EXHIBIT 10.18
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated March 3, 2004 (this
"Agreement"), is made by and between BIO-KEY INTERNATIONAL, INC., a Minnesota
corporation, with headquarters located at 0000 Xxxxxxxxx Xxxxxx Xxxxx, Xxxxx
000, Xxxxx, Xxxxxxxxx 00000 (the "Company"), and each entity named on a
signature page hereto (each, an "Investor") (each agreement with an Investor
being deemed a separate and independent agreement between the Company and such
Investor, except that each Investor acknowledges and consents to the rights
granted to each other Investor under such agreement).
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of (i) the
Securities Exchange Agreement, dated as of a date even herewith, between the
Investor and the Company (the "Exchange Agreement"), and (ii) the Preferred
Stock (terms not otherwise defined herein shall have the meanings ascribed to
them in the Exchange Agreement), the Company has agreed to issue to the Investor
certain convertible securities of the Company which are convertible into shares
of the Company's common stock, par value $.01 per share (the "Common Stock");
and
WHEREAS, to induce the Investor to execute and deliver the Exchange
Agreement the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "Securities
Act"), with respect to the Common Stock; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investor hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Investor" means the Investor and any permitted transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof and who holds Common Stock, Warrants or
Registrable Securities.
(b) "Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (ii) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.
(c) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(d) "Registrable Securities" means (i) the Common Stock issuable
pursuant to conversion of the Preferred Stock or dividends issued thereon, (ii)
the Common Stock issuable pursuant to conversion of the Company's Series B 9%
Convertible Preferred Stock or dividends issued thereon, (iii) the Common Stock
issuable upon exercise of Four Million (4,000,000) warrants expiring November
26, 2006, (iv) the Common Stock issuable upon exercise of One Hundred and Thirty
One Thousand, Two Hundred and Fifty (131,250) warrants expiring June 30, 2004
and (v) the Common Stock issuable upon conversion of that certain Secured Note
in the principal amount of up to $2,125,000.00, dated March 3, 2004.
(e) "Registration Statement" means a registration statement of the
Company under the Securities Act other than registration statements on SEC Forms
X-0, X-0 or any similar or successor forms.
2. REGISTRATION.
(a) INCIDENTAL REGISTRATION.
(i) Right to Include Common Stock. If the Company at any time
proposes to register any of its shares of Common Stock or other
securities convertible or exchangeable into Common Stock under the
Securities Act, whether or not for sale for its own account, the
Company will given written notice at least thirty (30) days prior to
the anticipated effective date of the registration statement filed or
to be filed in connection with such registration to all holders of
Registrable Securities of its intention to issue shares of its Common
Stock under the Securities Act and of such holders' rights under this
Section 2(a). Upon the written request of any such holders of
Registrable Securities made within fifteen (15) days of the date of the
foregoing notice from the Company (the "Incidental Registration
Inclusion Date") (which request shall specify the aggregate number of
the Registrable Securities requested to be registered and will also
specify the intended method of disposition thereof), the Company will
effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the
holders thereof (an "Incidental Registration"), to the extent required
to permit the public disposition (in accordance with such intended
methods thereof) of the Registrable Securities to be so registered;
PROVIDED that (i) if, any time after giving written notice of its
intention to register shares of Common Stock and prior to the effective
date of the Registration Statement filed in connection with such
registration, the Company shall determine for any reason not to
register the Common Stock, the Company shall give written notice of
such determination to each holder of Registrable Securities and,
thereupon, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (but not
from its obligation to pay the Registration Expenses in connection
therewith); and (ii) if a registration requested pursuant to this
Section 2(a) shall involve an underwritten public offering, any holder
of Registrable Securities requesting to be included in such
registration may elect, in writing at least twenty-five (25) days prior
to the effective date of the Registration Statement filed in
connection with such registration, not to register such securities in
connection with such registration.
