

 

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.

 

 
A-15

--------------------------------------------------------------------------------

 

  

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.

 

 
A-16

--------------------------------------------------------------------------------

 

 

(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.

 

 
A-17

--------------------------------------------------------------------------------

 

 

(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]

 

 
A-18

--------------------------------------------------------------------------------

 

 

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:

 

 

 

 

Name: Michael W. DePasquale

 

 

 

Title: Chairman and CEO

 

 

 
A-19

--------------------------------------------------------------------------------

 

 

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:    ____________________
Its:    ____________________

 

 
A-20

--------------------------------------------------------------------------------

 

 

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 [___], 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]

 

 
A-21

--------------------------------------------------------------------------------

 

 

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.

 

 

 
A-22

--------------------------------------------------------------------------------

 

 

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       *                          

 

--------------------------------------------------------------------------------

 

*     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].

  

 
A-23

--------------------------------------------------------------------------------

 

 

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;

 

 

●

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

 

 
A-24

--------------------------------------------------------------------------------

 

 

 

●

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:

 

 

●

the name of any such broker-dealers;

 

 

●

the number of shares involved;

 

 
A-25

--------------------------------------------------------------------------------

 

 

 

●

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.

 

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.

 

 
A-26

--------------------------------------------------------------------------------

 

 

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.

 

 
A-27

--------------------------------------------------------------------------------

 

 

EXHIBIT B TO THE
COMMON STOCK PURCHASE AGREEMENT
FORM OF FIXED REQUEST NOTICE

 

Reference is made to the Common Stock Purchase Agreement dated as of May [__],
2017 (the “Purchase Agreement”) between BIO-Key International, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
“Company”), and Xanthe Holdings Ltd., a company organized and existing under the
laws of the British Virgin Islands. Capitalized terms used and not otherwise
defined herein shall have the meanings given such terms in the Purchase
Agreement. In accordance with and pursuant to Section 3.1 of the Purchase
Agreement, the Company hereby issues this Fixed Request Notice to exercise a
Fixed Request for the Fixed Amount Requested indicated below.

 

Fixed Amount Requested (if Alternative Fixed Amount Requested not selected)
(dollar amount):

 $

   

Alternative Fixed Amount Requested Cap (if Alternative Fixed Amount Requested is
selected) (number of shares):

     

Pricing Period start date:

     

Pricing Period end date:

     

Threshold Price (calculated per defined term):

     

Settlement Dates:

 

 

On behalf of the Company, the undersigned hereby certifies to the Investor that
(i) the above Fixed Amount Requested does not exceed the Maximum Fixed Amount
Requested determined in accordance with Section 3.2 of the Purchase Agreement,
(ii) the sale of Shares pursuant to this Fixed Request Notice shall not cause
the Company to sell or the Investor to purchase shares of Common Stock which,
when aggregated with all purchases made by the Investor pursuant to all prior
Fixed Request Notices issued under the Purchase Agreement, would exceed the
Aggregate Limit, (iii) to the Company’s Knowledge, the sale of Shares pursuant
to this Fixed Request Notice shall not cause the Company to sell or the Investor
to purchase shares of Common Stock which would cause the aggregate number of
shares of Common Stock then beneficially owned (as calculated pursuant to
Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) by the
Investor and its Affiliates to exceed the Ownership Limitation, (iv) as of the
date hereof, the Company does not possess any material non-public information,
and (v) the Company has performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by the Purchase
Agreement and the Registration Rights Agreement to be performed, satisfied or
complied with by the Company at or prior to the date hereof and shall perform,
satisfy and comply in all material respects with all covenants, agreements and
conditions required by the Purchase Agreement and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to each applicable settlement date, including without limitation, delivery of
all certificates and bring down opinions required to be delivered by the
Purchase Agreement.

 

Dated:

By:

 

 

 

Name  

 

 

Title:  

 

        Address:     Facsimile No.  

