Document:

ex10-3.htm

Exhibit 10.3

 

REGISTRATION RIGHTS AGREEMENT

 

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

 

RECITALS

 

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

 

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

 

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

 

AGREEMENT

 

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

 

	
1.
	
Definitions.

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

	
2.
	
Registration.

 

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

 

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

 

(c)     Reserved. 

 

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

 

 

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

 

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

 

	
3.
	
Related Obligations.

 

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

 

 

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

 

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

 

 

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

 

 

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

 

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

 

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

 

 

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

 

(h)     Reserved.

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

 

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4.
	
Obligations of the Investor.

 

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

 

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

 

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

 

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

 

	
5.
	
Expenses of Registration.

 

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

 

 

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6.
	
Indemnification.

 

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

 

 

12

 

 

(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.

 

 

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.

 

 

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.

 

 

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.

 

 

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.

 

 

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]

 

 

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: 
	
/s/ Cecilia Welch
	
 

	
 
	
 
	
Name: Cecilia Welch
	
 

	
 
	
 
	
Title: Chief Financial Officer
	
 

 

 

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: 
	
/s/ Eliyahu Hassett
	
 

	
 
	
Its:
	
Director
	
 

  

 

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

 

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

 

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

 

Very truly yours,

 

[ISSUER’S COUNSEL]

 

By:_____________________

CC:     [LIST NAMES OF HOLDERS]

 

 

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.

 

 

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].

 

 

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;

 

 

24

 

 

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

 

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

 

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

 

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

 

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

 

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

 

	 	
●
	
privately negotiated transactions;

 

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

 

	 	
●
	
a combination of any such methods of sale; and

 

	 	
●
	
any other method permitted pursuant to applicable law.

 

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

 

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

 

 

25

 

 

	 	
●
	
the name of any such broker-dealers;

 

	 	
●
	
the number of shares involved;

 

	 	
●
	
the price at which such shares are to be sold;

 

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

 

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

 

	 	
●
	
other facts material to the transaction.

 

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

 

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

 

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

 

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

 

 

26

 

 

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

 

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

 

 

27EXHIBIT 10.1

 

 

April 27, 2017

 

Chong Guk Kum

 

 

 

Re:     Employment Agreement

 

Dear Mr. Kum:

 

This is your EMPLOYMENT AGREEMENT (the “Agreement”)
with Hanmi Financial Corporation, a Delaware corporation, and Hanmi Bank, a state chartered bank incorporated under the laws of
the State of California (together, the “Company”). It sets forth the terms of your employment with the
Company, effective as of the Effective Date (as defined below). This Agreement supersedes and replaces in its entirety that certain
Employment Agreement, dated May 24, 2013, by and between the Company and you (the “Prior Agreement”).

 

		1.	Your Position, Performance and Other Activities.

 

(a)                
Position. You will be employed in the position of President and Chief Executive Officer (“CEO”)
of the Company and will report directly to the Company’s Board of Directors (the “Board”).
You and the Company acknowledge that you are currently a member of the Board. The Company will use all reasonable efforts to cause
you to be nominated for re-election to the Board each time your Board term expires during the Term (as defined in Section 2). You
agree to serve as a member of the Board, as well as a member of any Board committee to which you may be elected or appointed. You
also agree that, unless otherwise agreed to by you and the Company, you will be deemed to have resigned from the Board and each
Board committee voluntarily, without any further action by you, as of the end of the Term or upon a termination of your employment
with the Company for any reason.

 

(b)                
Authority, Responsibilities and Reporting. You will have the authority, responsibilities and reporting relationships that
correspond to your position, including any particular authority, responsibilities and reporting relationships consistent with your
position that the Board may assign to you from time to time and you shall perform your duties hereunder in compliance with such
policies of the Company as may be adopted from time to time.

 

(c)                
Performance. During your employment, you will devote substantially all of your business time and attention to the Company
and will use good faith efforts to discharge your responsibilities under this Agreement to the best of your abilities. During the
Term, your place of performance will be the headquarters of the Company or such other place as the Board determines. Your performance
will be reviewed by the Board on an on-going basis and no less frequently than annually.

 

(d)                
Other Activities. During your employment, you will not render any business, commercial or professional services to any party
other than the Company. However, you may (i) serve on corporate, civic or charitable boards, (ii) manage personal investments,
and (iii) deliver lectures, fulfill speaking engagements and teach at educational institutions, so long as (A) these activities
do not interfere with your performance of your responsibilities under this Agreement, (B) any service on a corporate, civic or
charitable board is disclosed contemporaneously upon commencement and then at least annually to the Board and (C) no such services
are provided to any competitor of the Company.

 

		2.	Term of Your Employment.

 

Your employment under this Agreement shall be for a term commencing
on April 27, 2017 (the “Effective Date”) and ending upon the earlier of (i) June 12, 2020 (the “End
Date”), and (ii) the close of business on the effective date of termination of your employment pursuant to Section
5 (the “Term”). On the End Date and on each subsequent anniversary of the End Date thereafter (each,
a “Renewal Date”), the Term shall automatically renew for an additional one (1) year period, unless either
you or the Company provides the other party with written notice of non-renewal of the Term at least sixty (60) days prior to the
End Date or such Renewal Date, as applicable. Notwithstanding the foregoing, your employment can be terminated by either party
providing advance written notice in accordance with Section 5(e). If you remain employed by the Company following the expiration
of the Term (including pursuant to a non-renewal thereof), except as otherwise expressly provided herein, your employment relationship
with the Company (if any) shall cease to be governed by the terms and conditions of this Agreement and shall be on an at-will basis
on such terms as may be prescribed by the Company, unless otherwise agreed to by you and the Company in writing; provided, however,
that the provisions of Section 7 below shall survive the expiration or termination of the Term in accordance with their terms.

 

    	1

     

    

 

		3.	Your Compensation.

 

(a)                
Salary. During the Term, you will receive an annual base salary (as increased from time to time, your “Salary”)
payable in accordance with the Company’s regular payroll practices. The amount of your Salary as of the Effective Date is
$610,000. Your Salary will be reviewed at least annually commencing in 2017 and your Salary may be increased, but not decreased,
in the sole discretion of the independent members of the Board, based on a recommendation from the Compensation and Human Resources
Committee (the “CHRC”).

 

(b)                
Incentive Compensation. You will be eligible to receive an annual bonus (your “Bonus”) for each
fiscal year of the Company commencing with, and based upon your continued employment in, the fiscal year ending December 31, 2017,
pursuant to an annual bonus plan. The amount of the Bonus and the performance goals applicable to the Bonus shall be determined
in accordance with the terms and conditions of said bonus plan as in effect from time to time, as determined by the independent
members of the Board in sole discretion, based on a recommendation from the CHRC. Your total annual Bonus (cash plus equity awards)
for any fiscal year cannot exceed 100% of your Salary.