(ii) Priority in Incidental Registrations. If a registration
pursuant to Section 2(a)(i) involves an underwritten offering and the
managing underwriter advises the Company in writing that, in its
opinion, the total number of shares of Common Stock to be included in
such registration, including the Registrable Securities requested to be
included pursuant to this Section 2(a), exceeds the maximum number of
shares of Common Stock specified by the managing underwriter that may
be distributed without materially adversely affecting the price, timing
or distribution of such shares of Common Stock, then the Company shall
include in such registration only such maximum number of Registrable
Securities, which, in the reasonable opinion of such underwriter, can
be sold in the following order of priority: (A) first, all of the
shares of Common Stock that the Company proposes to sell for its own
account, if any; (B) second, all of the shares of Common Stock being
registered by holder(s) of Registrable Securities pursuant to a Demand
Registration; and (C) third, the Registrable Securities of the
holder(s) of Registrable Securities requested and permitted to be
included in such Incidental Registration. To the extent that shares of
Common Stock to be included in the Incidental Registration must be
allocated among the holder(s) of Registrable Securities pursuant to
clause (B) above, such units shall be allocated pro rata among the
holder(s) of Registrable Securities based on the number of shares of
Common Stock that such holder(s) of Registrable Securities shall have
requested to be included therein. To the extent shares of that Common
Stock to be included in the Incidental Registration must be allocated
among the holders of Registrable Securities pursuant to clause (C)
above, such units shall be allocated pro rata among the holder(s) of
Registrable Securities based on the number of shares of Common Stock
that such holder(s) of Registrable Securities shall have requested to
be included therein.
(iii) Selection of Underwriters. If any Incidental
Registration is an underwritten offering, the Company will have the
right to select the investment banker(s) for the offering, which
investment banker(s) will be nationally recognized, subject to the
approval by the holders of a majority of the Registrable Securities,
which will not be unreasonably withheld.
(b) DEMAND REGISTRATION.
(i) Right to Demand Registration. Subject to Section 2(b)(ii)
below, the holders of at least twenty (20%) percent (or such lesser
amount of Registrable Securities then held by all holders of
Registrable Securities in the aggregate) of the aggregate Registrable
Securities shall be entitled to make written requests ("Demand
Registration Requests") at any time and from time to time, to the
Company for registration with the SEC under and in accordance with the
provisions of the Securities Act (including, but not limited to,
registrations under Rule 415 promulgated under the Securities Act) (a
"Demand Registration") (which Demand Registration Request shall specify
the intended number of Registrable Securities to be disposed of by such
holders); PROVIDED that (i) the Company may, if the Board of Directors
so determines in the exercise of its reasonable judgment, that due to a
pending or contemplated acquisition or disposition or public offering
it would be inadvisable to effect such Demand Registration at such
time, defer such Demand Registration for a single period not to exceed
ninety (90) days.) Within ten (10) days after receipt of the
Demand Registration Request, the Company will serve written notice of
such Demand Registration Request to all holders of Registrable
Securities and, subject to paragraph (ii) below, the Company will
include in such registration all Registrable Securities of such holders
with respect to which the Company has received written requests for
inclusion therein from such holders within fifteen (15) business days
after duly given to the applicable holder of the notice from the
Company (such date, the "Demand Registration Inclusion Date"). All
requests made pursuant to this paragraph 2(b) will specify the
aggregate number of the Registrable Securities requested to be
registered.
(ii) Priority in Demand Registrations. Except for shares of
Common Stock issued upon exercise of options issued to employees and
consultants of the Company or in accordance with the existing
registration rights of the holders listed on Schedule A attached
hereto, the Company will not include in any Demand Registration any
securities which are not Registrable Securities without the prior
written consent of at least a majority of the Registrable Securities,
included in such registration. If any of the Registrable Securities
proposed to be registered pursuant to a Demand Registration are to be
sold in a firm commitment underwritten offering and the managing
underwriter of a Demand Registration advise the Company and the holders
of such Registrable Securities in writing that in its reasonable
opinion the number of shares of Common Stock proposed to be sold in
such Demand Registration exceeds the maximum number of shares of stock
specified by the managing underwriter that may be distributed without
materially adversely affecting the price, timing or distribution of the
shares of Common Stock, the Company shall include in such registration
only such maximum number of Registrable Securities which, in the
reasonable opinion of such underwriter can be sold in the following
order of priority: (A) first, the number of Registrable Securities
requested to be included in such registration, pro rata if necessary;
(B) second, the number of shares of Common Stock requested to be
included in such registration by the Company and (C) third, any other
shares of Common Stock requested to be included by employees or
consultants or the holders listed on Schedule A attached hereto.