 

AGREED AND ACCEPTED

         

By:                                        
Name
Title:

   

 

 
B-1

--------------------------------------------------------------------------------

 

 

EXHIBIT C TO THE
COMMON STOCK PURCHASE AGREEMENT
CERTiFICATE OF THE COMPANY

 

CLOSING CERTIFICATE

 

__________, 2017

 

The undersigned, the [___________] of BIO-Key International, Inc., a corporation
organized and existing under the laws of the State of Delaware (the “Company”),
delivers this certificate in connection with the Common Stock Purchase
Agreement, dated as of May 2, 2017 (the “Agreement”), by and between the Company
and Xanthe Holdings Ltd., a company organized and existing under the laws of the
British Virgin Islands (the “Investor”), and hereby certifies on the date hereof
that (capitalized terms used herein without definition have the meanings
assigned to them in the Agreement):

 

1.     Attached hereto as Exhibit A is a true, complete and correct copy of the
Certificate of Incorporation of the Company as filed with the Secretary of State
of the State of Delaware. The Certificate of Incorporation of the Company has
not been further amended or restated, and no document with respect to any
amendment to the Certificate of Incorporation of the Company has been filed in
the office of the Secretary of State of the State of Delaware since the date
shown on the face of the state certification relating to the Company’s
Certificate of Incorporation, which is in full force and effect on the date
hereof, and no action has been taken by the Company in contemplation of any such
amendment or the dissolution, merger or consolidation of the Company.

 

2.     Attached hereto as Exhibit B is a true and complete copy of the Bylaws of
the Company, as amended and restated through, and as in full force and effect
on, the date hereof, and no proposal for any amendment, repeal or other
modification to the Bylaws of the Company has been taken or is currently pending
before the Board of Directors or stockholders of the Company.

 

3.     The Board of Directors of the Company has approved the transactions
contemplated by the Transaction Documents; said approval has not been amended,
rescinded or modified and remains in full force and effect as of the date
hereof.

 

4.     Each person who, as an officer of the Company, or as attorney-in-fact of
an officer of the Company, signed the Transaction Documents to which the Company
is a party, was duly elected, qualified and acting as such officer or duly
appointed and acting as such attorney-in-fact, and the signature of each such
person appearing on any such document is his genuine signature.

 

IN WITNESS WHEREOF, I have signed my name as of the date first above written.

 

 

 

 

 

Name:

 

 

Title:

 

 

 
C-1

--------------------------------------------------------------------------------

 

 

EXHIBIT D TO THE
COMMON STOCK PURCHASE AGREEMENT
COMPLIANCE CERTIFICATE

 

In connection with the issuance of shares of common stock of BIO-Key
International, Inc., a corporation organized and existing under the laws of the
State of Delaware (the “Company”), pursuant to the Fixed Request Notice, dated
[_____________], delivered by the Company to Xanthe Holdings Ltd., a company
organized and existing under the laws of the British Virgin Islands (the
“Investor”), pursuant to Article III of the Common Stock Purchase Agreement,
dated as of May 2, 2017, by and between the Company and the Investor (the
“Agreement”), the undersigned hereby certifies to the Investor as follows:

 

1.     The undersigned is the duly appointed [_____________] of the Company.

 

2.     Except as set forth in the attached Disclosure Schedule, the
representations and warranties of the Company set forth in Article V of the
Agreement (i) that are not qualified by “materiality” or “Material Adverse
Effect” are true and correct in all material respects as of [insert Fixed
Request Exercise Date] and as of the date hereof with the same force and effect
as if made on such dates, except to the extent such representations and
warranties are as of another date, in which case, such representations and
warranties are true and correct in all material respects as of such other date
and (ii) that are qualified by “materiality” or “Material Adverse Effect” are
true and correct as of [insert Fixed Request Exercise Date] and as of the date
hereof with the same force and effect as if made on such dates, except to the
extent such representations and warranties are as of another date, in which
case, such representations and warranties are true and correct as of such other
date.

 

3.     The Company has performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by the Agreement
and the Registration Rights Agreement to be performed, satisfied or complied
with by the Company at or prior to [insert Fixed Request Exercise Date] and the
date hereof.

 

4.     The Shares issuable on the date hereof in respect of the Fixed Request
Notice referenced above shall be delivered electronically by crediting the
Investor’s or its designees’ account at DTC through its Deposit/Withdrawal at
Custodian (DWAC) system, and shall be freely tradable and transferable and
without restriction on resale. To the extent requested by the Investor pursuant
to Section 10.1(iv) under the Agreement, the legend set forth in Section
10.1(iii) of the Agreement has been removed from the certificate representing
the Commitment Shares in accordance with Section 10.1(iv) of the Agreement.