 

		4.	Other Employee Benefits. During the Term:

 

(a)                
Vacation. You shall be entitled to twenty (20) days paid vacation per year (prorated for partial years), and to such paid
holidays as are observed by the Company from time to time, all in accordance with the Company’s policies and practices that
are applicable to the Company’s senior executives. Unused vacation will be carried over from year to year and/or paid out
as provided in the Company’s vacation plans and polices in effect from time to time.

 

(b)                
Business Expenses. You will be reimbursed for all reasonable business expenses incurred by you in performing your responsibilities
under this Agreement. Reimbursements will be made pursuant to the Company’s normal practices and procedures for senior executives.

 

(c)                
Facilities. You will be provided with office space, facilities, secretarial support and other business services consistent
with your position on a basis that is at least as favorable as that provided to similarly situated senior executives of the Company.

 

(d)                
Employee Benefit Plans. (i) You shall be eligible to participate in all incentive plans, practices, policies and programs,
and all savings and retirement plans, policies and programs in effect from time to time, in each case that are applicable generally
to senior executives of the Company; (ii) you and your eligible family members shall be eligible for participation, at the Company’s
expense, in the welfare benefit plans, practices, policies and programs (including, if applicable, medical, dental, vision, disability,
employee life, group life and accidental death insurance plans and programs) maintained for the Company’s senior executives
from time to time; provided, however, that if your participation in such plans and programs at the Company’s
expense would violate applicable law or would result in fines or penalties to the Company (including, without limitation, pursuant
to the Patient Protection and Affordable Care Act or Section 2716 of the Public Health Service Act or any other health care law),
then you and the Company shall in good faith negotiate replacement benefits and/or replacement compensation to be paid or provided
to you in lieu of such participation at the Company’s expense; (iii) the Company shall pay directly or, at its election,
reimburse you for the cost of premiums for term life insurance coverage of One Million Dollars ($1,000,000) on your life during
the Term; and (iv) you shall be entitled to such fringe benefits and perquisites as are provided by the Company to its senior executives
from time to time, in accordance with the policies, practices, and procedures of the Company.

 

    	2

     

    

 

(e)                
Country Club Membership. The Company will provide you with a country club membership in Los Angeles, California at a country
club selected by the Company and reasonably acceptable to you, and will pay or reimburse you for any and all membership fees in
connection with such membership.

 

(f)                 
Automobile Allowance. The Company will provide you with an automobile and will reimburse you the cost of your related automobile
expenses, including automobile insurance thereon, fuel and maintenance.

 

(g)                
Liability Insurance. The Company shall maintain (i) a directors’ and officers’ liability insurance policy, or
an equivalent errors and omissions liability insurance policy, and (ii) an employment practices liability insurance policy. Each
such policy shall cover you with scope, exclusions, amounts and deductibles no less favorable to you than those applicable to the
Company’s senior executive officers and directors on the Effective Date, or any more favorable as may be available to any
other director or senior executive officer of the Company, while you are employed with the Company.

 

		5.	Termination of Your Employment.

 

(a)                
No Reason Required. You or the Company may terminate your employment at any time for any reason, or for no reason, subject
to compliance with Section 5(e).

 

(b)                
Termination by the Company for Cause.

 

(i)                 
“Cause” means any of the following:

 

(A)               
Your continued failure, either due to willful action or as a result of gross neglect, to substantially perform your duties and
responsibilities to the Company under this Agreement (other than any such failure resulting from your incapacity due to physical
or mental illness) that, if capable of being cured, has not been cured within thirty (30) days after written notice is delivered
to you by the Company, which notice specifies in reasonable detail the manner in which the Company believes you have not substantially
performed your duties and responsibilities;

 

(B)               
Your engagement in conduct which is demonstrably and materially injurious to the Company, or that materially harms the reputation
or financial position of the Company, unless the conduct in question was undertaken in good faith on an informed basis with due
care and with a rational business purpose and based upon the honest belief that such conduct was in the best interest of the Company;

 

(C)               
Your indictment or conviction of, or plea of guilty or nolo contendere to, a felony or any other crime involving dishonesty, fraud
or moral turpitude;

 

(D)               
Your being found liable in any SEC or other civil or criminal securities law action or entering any cease and desist order with
respect to such action (regardless of whether or not you admit or deny liability) where the conduct which is the subject of such
action is demonstrably and materially injurious to the Company;

 

(E)               
Your material breach of your fiduciary duties to the Company;

 

(F)                
Your (1) obstructing or impeding, (2) endeavoring to influence, obstruct or impede, or (3) failing to materially cooperate with,
any investigation authorized by the Board or any governmental or self-regulatory entity (an “Investigation”).
However, your failure to waive attorney-client privilege relating to communications with your own attorney in connection with an
Investigation shall not constitute “Cause”;

 

(G)               
Your removing, concealing, destroying, purposely withholding, altering or by any other means falsifying any material which is requested
in connection with an Investigation;

 

    	3

     

    

 

(H)              
Your disqualification, bar, prohibition, order or similar restriction imposed against you by any governmental or self-regulatory
authority from serving as an officer or director of any member of the Company or your loss of any governmental or self-regulatory
license that is reasonably necessary for you to perform your responsibilities to the Company under this Agreement, if (i) the disqualification,
bar or loss continues for more than 30 days and (ii) during that period the Company uses its good faith efforts to cause the disqualification
or bar to be lifted or the license replaced. While any disqualification, bar or loss continues during your employment, you will
serve in the capacity contemplated by this Agreement to whatever extent legally permissible and, if your employment is not permissible,
you will be placed on leave (which will be paid to the extent legally permissible);

 

(I)                 
Your unauthorized use or disclosure of confidential or proprietary information or related materials, or your violation of any of
the terms of the Confidentiality Agreements (as defined below) or the Company’s standard confidentiality policies and procedures,
in each case, which results or could reasonably be expected to result in reputational, economic, financial or other injury to the
Company or its subsidiaries or affiliates;

 

(J)                 
Your violation, as determined by the Board in good faith, of the Company’s (1) workplace violence policy or (2) policies
on discrimination, unlawful harassment or substance abuse; or

 

(K)               
Your material breach of this Agreement that has not been cured within thirty (30) days after written notice is delivered to you
by the Company, which notice specifies in reasonable detail the manner in which the Company believes this Agreement has been breached.

 

For purposes of this definition, no act or omission by you
will be “willful” unless it is made by you in bad faith or without a reasonable belief that your act or omission was
in the best interests of the Company.

 

(c)                
Your Termination for Good Reason.