(iii) Selection of Underwriters. In the case of a Demand
Registration for an underwritten offering, the party requesting such
Demand Registration (and if more than one party requests such Demand
Registration, the party requesting inclusion of the greater number of
Registrable Securities in such offering) will have the right to select
the investment banker(s), which investment banker(s) will be nationally
recognized, subject to the Company's approval, which will not be
unreasonably withheld.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration of
the Registrable Securities, the Company shall do each of the following.
(a) Prepare promptly, and file with the SEC by a date thirty (30)
days following the Incidental Registration Inclusion Date or Demand Registration
Inclusion Date, as applicable (the "Required Filing Date"), a Registration
Statement with respect to not less than the number of Registrable Securities
provided in Section 2(a) or 2(b) above, as applicable, and thereafter use its
best efforts to cause such Registration Statement relating to Registrable
Securities to become effective as soon as possible thereafter and keep the
Registration Statement effective at all times during the period (the
"Registration Period") continuing until the earliest of (i) the date that is
three (3) years after the last day of the calendar month following the month in
which the Effective Date
occurs, (ii) the date when the Investors may sell all Registrable Securities
under Rule 144 or (iii) the date the Investors no longer own any of the
Registrable Securities, which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) 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 light of the
circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) The Company shall permit a single firm of counsel designated by
the Investors to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time (but not less than five (5)
business days) prior to their filing with the SEC, and not file any document in
a form to which such counsel reasonably objects. If such counsel objects, the
Required Filing Date shall be extended by the number of days from the date the
Registration Statement was delivered to such counsel to the date such counsel no
longer objects.
(d) Notify each Investor, such Investor's legal counsel identified
to the Company (which, until further notice, shall be deemed to be Xxxxxxx,
Xxxxx & Xxxxxxxxx, LLP, Attn: Xxx X. Xxxxxxxx, Esq. (the "Investor's Counsel")),
and any managing underwriter immediately (and, in the case of (i)(A) below, not
less than five (5) days prior to such filing) and (if requested by any such
Person) confirm such notice in writing no later than one (1) business day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) whenever the SEC notifies the Company whether there will be a "review" of
such Registration Statement; (C) whenever the Company receives (or a
representative of the Company receives on its behalf) any oral or written
comments from the SEC relating to a Registration Statement (copies or, in the
case of oral comments, summaries of such comments shall be promptly furnished by
the Company to the Investors); and (D) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or any other Federal or state governmental
authority for amendments or supplements to the Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the SEC of
any stop order suspending the effectiveness of the Registration Statement
covering any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) if at any time any of the representations or
warranties of the Company contained in any agreement (including any underwriting
agreement) contemplated hereby ceases to be true and correct in all material
respects; (v) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (vi) of the occurrence of
any event that to the best knowledge of the Company makes any statement made in
the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration
Statement or the Prospectus, as the case may be, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. In addition, the
Company shall furnish the Investors with copies of all intended written
responses to the comments contemplated in clause (C) of this Section 3(d) not
later than three (3) business days in advance of the filing of such responses
with the SEC so that the Investors shall have the opportunity to comment
thereon.
