Exhibit 10.7

 

NEITHER THIS WARRANT NOR THE SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.

 

The number of shares of common stock issuable upon exercise of this warrant may
be less than the amounts set forth on the face hereof.

 

This Warrant is issued pursuant to that certain Securities Purchase Agreement
dated May 6, 2020, by and between the Company and the Holder (as defined below)
(the “Purchase Agreement”). Capitalized terms used and not otherwise defined
herein shall have the meanings set forth for such terms in the Purchase
Agreement. Receipt of this Warrant by the Holder shall constitute acceptance and
agreement to all of the terms contained herein.

 

No. 1

 

bio-key international, INC.

 

COMMON STOCK PURCHASE WARRANT

 

 

BIO-key International, Inc., a Delaware corporation (together with any
corporation which shall succeed to or assume the obligations of BIO-key
International, Inc. hereunder, the “Company”), hereby certifies that, for value
received, Lind Global Macro Fund, LP, a Delaware limited partnership (the
“Holder”), is entitled, subject to the terms set forth below, to purchase from
the Company at any time during the Exercise Period (as defined in Section 9) up
to One Million Nine Hundred Thousand (1,900,000) fully paid and non-assessable
shares of Common Stock (as defined in Section 9), at a purchase price per share
equal to the Exercise Price (as defined in Section 9). The number of shares of
Common Stock for which this Common Stock Purchase Warrant (this “Warrant”) is
exercisable and the Exercise Price are subject to adjustment as provided herein.

 

1.     DEFINITIONS. Certain terms are used in this Warrant as specifically
defined in Section 9.

 

2.     EXERCISE OF WARRANT.

 

2.1.     Exercise. This Warrant may be exercised prior to its expiration
pursuant to Section 2.5 hereof by the Holder at any time or from time to time
during the Exercise Period, by submitting the form of subscription attached
hereto (the “Exercise Notice”) duly executed by the Holder, to the Company at
its principal office, indicating whether the Holder is electing to purchase a
specified number of shares by paying the Aggregate Exercise Price as provided in
Section 2.2 or is electing to exercise this Warrant as to a specified number of
shares pursuant to the net exercise provisions of Section 2.3. On or before the
first Trading Day following the date on which the Company has received the
Exercise Notice, the Company shall transmit by electronic mail an
acknowledgement of confirmation of receipt of the Exercise Notice. Subject to
Section 2.4, this Warrant shall be deemed exercised for all purposes as of the
close of business on the day on which the Holder has delivered the Exercise
Notice to the Company. The Aggregate Exercise Price, if any, shall be paid by
wire transfer to the Company within five (5) Business Days of the date of
exercise and prior to the time the Company issues the certificates evidencing
the shares issuable upon such exercise. In the event this Warrant is not
exercised in full, the Company may, at its expense, require the Holder, after
such partial exercise, to promptly return this Warrant to the Company and the
Company will forthwith issue and deliver to or upon the order of the Holder a
new Warrant or Warrants of like tenor, in the name of the Holder or as the
Holder (upon payment by the Holder of any applicable transfer taxes) may
request, calling in the aggregate on the face or faces thereof for the number of
shares of Common Stock equal (without giving effect to any adjustment therein)
to the number of such shares called for on the face of this Warrant minus the
number of such shares (without giving effect to any adjustment therein) for
which this Warrant shall have been exercised.

 

 

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2.2.     Payment of Exercise Price by Wire Transfer. If the Holder elects to
purchase a specified number of shares by paying the Aggregate Exercise Price,
the Holder shall pay such amount by wire transfer of immediately available funds
to the account designated by the Company in its acknowledgement of receipt of
such Exercise Notice pursuant to Section 2.1.

 

2.3.     Net Exercise. If a registration statement covering the shares of Common
Stock that are the subject of the Notice of Exercise (the “Unavailable Warrant
Shares”) is not available for the resale of such Unavailable Warrant Shares to
the public or upon exercise of this Warrant in connection with a Fundamental
Transaction, the Holder may elect to exercise this Warrant by receiving shares
of Common Stock equal to the number of shares determined pursuant to the
following formula:

 

X = Y (A - B)

            A

where,

 

 

X =

the number of shares of Common Stock to be issued to Holder;

 

 

Y =

the number of shares of Common Stock as to which this Warrant is to be exercised
(as indicated on the Exercise Notice);

 

 

A =

VWAP for the Trading Day immediately preceding the date of exercise; and

 

 

B =

the Exercise Price.