 

(i)                 
“Good Reason” means the occurrence (without your express written consent) of any of the following:

 

(A)               
a 5% or greater reduction in your Salary and maximum Bonus;

 

(B)               
the assignment to you of duties substantially inconsistent with your position, authority, responsibilities or status as Chief Executive
Officer of the Company (except in connection with a for Cause termination);

 

(C)               
a change in the geographic location at which you must perform the services under this Agreement outside of Los Angeles County,
California, exclusive of required business travel; or

 

(D)               
material breach by the Company of this Agreement.

 

For purposes of this Agreement, Good Reason shall not be deemed
to exist unless (1) your termination of employment for Good Reason occurs within 90 days following the initial existence of one
of the conditions specified in clauses (A) through (D) above, (2) you provide the Company with written notice of the existence
of such condition within 60 days after the initial existence of the condition, and (3) the Company fails to remedy the condition
within 30 days after its receipt of such notice.

 

    	4

     

    

 

(d)                
Termination on Disability or Death.

 

(i)                 
The term “Disability” means your absence from your responsibilities with the Company on a full-time basis
for 90 consecutive days or 180 days in any consecutive 12 month period as a result of incapacity due to mental or physical illness
or injury. If the Company determines in good faith that your Disability has occurred, the Company may give you Termination Notice
(as defined below). If within 30 days of the Termination Notice you do not return to full-time performance of your responsibilities,
your employment will terminate. If you do return to full-time performance in that 30-day period, the Termination Notice will be
cancelled for all purposes of this Agreement. Except as provided in this Section 5(d), your incapacity due to mental or physical
illness or injury will not affect the Company’s obligations under this Agreement.

 

(ii)                 
Your employment will terminate automatically on your death.

 

(e)                
Advance Notice Generally Required.

 

(i)                 
To terminate your employment, either you or the Company must provide a Termination Notice to the other. A “Termination
Notice” is a written notice that states the specific provision of this Agreement on which such termination is based,
including, if applicable, the specific clause of the definition of Cause and a reasonably detailed description of the facts that
permit termination under that clause. The failure to include any fact in a Termination Notice that contributes to a showing of
Cause does not preclude the Company from asserting that fact in enforcing its rights under this Agreement.

 

(ii)                 
You and the Company agree to provide 30 days’ advance Termination Notice of any termination, unless your employment is terminated
by the Company for Cause or because of your Disability or death. Accordingly, the effective date of termination of your employment
will be 30 days after Termination Notice is given, except that (A) the effective date will be the date of the Company’s Termination
Notice if your employment is terminated by the Company for Cause, although the Company may provide a later effective date in the
Termination Notice, (B) the effective date will be 30 days after Termination Notice is given if your employment is terminated because
of your Disability, and (C) the effective date will be the time of your death if your employment is terminated because of your
death. The Company may elect to place you on paid leave for all or part of the advance Termination Notice period. Notwithstanding
the foregoing, if you give the Company Termination Notice, the Company in its sole discretion may waive the 30-day notice requirement
and accelerate the effective date of termination of your employment to any earlier date. In the event of a termination for Good
Reason, the provisions of Section 5(c) above shall control over any inconsistent provisions in this Section 5(e)(ii).

 

(f)                 
Non-Renewal. Notwithstanding anything contained herein, in no event shall the expiration of the Term or the Company’s
election not to renew or extend the Term or your employment with the Company constitute a termination of your employment by the
Company without Cause or by you for Good Reason. For the avoidance of doubt, nothing contained in this Section 5(f) shall preclude
or limit the Company’s ability to, in its sole discretion, pay or provide you with severance or termination pay and/or benefits
in connection with a termination of your employment upon or following the expiration of the Term or the Company’s election
not to renew or extend the Term.

 

		6.	The Company’s Obligations in Connection with Your Termination.

 

(a)                
General Effect. On termination, your employment will end and the Company will have no further obligations to you except
as provided in this Section 6.

 

(b)                
By the Company Without Cause or by You for Good Reason. If the Company terminates your employment without Cause or you terminate
your employment for Good Reason, in either case, other than within eighteen (18) months following a “Change in Control”
(as defined below), subject to Section 6(f):

 

(i)                 
The Company will pay you the following as of the end of your employment: (A) your unpaid Salary through the date of termination,
(B) your Salary for any accrued but unused vacation, and (C) any accrued expense reimbursements and other cash entitlements (together,
your “Accrued Compensation”), in each case, as and when such amounts would otherwise been paid had your
employment not been terminated or such earlier time as may be required by law. In addition, the Company will timely pay you any
amounts and provide to you any benefits that are required, or to which you are entitled, under any plan, contract or arrangement
of the Company (together, the “Other Benefits”).

 

    	5

     

    

 

(ii)                 
The Company will pay you an amount equal to one year of your then-current annual Salary, to be paid on the Company’s regular
pay cycle and through the Company’s payroll over a 12-month period commencing on the date of the termination of employment.

 

(iii)                 
The Company will pay you an amount equal to a pro-rated portion of your prior year’s Bonus based on the number of days worked
during the year of termination, payable in a lump-sum within thirty (30) days following the date of termination of employment.

 

(iv)                 
All outstanding and then unvested stock options, restricted stock and other equity awards granted to you under any of the Company’s
equity incentive plans (or awards substituted therefore covering the securities of a successor company) (each, an “Equity
Award”) which are at such time subject to vesting solely based on your continued employment with the Company (each,
a “Time-Vesting Equity Award”) shall be deemed to have vested as if your employment has continued for
one (1) year following the actual termination date. All other outstanding and unvested Equity Awards (each, a “Performance-Vesting
Equity Award”) shall be treated in accordance with the terms of the plan document and applicable award agreement
governing such Performance-Vesting Equity Award.

 

(v)                 
If you timely elect to continue your Company-provided health insurance coverage pursuant to the federal COBRA law, the Company
will pay directly or, at its election, reimburse you for the cost of such COBRA premiums, at the same level as you maintain as
of the date of termination, through the end of the COBRA period (18 months), or until such time as you qualify for health insurance
benefits through a new employer, whichever occurs first (the “COBRA Period”). The reimbursement shall
be for 100% of your COBRA premiums, as well as for your eligible dependents’ COBRA premiums, and the coverage to be provided
on this basis shall be health and dental coverage. Notwithstanding the foregoing, if (x) any plan pursuant to which such benefits
are provided is not, or ceases prior to the expiration of the period of continuation coverage to be, exempt from the application
of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) under Treasury Regulation
Section 1.409A-1(a)(5), or (y) the Company is otherwise unable to continue to cover you under its group health plans without incurring
penalties (including without limitation, pursuant to the Patient Protection and Affordable Care Act or Section 2716 of the Public
Health Service Act or any other health care law), then, in either case, an amount equal to each remaining COBRA premium under such
plans shall thereafter be paid to you in substantially equal monthly installments over the COBRA Period (or the remaining portion
thereof) (the benefits under this Section 6(b)(v), the “COBRA Benefit”).