(e) Furnish to each Investor and such Investor's Counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
(f) As promptly as practicable after becoming aware thereof, notify
each Investor of the happening of any event of which the Company has knowledge,
as a result of which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to each Investor as such Investor may reasonably
request;
(g) As promptly as practicable after becoming aware thereof, notify
each Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance by the SEC
of a Notice of Effectiveness or any notice of effectiveness or any stop order or
other suspension of the effectiveness of the Registration Statement at the
earliest possible time;
(h) Use its reasonable efforts to secure and maintain the
designation of all the Registrable Securities covered by the Registration
Statement on the "OTC Bulletin Board Market" of the National Association of
Securities Dealers Automated Quotations System ("NASDAQ") within the meaning of
Rule 11Aa2-1 of the SEC under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the quotation of the Registrable Securities on the OTC
Bulletin Board Market.
(i) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than three (3) days after the
effective date of the Registration Statement;
(j) Cooperate with the Investors to facilitate the timely
preparation and delivery of certificates for the Registrable Securities to be
offered pursuant to the Registration Statement and enable such certificates for
the Registrable Securities to be in such denominations or amounts as the case
may be, as the Investors may reasonably request, and, within three (3) business
days after a Registration Statement which includes Registrable Securities is
ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an appropriate instruction and opinion of such counsel; and
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration of
the Registrable Securities, the Investors shall have the following obligations:
(a) 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 a particular Investor that such 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 the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. At
least ten (10) days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;
(b) Each Investor, by such Investor's 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 the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
(d) Notwithstanding the foregoing, if at any time or from time to
time after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing of the existence of a Potential Material
Event, the Investors shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a Potential
Material Event until such Investor receives written notice from the Company that
such Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; provided, however, that the
Company may not so suspend the right to such holders of Registrable Securities
for more than two twenty (20) business day periods in the aggregate during any
12-month period (the last date of such period being
the "Restricted Sale Date") with at least a ten (10) business day interval
between such periods, during the periods the Registration Statement is required
to be in effect.
5. EXPENSES OF REGISTRATION.
(a) All reasonable expenses (other than underwriting discounts and
commissions of the Investor) incurred in connection with registrations, filings
or qualifications pursuant to this Agreement (the "Registration Expenses"),
including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company and a fee for a single counsel for the Investors (as a group and not
individually), which fee shall not exceed $3,500 for a registration statement
and $2,000 for each amendment thereto.
(b) Neither the Company nor any of its subsidiaries has, as of the
date hereof, nor shall the Company nor any of its subsidiaries, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Investors in this Agreement
or otherwise conflicts with the provisions hereof. Except as set forth on
Schedule 5(b) hereto, neither the Company nor any of its subsidiaries has
previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person. Without limiting the generality
of the foregoing, without the written consent of the Investors holding a
majority of the Registrable Securities, the Company shall not grant to any
person the right to request the Company to register any securities of the
Company under the Securities Act unless the rights so granted are subject in all
respects to the prior rights in full of the Investors set forth herein, and are
not otherwise in conflict or inconsistent with the provisions of this Agreement.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified Person" or
"Indemnified Party"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
the final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) 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 or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation under the Securities Act, the Exchange Act or any state
securities law (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations").
Subject to clause (b) of this Section 6, the Company shall reimburse the
Investors, 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) shall not (I) apply to a Claim 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 or on behalf of any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (II) be available to the extent such Claim is based on a failure of the
Investor to deliver or cause to be delivered the prospectus made available by
the Company or the failure to comply with the plan of distribution contained in
the prospectus; (III) 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 (IV) any violation or alleged
violation by an Indemnified Person of the Securities Act, the Exchange Act, any
state securities laws or any rule or regulation under the Securities Act, the
Exchange Act, or any state securities laws. Each Investor will indemnify the
Company and its officers, directors and agents (each, an "Indemnified Person" or
"Indemnified Party") against any claims 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 or on behalf of such Investor, expressly for use in
connection with the preparation of the Registration Statement, subject to such
limitations and conditions as are applicable to the Indemnification provided by
the Company in this Section 6. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
(b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party 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 Indemnified Person or the Indemnified Party, as the
case may be. In case any such action is brought against any Indemnified Person
or Indemnified Party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, assume the defense thereof, subject to the provisions herein stated
and after notice from the indemnifying party to such Indemnified Person or
Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified Person or Indemnified
Party under this Section 6 for any legal or other reasonable out-of-pocket
expenses subsequently incurred by such Indemnified Person or Indemnified Party
in connection with the defense thereof other than reasonable costs of
investigation, unless the indemnifying party shall not pursue the action to its
final conclusion. The Indemnified Person or Indemnified Party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and reasonable out-of-pocket expenses of such
counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the Indemnified Person or Indemnified Party. 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
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. 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 such expense, loss, damage or liability is incurred and is due and
payable.