 

5.     As of [insert Fixed Request Exercise Date] and the date hereof, the
Company did not and does not possess any material non-public information.

 

Capitalized terms used but not otherwise defined herein shall have the meanings
assigned to them in the Agreement.

 

The undersigned has executed this Certificate this [___] day of [___________],
20[__].

 

By:                                                            

 

Name:                                            

 

Title:                                     

 

 
D-1

--------------------------------------------------------------------------------

 

 
DISCLOSURE SCHEDULE
RELATING TO THE COMMON STOCK
PURCHASE AGREEMENT, DATED AS OF MAY 2, 2017
BETWEEN BIO-KEY INTERNATIONAL, INC. AND XANTHE HOLDINGS LTD.

 

This disclosure schedule is made and given pursuant to Article V of the Common
Stock Purchase Agreement, dated as of May 2, 2017 (the “Agreement”), 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. Unless the context otherwise requires, all capitalized
terms are used herein as defined in the Agreement. The numbers below correspond
to the section numbers of representations and warranties in the Agreement most
directly modified by the below exceptions.

 

 
D-2

--------------------------------------------------------------------------------

 

 

FORM OF OPINION OF OUTSIDE COUNSEL TO BE DELIVERED PURSUANT TO
SECTION 7.1(iv) OF THE COMMON STOCK PURCHASE AGREEMENT
DATED AS OF MAY 2, 2017 BETWEEN BIO-KEY INTERNATIONAL, INC. AND XANTHE HOLDINGS
LTD.

 

[Company Counsel’s Letterhead]

 

 

The following opinions will (i) all speak only as of the Closing Date and will
not address any matters that may be changed by future events, facts or
circumstances post-Closing including increases in the Company’s outstanding
shares occurring after the Closing and (ii) be subject to customary assumptions,
limitation and qualifications. Opinions regarding the valid existence and good
standing of an entity may be made in reliance upon current “good standing”
certificates issued by applicable government officials. Capitalized terms herein
not otherwise defined herein will have the meaning given to such terms in the
Common Stock Purchase Agreement dated as of May 2, 2017 between BIO-Key
International, Inc. and Xanthe Holdings Ltd. (the “Purchase Agreement”).

 

1.

The Company has been duly incorporated and is validly existing and in good
standing under the laws of the State of Delaware, with full corporate power and
authority to own its properties and to conduct its business as such business is
presently conducted. The Company is duly qualified to do business as a foreign
corporation and is in good standing in the State of New Jersey.

 

2.

The Company has the requisite corporate power and authority to execute, deliver
and perform its obligations under the Purchase Agreement and the Registration
Rights Agreement. The execution and delivery by the Company of the Purchase
Agreement and the Registration Rights Agreement, and the consummation by the
Company of the transactions contemplated thereby (including, without limitation,
the issuance of the Securities) have been duly and validly authorized by all
necessary corporate action and, except for (a) any consent or authorization of
the Company’s Board of Directors or a committee thereof (i) in connection with
the delivery of a Fixed Request Notice to the Investor or (ii) that is required
to enable the Company to perform its future obligations under the Registration
Rights Agreement, and (b) any consent contemplated by the Disclosure Schedule,
no further consent or authorization of the Company, its Board of Directors or
its stockholders is required.

 

3.

Each of the Purchase Agreement and the Registration Rights Agreement has been
duly executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its respective terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).

 

 

--------------------------------------------------------------------------------

 

 

4.