 

(c)                
By the Company For Cause or by You for Any Reason other than for Good Reason. If the Company terminates your employment
for Cause or you terminate your employment for any reason other than for Good Reason as set forth in Section 6(b) or 6(e), the
Company will pay your Accrued Compensation and provide your Other Benefits, as and when such amounts would otherwise been paid
had your employment not been terminated or such earlier time as may be required by law.

 

(d)                
Your Disability or Death. If your employment terminates because of Disability or death, the Company will pay or provide
you or your estate (1) your Accrued Compensation and your Other Benefits, as and when such amounts would otherwise been paid had
your employment not been terminated or such earlier time as may be required by law, and (2) subject to Section 6(f), an amount
equal to a pro-rated portion of your prior year’s Bonus based on the number days worked during the year of termination, payable
in a lump-sum within thirty (30) days following the date of termination of employment. In such event, all Equity Awards granted
to you after the Effective Date shall be treated as provided in Section 6(b)(iv).

 

    	6

     

    

 

(e)                
Change in Control; Termination in Connection with a Change in Control. If within eighteen (18) months following a Change
in Control, the Company terminates your employment without Cause or you terminate your employment for Good Reason, in either case,
subject to Section 6(f):

 

(i)                 
The Company will pay you your Accrued Compensation and provide your Other Benefits, as and when such amounts would otherwise have
been paid had your employment not been terminated or such earlier time required by law.

 

(ii)                 
In lieu of the amounts set forth in Sections 6(b)(ii) and (iii) above, the Company will pay you an amount equal to two and one-half
(2.5) times the sum of (a) your then-current annual Salary and (b) your then-maximum annual Bonus, payable in a lump-sum within
thirty (30) days following the date of termination.

 

(iii)                 
The Company shall provide you with the COBRA Benefit on the terms and conditions set forth in Section 6(b)(v) above.

 

(iv)                 
In the event of any Change in Control, (a) your Time-Vesting Equity Awards shall fully and automatically vest as of the date of
such Change in Control and (b) your Performance-Vesting Equity Awards shall be treated in accordance with the terms of the plan
document and applicable award agreement governing such Performance-Vesting Equity Award.

 

(v)                 
For purposes of this Agreement, a “Change in Control” shall mean any transaction or series of related
transactions as a result of which:

 

(A)               
the Company consummates a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of
its assets (each a “Business Combination”), in each case, unless immediately following the consummation
of such Business Combination all of the following conditions are satisfied:

 

(1)                
Persons, who, immediately prior to such Business Combination, were the beneficial owners of the Outstanding Voting Securities of
the Company, beneficially own (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), directly or indirectly, more than 50% of the combined voting power of the then
Outstanding Voting Securities of the entity (the “Resulting Entity”) resulting from such Business Combination
(including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of
the Company’s assets either directly or through one or more subsidiaries);

 

(2)                
no Person beneficially owns (within the meaning of Rule 13d-3), directly or indirectly, more than 50% of the then outstanding combined
voting power of the Outstanding Voting Securities of the Resulting Entity, except to the extent that such Person’s beneficial
ownership of the Company immediately prior to the Business Combination exceeded such threshold;

 

(3)                
at least one-half of the members of the board of directors of the Resulting Entity were members of the Board at the time the Board
authorized the Company to enter into the definitive agreement providing for such Business Combination; or

 

(B)               
any Person acquires beneficial ownership (within the meaning of Rule 13d-3) of more than 50% of the combined voting power (calculated
as provided in Rule 13d-3 in the case of rights to acquire securities) of the then Outstanding Voting Securities of the Company
and has greater beneficial ownership than the existing stockholders of the Company as of the date hereof; provided, however,
that for purposes of this clause, the following acquisitions shall not constitute a Change of Control: (x) any acquisition directly
from the Company, (y) any acquisition by the Company, or (z) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any entity controlled by the Company.

 

    	7

     

    

 

(C)               
“Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act, which definition
shall include a “person” within the meaning of Section 13(d)(3) of the Exchange Act.

 

(D)               
“Outstanding Voting Securities” of any Person means the outstanding securities of such Person entitling
the holders thereof to vote generally in the election of directors of such Person.

 

(vi)                 
The payments and vesting provisions set forth in this Agreement, including under this subsection (e), shall: (A) with respect to
the treatment of Equity Awards under this Section 6, take precedence over any conflicting provision under any award agreement applicable
to such Equity Awards, unless such award agreement is more favorable to you, in which case the award agreement shall govern; and
(B) be subject to the provisions set forth in Annex A.

 

(f)                 
Release. Notwithstanding anything to the contrary herein, the Company will not be required to make the payments or provide
the benefits stated in this Section 6 (other than your Accrued Compensation and Other Benefits) unless you execute and deliver
to the Company (and do not revoke within the applicable time period) a general release of claims substantially in the form attached
hereto as Annex B (the “Release”) within thirty (30) days following the date of termination of
your employment. If the Release is executed and delivered and no longer subject to revocation as provided in the preceding sentence,
then the following shall apply:

 

(i)                 
To the extent any such cash payment or continuing benefit to be provided is not “deferred compensation” for purposes
of Section 409A of the Code (“Section 409A”), then such payment or benefit shall commence upon the first
scheduled payment date immediately after the date the Release is executed and no longer subject to revocation (the “Release
Effective Date”). The first such cash payment shall include payment of all amounts that otherwise would have been
due prior to the Release Effective Date under the terms of this Agreement had such payments commenced immediately upon the termination
of your employment, and any payments made thereafter shall continue as provided herein. The delayed benefits shall in any event
expire at the time such benefits would have expired had such benefits commenced immediately following the termination of your employment.

 

(ii)                 
To the extent any such cash payment or continuing benefit to be provided is “deferred compensation” for purposes of
Section 409A, then such payments or benefits shall be made or commence upon the thirty-first (31st) day following the
termination of your employment. The first such cash payment shall include payment of all amounts that otherwise would have been
due prior thereto under the terms of this Agreement had such payments commenced immediately upon the termination of your employment,
and any payments made thereafter shall continue as provided herein. The delayed benefits shall in any event expire at the time
such benefits would have expired had such benefits commenced immediately following the termination of your employment.

 

		7.	Confidentiality; Non-Solicitation; Non-Disparagement.

 

(a)                
You acknowledge and agree that you are bound by certain confidentiality, non-solicitation and other covenants set forth in the
Confidentiality Agreement between you and the Company, dated July 24, 2013, and the Non-Disclosure and Non-Solicitation Agreement
and Acknowledgement between you and the Company, dated June 12, 2013 (together, the “Confidentiality Agreements”).
You hereby reaffirm the covenants and provisions set forth in the Confidentiality Agreements. Nothing in this Agreement, the Confidentiality
Agreements, or the Company’s standard confidentiality policies and procedures in effect from time to time shall prevent your
truthful testimony as a witness, participation in an Investigation, or disclosure of wrongdoing to law enforcement or regulatory
agencies of competent jurisdiction, including, without limitation, the Equal Employment Opportunity Commission (EEOC), National
Labor Relations Board (NLRB), Occupational Safety and Health Administration (OSHA), the Securities and Exchange Commission, the
Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC) or California Department
of Business Oversight (DBO), or prohibit you from divulging confidential or proprietary information to the extent required by order
of court or agency of competent jurisdiction.