 

2.4.     Antitrust Notification. If the Holder determines, in its sole judgment
upon the advice of counsel, that the issuance of any Warrant Shares pursuant to
the terms hereof would be subject to the provisions of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the “HSR Act”), the Company
shall file as soon as practicable after the date on which the Company receives
notice from the Holder of the applicability of the HSR Act and a request to so
file with the United States Federal Trade Commission and the United States
Department of Justice the notification and report form required to be filed by
it pursuant to the HSR Act in connection with such issuance.

 

2.5.     Termination. This Warrant shall terminate upon the earlier to occur of
(i) exercise in full or (ii) the expiration of the Exercise Period.

 

3.     REGISTRATION RIGHTS. The Holder of this Warrant has certain rights to
require the Company to register its resale of the Warrant Shares under the
Securities Act and any blue sky or securities laws of any jurisdictions within
the United States at the time and in the manner specified in the Purchase
Agreement.

 

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4.     DELIVERY OF STOCK CERTIFICATES ON EXERCISE.

 

4.1.     Delivery of Exercise Shares. As soon as practicable after any exercise
of this Warrant and in any event within three (3) Trading Days thereafter (such
date, the “Exercise Share Delivery Date”), the Company shall, at its expense
(including the payment by it of any applicable issue or stamp taxes), cause to
be issued in the name of and delivered to the Holder, or as the Holder may
direct, a certificate or certificates evidencing the number of fully paid and
non-assessable shares of Common Stock (which number shall be rounded down to the
nearest whole share in the event any fractional share may otherwise be issuable
upon such exercise and the Company shall pay a cash adjustment to the Holder in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price) to which the Holder shall be entitled on such exercise, in
such denominations as may be requested by the Holder, which certificate or
certificates shall be free of restrictive and trading legends (except for any
such legends as may be required under the Securities Act). In lieu of delivering
physical certificates for the shares of Common Stock issuable upon any exercise
of this Warrant, provided the Warrant Shares are not restricted securities and
the Company’s transfer agent is participating in the Depository Trust Company
(“DTC”) Fast Automated Securities Transfer program or a similar program, upon
request of the Holder, the Company shall cause its transfer agent to
electronically transmit such shares of Common Stock issuable upon exercise of
this Warrant to the Holder (or its designee), by crediting the account of the
Holder’s (or such designee’s) broker with DTC through its Deposit Withdrawal
Agent Commission system (provided that the same time periods herein as for stock
certificates shall apply) as instructed by the Holder (or its designee).

 

4.2.     Compensation for Buy-In on Failure to Timely Deliver Exercise Shares.
In addition to any other rights available to the Holder, if the Company fails to
cause its transfer agent to transmit to the Holder Exercise Shares pursuant to
an exercise on or before the Exercise Share Delivery Date, and if after such
date the Holder is required by its broker to purchase (in an open market
transaction or otherwise) or the Holder’s brokerage firm otherwise purchases,
shares of Common Stock to deliver in satisfaction of a sale by the Holder of the
Exercise Shares which the Holder anticipated receiving upon such exercise (a
“Buy-In”), then the Company shall (a) pay in cash to the Holder the amount, if
any, by which (x) the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the
amount obtained by multiplying (1) the number of Exercise Shares that the
Company was required to deliver to the Holder in connection with the exercise at
issue times (2) the price at which the sell order giving rise to such purchase
obligation was executed, and (b) at the option of the Holder, either reinstate
the portion of the Warrant and equivalent number of Exercise Shares for which
such exercise was not honored (in which case such exercise shall be deemed
rescinded) or deliver to the Holder the number of shares of Common Stock that
would have been issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted exercise of shares of Common Stock with an aggregate sale price
giving rise to such purchase obligation of $10,000, under clause (a) of the
immediately preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In and evidence of the
amount of such loss. Nothing herein shall limit a Holder’s right to pursue a
decree of specific performance and/or injunctive relief with respect to the
Company’s failure to timely deliver shares of Common Stock upon exercise of the
Warrant as required pursuant to the terms hereof.