The execution, delivery and performance by the Company of the Purchase Agreement
and the Registration Rights Agreement and the consummation by the Company of the
transactions contemplated thereby (including, without limitation, the issuance
of the Securities) do not: (i) violate the Company’s certificate of
incorporation or bylaws (the “Governing Documents”); (ii) violate the general
corporation law of the State of Delaware, or any federal or New Jersey statute,
rule or regulation applicable to the Company; (iii) require any consents,
approvals, or authorizations to be obtained by the Company, or any
registrations, declarations or filings to be made by the Company, in each case,
under the general corporation law of the State of Delaware or any federal or New
Jersey statute, rule or regulation applicable to the Company that have not been
obtained or made (other than any filings required to be made by the Company
after the Closing Date with the Commission in order to enable the Company to
perform its obligations under the Purchase Agreement and the Registration Rights
Agreement and authorization of the Company’s Board of Directors or a committee
thereof in connection with the delivery of a Fixed Request Notice to the
Investor); (iv) except as set forth in the Disclosure Schedule, conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company is a party or is bound that has been filed as an
exhibit to the 2016 Form 10-K or any other Commission Document filed after the
2016 Form 10-K and prior to the date on which this opinion is given (an
“Existing SEC-Filed Material Agreement”); (v) create or impose a lien, charge or
encumbrance on any property of the Company under the terms of any Existing
SEC-Filed Material Agreement; or (vi) to our knowledge, result in a violation of
any United States federal or New Jersey state order, judgment or decree
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries are bound or affected.

 

5.

Assuming the accuracy of the representations and warranties made by you in the
Purchase Agreement at all relevant times, both on and after the Closing Date,
and your compliance with the covenants made by you in the Purchase Agreement and
the Registration Rights Agreement, the offering, sale and issuance of the
Securities by the Company to you in accordance with the terms of the Purchase
Agreement is exempt from the registration requirements of the Securities Act.

 

6.

When issued in accordance with the Purchase Agreement, the Commitment Shares
will be duly authorized and validly issued, fully paid and nonassessable, free
and clear of all liens, charges, taxes, security interests, encumbrances, rights
of first refusal, preemptive or similar rights and other encumbrances under the
Company’s Governing Documents, the General Corporation Law of the State of
Delaware or any Existing SEC-Filed Material Agreement. When issued and paid for
in accordance with the Purchase Agreement, except as set forth in the Disclosure
Schedule, the Shares will be duly authorized and validly issued, fully paid and
nonassessable, free and clear of all liens, charges, taxes, security interests,
encumbrances, rights of first refusal, preemptive or similar rights and other
encumbrances under the Company’s Governing Documents, the General Corporation
Law of the State of Delaware or any Existing SEC-Filed Material Agreement. To
our knowledge, except as set forth in the Disclosure Schedule, the execution and
delivery of the Registration Rights Agreement by the Company do not, and the
performance by the Company of its obligations thereunder shall not, give rise to
any rights of any other person that exist and are in effect as of the date of
the Closing, for the registration under the Securities Act of any shares of
Common Stock or other securities of the Company which have not been waived.

 

 

--------------------------------------------------------------------------------

 

 

7.

To our knowledge, there is no action, suit, claim, investigation or proceeding
pending or threatened against the Company or any Subsidiary which questions the
validity of any of the Transaction Documents or the transactions contemplated
thereby or any action taken or to be taken pursuant thereto. Except as set forth
in the Commission Documents, to our knowledge, there is no action, suit, claim,
investigation or proceeding pending or threatened against or involving the
Company, any Subsidiary or any of their respective properties or assets that
would be required to be reported by the Company in any Commission Document and
has not been so reported.

 

8.

The Company is not an “investment company” or any entity controlled by an
“investment company,” as such term is defined in the Investment Company Act of
1940, as amended.

 

 

--------------------------------------------------------------------------------

 

 

FORM OF OPINION OF OUTSIDE COUNSEL TO BE DELIVERED PURSUANT TO
SECTION 7.2(xv) OF THE COMMON STOCK PURCHASE AGREEMENT
DATED AS OF May 2, 2017 BETWEEN BIO-KEY INTERNATIONAL, INC. AND XANTHE HOLDINGS
LTD.

 

[Company Counsel’s Letterhead]

 

1.

The Registration Statement has become effective under the Securities Act. With
your consent, based solely on a telephonic confirmation by a member of the Staff
of the Commission on [__________], 2017, no stop order suspending the
effectiveness of the Registration Statement has been issued by the Commission
under the Securities Act and, to our knowledge, no proceedings therefor have
been initiated or threatened by the Commission. The Prospectus and a Prospectus
Supplement have been filed in accordance with Rule 424 under the Securities Act.