 

    	8

     

    

 

(b)                
You agree that you will not make any public statement that would libel, slander or disparage any member of the Company or any of
their respective past or present officers, directors, employees or agents.

 

		8.	Effect on Other Agreements; Entire Agreement.

 

This Agreement is the entire agreement between you and the Company
with respect to the relationship contemplated by this Agreement and supersedes any earlier agreement, written or oral, with respect
to the subject matter of this Agreement. You agree that, effective as of the Effective Date, this Agreement replaces, terminates
and supersedes the Prior Agreement, and that the Prior Agreement is hereby terminated and shall be of no further force or effect.
In entering into this Agreement, no party has relied on or made any representation, warranty, inducement, promise or understanding
that is not in this Agreement. You hereby acknowledge that you are not subject to any obligation which would in any way restrict
the performance of your duties hereunder.

 

		9.	Successors.

 

(a)                
Payments on Your Death. If you die and any amounts are or become payable under this Agreement, the Company will pay those
amounts to your estate.

 

(b)                
Assignment by You. You may not assign this Agreement without the Company’s consent. Also, except as required by law,
your right to receive payments or benefits under this Agreement may not be subject to execution, attachment, levy or similar process.
Any attempt to effect any of the preceding in violation of this Section 9(b), whether voluntary or involuntary, will be void.

 

(c)                
Assumption by any Surviving Company. Before the effectiveness of any merger, consolidation, statutory share exchange or
similar transaction (including an exchange offer combined with a merger or consolidation) involving the Company (a “Reorganization”)
or any sale, lease or other disposition (including by way of a series of transactions or by way of merger, consolidation, stock
sale or similar transaction involving one or more subsidiaries) of all or substantially all of the Company’s consolidated
assets (a “Sale”), other than a Reorganization or Sale pursuant to which this Agreement will be assumed
by the Surviving Company by operation of law, the Company will cause (1) the Surviving Company to unconditionally assume this Agreement
in writing and (2) a copy of the assumption to be provided to you. After the Reorganization or Sale, the Surviving Company will
be treated for all purposes as the Company under this Agreement. The “Surviving Company” means (i) in
a Reorganization, the entity resulting from the Reorganization or (ii) in a Sale, the entity that has acquired all or substantially
all of the assets of the Company.

 

		10.	Disputes.

 

(a)                
Employment Matters. This Section 10 applies to any controversy or claim between you and the Company arising out of or relating
to or concerning this Agreement or any aspect of your employment with the Company or the termination of that employment (together,
an “Employment Matter”). This includes, but is not limited to, any and all employment-related claims
or controversies, such as breach of employment agreement, breach of the covenant of good faith and fair dealing, negligent supervision
or hiring, wrongful discharge in violation of public policy, unpaid wages under the state and federal wage payment laws, breach
of privacy claims, intentional or negligent infliction of emotional distress claims, fraud, misrepresentations, defamation, and
any claims that could be asserted under all state and federal anti-discrimination laws, including, but not limited to, the California
Fair Employment and Housing Act, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans
with Disabilities Act, the California Labor Code, and the Family and Medical Leave Act. You specifically agree to arbitrate all
claims for discrimination and marital status, sexual orientation, disability, political activity, or any other statutorily-protected
basis under the procedure set forth in the this Section 10 and not through a court of law. This Agreement is further intended to
apply to any claim you may have against any of the Company’s officers, directors, employees, agents, or any of its affiliated
or related entities, and to any and all past and future employment relationships you may have with the Company regardless of job
position or title.

 

    	9

     

    

 

(b)                
Mandatory Arbitration. Any controversy arising out of or relating to this Agreement, its enforcement or interpretation,
or because of an alleged breach, default, or misrepresentation in connection with any of its provisions, or any other controversy
arising out of your employment, including, but not limited to, any state or federal statutory claims, shall be submitted to arbitration
in the County of Los Angeles, California, before a sole arbitrator selected from Judicial Arbitration and Mediation Services, Inc.,
Los Angeles, California, or its successor (“JAMS”), or if JAMS is no longer able to supply the arbitrator,
such arbitrator shall be selected from the American Arbitration Association, and shall be conducted in accordance with the provisions
of California Code of Civil Procedure § 1280 et seq. as the exclusive forum for the resolution of such dispute; provided,
however, that in the event that provisional injunctive relief is not available, or is not available in a timely manner,
through such arbitration, then provisional injunctive relief may, but need not, be sought by either party to this Agreement in
a court of law while arbitration proceedings are pending, and any provisional injunctive relief granted by such court shall remain
effective until the matter is finally determined by the Arbitrator. Either you or the Company may initiate the arbitration process
by delivering a written request for arbitration to the other party within the time limits that would apply to the filing of civil
complaint in state or federal district court, as applicable to the claim at issue. A late request will be void. Final resolution
of any dispute through arbitration may include any remedy or relief which the Arbitrator deems just and equitable, including any
and all remedies provided by applicable state or federal statutes. At the conclusion of the arbitration, the Arbitrator shall issue
a written decision that sets forth the essential findings and conclusions upon which the Arbitrator’s award or decision is
based. Any award or relief granted by the Arbitrator hereunder shall be final and binding on the parties hereto and may be enforced
by any court of competent jurisdiction. The parties hereto acknowledge and agree that they are hereby waiving any rights to trial
by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other in connection with
any matter whatsoever arising out of or in any way connected with this Agreement or your employment. The parties hereto agree that
the Company shall be responsible for payment of the forum costs of any arbitration hereunder, including the Arbitrator’s
fee. You and the Company further agree that in any proceeding to enforce the terms of this Agreement, the prevailing party shall
be entitled to its or his reasonable attorneys’ fees and costs (other than forum costs associated with the arbitration) incurred
by it or him in connection with resolution of the dispute in addition to any other relief granted. Notwithstanding this provision,
the parties hereto may mutually agree to mediate any dispute prior to or following submission to arbitration.

 

(c)                
Enforcement of Arbitration Awards. You or the Company may bring an action or special proceeding in a state or federal court
of competent jurisdiction sitting in the County of Los Angeles, California to enforce any arbitration award under Section 10(b).