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, that (a) 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; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. REPORTS UNDER SECURITIES ACT AND EXCHANGE ACT. With a view to making
available to the Investors the benefits of Rule 144 promulgated under the
Securities Act or any other similar rule or regulation of the SEC that may at
any time permit the Investors to sell securities of the Company to the public
without registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) 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;
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act 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 and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration; and
(d) at the request of any Holder of Registrable Securities, upon
receipt from such Holder of a certificate certifying (i) that such Holder has
held such Registrable Securities for a period of not less than one (1) year and
(ii) as to all other matters and actions required under Rule 144, remove from
the stock certificate representing such Registrable Securities that portion of
any restrictive legend which relates to the registration provisions of the
Securities Act in order to permit the public sale of such Registrable
Securities, provided, however, counsel to Investor may provide such instructions
and opinion to the transfer agent regarding the removal of the restrictive
legend.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the Registrable
Securities (or all or any portion of any
unconverted Preferred Stock) only if: (a) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment, (b)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, and (d) at or before the time the Company received the written notice
contemplated by clause (b) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein.
In the event of any delay in filing or effectiveness of the Registration
Statement as a result of such assignment, the Company shall not be liable for
any damages arising from such delay.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold a eighty (80%) percent
interest of the Registrable Securities. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the
Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be
given in the manner contemplated by the Exchange Agreement, (i) if to the
Company or to the Investor, to their respective address contemplated by the
Exchange agreement, and (iii) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company, or at such other address
as each such party furnishes by notice given in accordance with this Section
11(b).
(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.
(d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws, except to the extent that the Minnesota Business
Corporation Act would apply to the Internal Corporate Governance of the
Company.. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the City of New York or the state courts
of the State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on FORUM NON
COVENIENS, to the bringing of any such proceeding in such jurisdictions. To the
extent determined
by such court, the Company shall reimburse the Buyer for any reasonable legal
fees and disbursements incurred by the Buyer in enforcement of or protection of
any of its rights under this Agreement.
(e) 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 or the
validity or enforceability of this Agreement in any other jurisdiction. If any
such invalidity, unenforceability or illegality of a provision of this Agreement
becomes known or apparent to any of the parties hereto, the parties shall
negotiate promptly and in good faith in an attempt to make appropriate changes
and adjustments to such provision specifically and this Agreement generally to
achieve as closely as possible, consistent with applicable law, the intent and
spirit of such provision specifically and this Agreement generally.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
(j) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof. This Agreement may be amended only by an instrument in writing signed by
the party to be charged with enforcement thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COMPANY:
BIO-KEY INTERNATIONAL, INC.
By: /s/ Xxxx Xxxxx
----------------------------------
Name: Xxxx Xxxxx
------------------------------
Title: CFO
------------------------------
INVESTOR:
THE SHAAR FUND, LTD.
By: /s/
----------------------------------
Name: InterCaribbean Services Ltd.
------------------------------
Title: Director
------------------------------
SCHEDULE A TO REGISTRATION RIGHTS AGREEMENT
-------------------------------------------
1. Warrants issued to CEO Cast, Inc. to purchase 400,000 shares of common
stock.
2. Warrants issued to Punk Xxxxxx, Inc. to purchase 25,000 shares of
common stock.