 

2.

The Registration Statement, as of the date it became effective, the Prospectus
and the Prospectus Supplement, in each case as of its date (in each case, other
than the financial statements and schedules and other financial and statistical
data contained therein) appeared on their face to be appropriately responsive in
all material respects with the requirements of the Securities Act.

 

In addition, we have participated in conferences with officers and other
representatives of the Company, at which the contents of the Registration
Statement, the Prospectus and each Prospectus Supplement, and the Commission
Documents incorporated by reference therein, and related matters were discussed
and, although we are not passing upon, and do not assume any responsibility for,
the accuracy, completeness or fairness of the statements contained or
incorporated by reference in the Registration Statement, the Prospectus, each
Prospectus Supplement, or the Commission Documents incorporated by reference
therein, and have not made any independent check or verification thereof, during
the course of such participation, on the basis of the information we gained in
the course of such conferences referred to above and an officer’s certificate of
the Company including representation of the Company to us, no facts came to our
attention that caused us to believe that the Registration Statement, at the time
it became effective, together with the Commission Documents incorporated by
reference therein, at such time and as of the date hereof, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus, as of its date and as of the date hereof, together with the
Commission Documents incorporated by reference therein, at that date and as of
the date hereof, contained an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; it being understood
that we express no belief with respect to any of the financial statements, the
notes and schedules thereto, other financial data, financial information or
exhibits included in, incorporated by reference in, or omitted from, the
Registration Statement or the Prospectus.

 

 

--------------------------------------------------------------------------------

 

 

FORM OF OPINION “BRING DOWN” OF OUTSIDE COUNSEL TO BE DELIVERED PURSUANT TO
SECTIONs 6.19 and 7.2(xv) OF THE COMMON STOCK PURCHASE AGREEMENT DATED AS OF MAY
2, 2017 BETWEEN BIO-KEY INTERNATIONAL, INC. AND XANTHE HOLDINGS LTD.

 

[Company Counsel’s Letterhead]

 

1.

The Registration Statement has become effective under the Securities Act. With
your consent, based solely on a telephonic confirmation by a member of the Staff
of the Commission on [__________], 20[__], no stop order suspending the
effectiveness of the Registration Statement has been issued by the Commission
under the Securities Act and, to our knowledge, no proceedings therefor have
been initiated or threatened by the Commission. The Prospectus and a Prospectus
Supplement have been filed in accordance with Rule 424 under the Securities Act.

 

2.

Based on our inquiry of the Company’s Chief Executive Officer, Chief Financial
Officer and Chief Legal Officer, no facts have come to our attention that cause
us to believe that any of the opinions expressed in our opinion letter to you
dated [_______], 2017 are not true and correct as of the date hereof.

 

3.

Based on our inquiry of the Company’s Chief Executive Officer and Chief Legal
Officer, no facts have come to our attention that cause us to believe that the
opinion expressed in paragraph 2 of our opinion letter to you dated [_______],
20[__] is not true and correct as of the date hereof.

 

In addition, we have participated in conferences with officers and other
representatives of the Company, at which the contents of the Registration
Statement, the Prospectus and each Prospectus Supplement, and the Commission
Documents incorporated by reference therein, and related matters were discussed
and, although we are not passing upon, and do not assume any responsibility for,
the accuracy, completeness or fairness of the statements contained or
incorporated by reference in the Registration Statement, the Prospectus, each
Prospectus Supplement, or the Commission Documents incorporated by reference
therein, and have not made any independent check or verification thereof, during
the course of such participation, on the basis of the information we gained in
the course of such conferences referred to above and an officer’s certificate of
the Company including representation of the Company to us, no facts came to our
attention that caused us to believe that the Registration Statement, at the time
it became effective, together with the Commission Documents incorporated by
reference therein, at such time and as of the date hereof, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus, as of its date and as of the date hereof, together with the
Commission Documents incorporated by reference therein, at that date and as of
the date hereof, contained an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; it being understood
that we express no belief with respect to any of the financial statements, the
notes and schedules thereto, other financial data, financial information or
exhibits included in, incorporated by reference in, or omitted from, the
Registration Statement or the Prospectus.