 

(d)                
Jurisdiction and Choice of Forum. You and the Company irrevocably submit to the exclusive jurisdiction of any state or federal
court located in the County of Los Angeles, California over any Employment Matter that is not otherwise arbitrated or resolved
according to Section 10(b). This includes any action or proceeding to compel arbitration or to enforce an arbitration award. Both
you and the Company (i) acknowledge that the forum stated in this Section 10(d) has a reasonable relation to this Agreement and
to the relationship between you and the Company and that the submission to the forum will apply even if the forum chooses to apply
non-forum law, (ii) waive, to the extent permitted by law, any objection to personal jurisdiction or to the laying of venue of
any action or proceeding covered by this Section 10(d) in the forum stated in this Section, including any objection on the grounds
of forum non conveniens or the like, (iii) agree not to commence any such action or proceeding in any forum other than the
forum stated in this Section 10(d), and (iv) agree that, to the extent permitted by law, a final and non-appealable judgment in
any such action or proceeding in any such court will be conclusive and binding on you and the Company.

 

(e)                
Waiver of Jury Trial. To the extent permitted by law, you and the Company waive any and all rights to a jury trial with
respect to any Employment Matter. Notwithstanding the provisions of this Agreement, you shall have the right to file a claim for
workers’ compensation and unemployment insurance benefits with the appropriate state agencies, unfair labor practice charges
with the National Labor Relations Board, or an administrative charge with the Equal Employment Opportunity Commission, California
Department of Fair Employment and Housing, or any similar state agency.

 

(f)                 
Governing Law. This Agreement, and all questions relating to its validity, interpretation, performance and enforcement,
as well as the legal relations hereby created between the parties hereto, shall be governed by and construed under, and interpreted
and enforced in accordance with, the laws of the State of California, notwithstanding any California or other conflict of law provision
to the contrary.

 

    	10

     

    

 

		11.	General Provisions.

 

(a)                
Construction. References (A) to Sections are to sections of this Agreement unless otherwise stated; (B) to any contract
(including this Agreement) are to the contract as amended, modified, supplemented or replaced from time to time; (C) to any statute,
rule or regulation are to the statute, rule or regulation as amended, modified, supplemented or replaced from time to time (and,
in the case of statutes, include any rules and regulations promulgated under the statute) and to any section of any statute, rule
or regulation include any successor to the section; (D) to any governmental authority include any successor to the governmental
authority; (E) to any plan include any programs, practices and policies; (F) to any entity include any corporation, limited liability
company, partnership, association, business trust and similar organization and include any governmental authority; and (G) to any
affiliate of any entity are to any person or other entity directly or indirectly controlling, controlled by or under common control
with the first entity.

 

(i)                 
The various headings in this Agreement are for convenience of reference only and in no way define, limit or describe the scope
or intent of any provisions or Sections of this Agreement.

 

(ii)                 
Unless the context requires otherwise, (A) words describing the singular number include the plural and vice versa, (B) words denoting
any gender include all genders and (C) the words “include”, “includes” and “including” will
be deemed to be followed by the words “without limitation.”

 

(iii)                 
It is your and the Company’s intention that this Agreement not be construed more strictly with regard to you or the Company.

 

(b)                
Withholding. You and the Company will treat all payments to you under this Agreement as compensation for your employment.
Accordingly, the Company may withhold from any payment any taxes that are required to be withheld under any law, rule or regulation.

 

(c)                
Severability. If any provision of this Agreement is found by any court of competent jurisdiction (or legally empowered agency)
to be illegal, invalid or unenforceable for any reason, then (1) the provision will be amended automatically to the minimum extent
necessary to cure the illegality or invalidity and permit enforcement and (2) the remainder of this Agreement will not be affected.

 

(d)                
No Set-off or Mitigation. Except if your employment is terminated by the Company for Cause, your and the Company’s
respective obligations under this Agreement will not be affected by any set-off, counterclaim, recoupment or other right you or
any member of the Company may have against each other or anyone else. You do not need to seek other employment or take any other
action to mitigate any amounts owed to you under this Agreement.

 

(e)                
Notices. All notices, requests, demands and other communications under this Agreement must be in writing and will be deemed
given (1) on the business day sent, when delivered by hand or facsimile transmission (with confirmation) during normal business
hours, (2) on the business day after the business day sent, if delivered by a nationally recognized overnight courier or (3) on
the third business day after the business day sent if delivered by registered or certified mail, return receipt requested, in each
case to the following address or number (or to such other addresses or numbers as may be specified by notice that conforms to this
Section 11(e)):

 

If to you, to your address then on file with the Company’s
payroll department with a copy to:

 

Manatt, Phelps & Phillips, LLP

11355 Olympic Boulevard

Los Angeles, California 90064

Attention: Gordon M. Bava

Facsimile: (310) 914-5772

 

    	11

     

    

 

If to the Company or any other member of the Company, to:

 

Hanmi Financial Corporation

3660 Wilshire Boulevard, Penthouse Suite A

Los Angeles, California 90010

Attention: Chairman of the Board

Facsimile: (213) 384-0990

 

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

 

Latham & Watkins LLP

355 South Grand Ave.

Los Angeles, CA 90071

Attention: Charles Ruck; David Taub

Facsimile: (213) 891-8763

 

(f)                 
Consideration. This Agreement is in consideration of the mutual covenants contained in it. You and the Company acknowledge
the receipt and sufficiency of the consideration to this Agreement and intend this Agreement to be legally binding.

 

(g)                
Amendments and Waivers. Any provision of this Agreement may be amended or waived but only if the amendment or waiver is
in writing and signed, in the case of an amendment, by you and the Company or, in the case of a waiver, by the party that would
have benefited from the provision waived. Except as this Agreement otherwise provides, no failure or delay by you or the Company
to exercise any right or remedy under this Agreement will operate as a waiver, and no partial exercise of any right or remedy will
preclude any further exercise.

 

(h)                
Legal Counsel; Mutual Drafting. Each party recognizes that this is a legally binding contract and acknowledges and agrees
that they have had the opportunity to consult with legal counsel of their choice. Each party has cooperated in the drafting, negotiation
and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against
either party on the basis of that party being the drafter of such language. You agree and acknowledge that you have read and understand
this Agreement, are entering into it freely and voluntarily, and have been advised to seek counsel prior to entering into this
Agreement and have had ample opportunity to do so.

 

(i)                  
Golden Parachute/Bank Regulatory Limitation. The parties understand and agree that at the time any payment would otherwise
be made or benefit provided under Section 6 of this Agreement, depending on the facts and circumstances existing at such time,
the satisfaction of such obligations by the Company may be deemed by a regulatory authority to be illegal, an unsafe and unsound
practice, or for some other reason not properly due or payable by the Company. Among other things, applicable banking laws, regulations
and published guidance and policies of the appropriate regulatory authorities (including, but not limited to, Section 39(a) of
the Federal Deposit Insurance Act 12 C.F.R. Part 208 Appendix D-1, § III, Guidance on Sound Incentive Compensation Policies,
75 Fed. Reg. 36,395 (June 25, 2010) or similar regulations or regulatory action following similar principles may apply at such
time. You understand, acknowledge and agree that, notwithstanding any other provision of this Agreement, the Company shall not
be obligated to make any payment or provide any benefit under Section 6 of this Agreement where (i) an appropriate regulatory authority
does not approve or acquiesce as required or objects to the making of such payment or benefit or (ii) the Company has been informed
in writing by a representative of the appropriate regulatory authority that it is the position of such regulatory authority that
making such payment or providing such benefit would constitute an unsafe and unsound practice, violate a written agreement with
the regulatory authority, violate an applicable rule or regulation, or would cause the representative of the regulatory authority
to recommend enforcement action against the Company.

 

(j)                 
Key Employee Delay on Payments. Notwithstanding the timing of payments set forth in Agreement, if the Company determines
that you are a “specified employee” within the meaning of Section 409A, as may be amended and that, as a result of
such status, any portion of the payment under this Agreement would be subject to additional taxation, the Company will delay paying
any portion of such payment until the earliest permissible date on which payments may commence without triggering such additional
taxation (with such delay not to exceed six (6) months), with the first such payment to include the amounts that would have been
paid earlier but for the above delay.

 

    	12

     

    

 

(k)                
Third-Party Beneficiaries. Subject to Section 9, this Agreement will be binding on, inure to the benefit of and be enforceable
by the parties and their respective heirs, personal representatives, successors and assigns. This Agreement does not confer any
rights, remedies, obligations or liabilities to any entity or person other than you and the Company and your and the Company’s
permitted successors and assigns, although (i) this Agreement will inure to the benefit of the Company and (ii) Section 9(a) will
inure to the benefit of the most recent persons named in a notice under that Section.

 

		12.	Compliance with Section 409A.

 

(a)                
General. It is the intention of both the Company and you that the benefits and rights to which you could be entitled pursuant
to this Agreement comply with Section 409A to the extent that the requirements of Section 409A are applicable thereto, and the
provisions of this Agreement shall be construed in a manner consistent with that intention. If you or the Company believes, at
any time, that any such benefit or right that is subject to Section 409A does not so comply, it shall promptly advise the other
and shall negotiate reasonably and in good faith to amend the terms of such benefits and rights such that they comply with Section
409A (with the most limited possible economic effect on you and on the Company). Notwithstanding the foregoing, the Company does
not make any representation to you that the payments or benefits provided under this Agreement are exempt from, or satisfy, the
requirements of Section 409A, and the Company shall have no liability or other obligation to indemnify or hold harmless the you
or any beneficiary for any tax, additional tax, interest or penalties that you or any beneficiary may incur in the event that any
provision of this Agreement, or any amendment or modification thereof, or any other action taken with respect thereto, is deemed
to violate any of the requirements of Section 409A.

 

(b)                
Distributions on Account of Separation from Service. If and to the extent required to comply with Section 409A, no payment
or benefit required to be paid under this Agreement on account of termination of your employment shall be made unless and until
you incur a “separation from service” within the meaning of Section 409A.

 

(c)                
No Acceleration of Payments. Neither the Company nor you, individually or in combination, may accelerate any payment or
benefit that is subject to Section 409A, except in compliance with Section 409A and the provisions of this Agreement, and no amount
that is subject to Section 409A shall be paid prior to the earliest date on which it may be paid without violating Section 409A.

 

(d)                
Treatment of Each Installment as a Separate Payment and Timing of Payments. For purposes of applying the provisions of Section
409A to this Agreement, each separately identified amount to which you are entitled under this Agreement shall be treated as a
separate payment. In addition, to the extent permissible under Section 409A, any series of installment payments under this Agreement
shall be treated as a right to a series of separate payments. Whenever a payment under this Agreement specifies a payment period
with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion
of the Company.

 

(e)                
Taxable Reimbursements and In-Kind Benefits.

 

(i)                 
Any reimbursements by the Company to you of any eligible expenses under this Agreement that are not excludable from your income
for Federal income tax purposes (the “Taxable Reimbursements”) shall be made by no later than the earlier
of the date on which they would be paid under the Company’s normal policies and the last day of the calendar year following
the year in which the expense was incurred.

 

(ii)                 
The amount of any Taxable Reimbursements, and the value of any in-kind benefits to be provided to you, during any calendar year
shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year (except
for any life-term or other aggregate limitation applicable to medical expenses).

 

    	13

     

    

 

(iii)                 
The right to Taxable Reimbursement, or in-kind benefits, shall not be subject to liquidation or exchange for another benefit.

 

		13.	Counterparts.

 

This Agreement may be executed in counterparts, each of which will
constitute an original and all of which, when taken together, will constitute one agreement. However, this Agreement will not be
effective until the date both parties have executed this Agreement.

 

 

	 	 	Very truly yours,
	 	 	 
	 	 	HANMI FINANCIAL CORPORATION
	 	 	 
	 	 	/s/ Joseph Rho
	 	 	Name: Joseph Rho
	 	 	Title: Chairman
	 	 	 
	 	 	 
	 	 	HANMI BANK
	 	 	 
	 	 	/s/ Joseph Rho
	 	 	Name: Joseph Rho
	 	 	Title: Chairman
	 	 	 
	 	 	 
	ACCEPTED AND AGREED TO:	 	 
	 	 	 
	/s/ Chong Guk Kum	 	 
	Chong Guk Kum	 	 
	 	 	 
	Dated: April 27, 2017	 	 

 

 

  

    	14

     

    

 

Annex A

 

Limitation on Payments Following a Change in
Control

 

In the event that any payment or benefit received or to be received
by Chong Guk Kum (“Executive”) pursuant to that certain Employment Agreement (the “Agreement”),
dated April 27, 2017, by and between Executive, Hanmi Financial Corporation and Hanmi Bank (together, the “Company”)
or otherwise (“Payments”) would (i) constitute a “parachute payment” within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and (ii) but for this Annex
A, be subject to the excise tax imposed by Section 4999 of the Code, any successor provisions, or any comparable federal, state,
local or foreign excise tax (“Excise Tax”), then such Payments shall be either (A) provided in full pursuant
to the terms of the Agreement and any other applicable agreements and plans, or (B) provided as to such lesser extent which would
result in no portion of such Payments being subject to the Excise Tax (“Reduced Amount”), whichever of
the foregoing amounts, taking into account the applicable federal, state, local and foreign income, employment and other taxes
and the Excise Tax (including, without limitation, any interest or penalties on such taxes), results in the receipt by Executive,
on an after-tax basis, of the greatest amount of payments and benefits provided for hereunder or otherwise, notwithstanding that
all or some portion of such Payments may be subject to the Excise Tax. Unless the Company and Executive otherwise agree in writing,
any determination required under this Annex A shall be made by independent tax counsel designated by the Company and reasonably
acceptable to Executive (“Independent Tax Counsel”), whose determination shall be conclusive and binding
upon Executive and the Company for all purposes. For purposes of making the calculations required under this Annex A, Independent
Tax Counsel may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the Code; provided that Independent Tax Counsel shall assume
that Executive pays all taxes at the highest marginal rate unless Executive’s actual effective marginal tax rate at the relevant
time is less than the highest marginal rate, in which case such lower rate shall be used by Independent Tax Counsel. The Company
and Executive shall furnish to Independent Tax Counsel such information and documents as Independent Tax Counsel may reasonably
request in order to make a determination under this Annex A. The Company shall bear all costs that Independent Tax Counsel may
reasonably incur in connection with any calculations contemplated by this Annex A. In the event that (ii)(B) above applies, then
based on the information provided to Executive and the Company by Independent Tax Counsel, and notwithstanding any other provision
of the Agreement or any other plan, arrangement or agreement to the contrary, the reduction of such Payments shall be made as follows:
(A) if none of the Payments constitute non-qualified deferred compensation (within the meaning of Section 409A of the Code), then
such reduction and/or repayment shall occur in the manner the Executive elects in writing prior to the date of Payment; or (B)
if any Payment constitutes non-qualified deferred compensation or if the Executive fails to elect an order in the event that none
of the Payments constitutes non-qualified deferred compensation (within the meaning of Section 409A of the Code), then the Payments
to be reduced will be determined in a manner which maximizes the Executive’s economic position and, to the extent the economic
cost is equivalent between one or more Payments, such Payments will be reduced in the inverse order of when payment would have
been made to the Executive, until the aggregate Payments payable to the Executive equal the Reduced Amount.

 

 

Annex A

     

     

    

 

Annex B

 

General Release

 

For valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the undersigned does hereby release and forever discharge the “Releasees” hereunder,
consisting of Hanmi Financial Corporation, a Delaware corporation, and Hanmi Bank, a state chartered bank incorporated under the
laws of the State of California (together, the “Company”), and their partners, associates, parents, subsidiaries,
affiliates, successors, heirs, assigns, agents, directors, officers, employees, equityholders, representatives, lawyers, insurers,
and all persons acting by, through, under or in concert with them, or any of them, of and from any and all manner of action or
actions, cause or causes of action, in law or in equity, suits, debts, liens, contracts, agreements, promises, liability, claims,
demands, damages, losses, costs, attorneys’ fees or expenses, of any nature whatsoever, known or unknown, fixed or contingent
(hereinafter called “Claims”), which the undersigned now has or may hereafter have against the Releasees,
or any of them, by reason of any matter, cause, or thing whatsoever from the beginning of time to the date hereof.  The Claims
released herein include, without limiting the generality of the foregoing, any Claims in any way arising out of, based upon, or
related to the employment or termination from employment of the undersigned by the Releasees, or any of them; any claim for benefits
under any stock option or other equity-based incentive plan of the Releasees (or any related agreement to which any Releasee is
a party); any alleged breach of any express or implied contract of employment; any alleged torts or other alleged legal restrictions
on Releasee’s right to terminate the employment of the undersigned; and any alleged violation of any federal, state or local
statute or ordinance including, without limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment
Act, and the Americans With Disabilities Act. Notwithstanding the foregoing, this Release shall not operate to release any Claims
which the undersigned may have with respect to (i) payments and other express obligations of the Company under that certain Employment
Agreement, dated as of April 27, 2017, between the Company and the undersigned (“Employment Agreement”); (ii) accrued
or vested benefits the undersigned may have, if any, as of the date hereof under any employee benefit plan of the Company or, with
respect to any outstanding equity awards held by the undersigned, under any equity incentive plan, stock award or option agreement,
as any such stock award or option agreement may be amended by the Employment Agreement, if such amendment is more favorable to
the undersigned; (iii) payments and other obligations of the Company with respect to indemnification of the undersigned under the
Company’s Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, and under any indemnification agreement
between the Company and the undersigned. Additionally, notwithstanding the foregoing, the undersigned does not release the undersigned’s
rights under this Release and any Claims that cannot be released as a matter of law, including, without limitation, the undersigned’s
right to communicate directly with, cooperate with, or provide information to, any federal, state or local government regulator.

 

THE UNDERSIGNED ACKNOWLEDGES THAT HE HAS BEEN ADVISED BY LEGAL COUNSEL
AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER
MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

 

THE UNDERSIGNED, BEING AWARE OF SAID CODE SECTION, HEREBY EXPRESSLY
WAIVES ANY RIGHTS HE MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.

 

IN ACCORDANCE WITH THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990,
THE UNDERSIGNED IS HEREBY ADVISED AS FOLLOWS:

 

(1)       HE HAS THE RIGHT
TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS RELEASE;

 

 

Annex B

     

     

    

 

(2)       HE HAS TWENTY-ONE
(21) DAYS TO CONSIDER THIS RELEASE BEFORE SIGNING IT; AND

 

(3)       HE HAS SEVEN (7)
DAYS AFTER SIGNING THIS RELEASE TO REVOKE IT, AND THIS RELEASE SHALL BECOME EFFECTIVE UPON THE EXPIRATION OF THAT REVOCATION PERIOD.

 

The undersigned represents and warrants that there has been no assignment
or other transfer of any interest in any Claim which he may have against Releasees, or any of them, and the undersigned agrees
to indemnify and hold Releasees, and each of them, harmless from any liability, Claims, demands, damages, costs, expenses and attorneys’
fees incurred by Releasees, or any of them, as the result of any such assignment or transfer of any rights or Claims under any
such assignment or transfer.  It is the intention of the parties that this indemnity does not require payment as a condition
precedent to recovery by the Releasees against the undersigned under this indemnity.

 

The undersigned agrees that if he hereafter commences any suit arising
out of, based upon, or relating to any of the Claims released hereunder or in any manner asserts against Releasees, or any of them,
any of the Claims released hereunder, then the undersigned agrees to pay to Releasees, and each of them, in addition to any other
damages caused to Releasees thereby, all attorney’s fees incurred by Releasees in defending or otherwise responding to said
suit or Claim.

 

The undersigned further understands and agrees that neither the payment
of any sum of money nor the execution of this Release shall constitute or be construed as an admission of any liability whatsoever
by the Releasees, or any of them, who have consistently taken the position that they have no liability whatsoever to the undersigned.

 

IN WITNESS WHEREOF, the undersigned has executed this Release this
____ day of ___________, ____.

 

 

	 	 	 
	 	 	Chong Guk Kum
	 	 	 
	 	 	 
	 	 	 

 

 

 

Annex B

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