 

4.3.     Charges, Taxes and Expenses. Issuance of Exercise Shares shall be made
without charge to the Holder for any issue or transfer tax or other incidental
expense in respect of the issuance of such Exercise Shares, all of which taxes
and expenses shall be paid by the Company, and such Exercise Shares shall be
issued in the name of the Holder or in such name or names as may be directed by
the Holder; provided, however, that in the event Exercise Shares are to be
issued in a name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form attached
hereto (the “Assignment Form”) duly executed by the Holder and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.

 

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5.     CERTAIN ADJUSTMENT.

 

5.1.     Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding: (a) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company upon exercise of this Warrant), (b) subdivides outstanding shares of
Common Stock into a larger number of shares, (c) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares, or (d) issues by reclassification of shares of the Common Stock any
shares of capital stock of the Company, then in each case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event and the
number of shares issuable upon exercise of this Warrant shall be proportionately
adjusted such that the aggregate Exercise Price of this Warrant shall remain
unchanged. Any adjustment made pursuant to this Section 5.1 shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.

 

5.2     Pro Rata Distributions. During such time as this Warrant is outstanding,
if the Company shall declare or make any dividend or other distribution of its
assets (or rights to acquire its assets) to holders of shares of Common Stock,
by way of return of capital or otherwise (including, without limitation, any
distribution of cash, stock or other securities, property or options by way of a
dividend, spin off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a “Distribution”), at any time after
the issuance of this Warrant, then, in each such case, the Holder shall be
entitled to participate in such Distribution to the same extent that the Holder
would have participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant (without regard
to any limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of which a record
is taken for such Distribution, or, if no such record is taken, the date as of
which the record holders of shares of Common Stock are to be determined for the
participation in such Distribution (provided, however, that, to the extent that
the Holder's right to participate in any such Distribution would result in the
Holder exceeding the beneficial ownership limitation provided for in Section 10,
then the Holder shall not be entitled to participate in such Distribution to
such extent (or in the beneficial ownership of any shares of Common Stock as a
result of such Distribution to such extent) and the portion of such Distribution
shall be held in abeyance for the benefit of the Holder until such time, if
ever, as its right thereto would not result in the Holder exceeding the
beneficial ownership limitation).

 

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5.3     Fundamental Transaction. If, at any time while this Warrant is
outstanding, (a) the Company effects any merger or consolidation of the Company
with or into another Person, (b) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions, (c)
any tender offer or exchange offer (whether by the Company or another Person) is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (d) the Company
effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (each, a “Fundamental
Transaction”), then, upon the closing of a Fundamental Transaction and payment
of the exercise price therefore (including at the election of the Holder by
cashless exercise), the Holder shall receive, for each Warrant Share that would
have been issuable upon such exercise immediately prior to the occurrence of
such Fundamental Transaction, the number of shares of Common Stock of the
successor or acquiring corporation or of the Company, if it is the surviving
corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such merger, consolidation or disposition of assets by
a holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event. For purposes of any such exercise,
the determination of the Exercise Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as
to the Alternate Consideration it receives upon exercise of this Warrant upon
the closing of such Fundamental Transaction. The foregoing notwithstanding, if
the Company effects any reclassification of the Common Stock or any compulsory
share exchange, in each case, into another security of the Company, this Warrant
shall remain outstanding and the Holder shall be entitled to receive the
Alternative Consideration upon any subsequent exercise of this Warrant and the
payment of the exercise price therefor. The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms requiring any
such successor or surviving entity to comply with the provisions of this Section
5.3

 

5.4     Calculations. All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 5, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding treasury shares, if any) issued and outstanding at the
close of the Trading Day on or, if not applicable, most recently preceding, such
given date.

 

5.5     Notice to Holder.

 

(a)      Adjustment to Exercise Price. Whenever the Exercise Price is adjusted
pursuant to any provision of this Section 5, the Company shall promptly mail to
the Holder a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.

 

(b)      Notice to Allow Exercise by Holder. If (i) the Company shall declare a
dividend (or any other distribution in whatever form) on the Common Stock; (ii)
the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock; (iii) the Company shall authorize the granting
to all holders of the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights; (iv) the
approval of any stockholders of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property; or (v) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company; then, in each case, the Company shall cause to be
mailed to the Holder at its last address as it shall appear upon the Warrant
Register of the Company, at least twenty (20) calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. Subject to applicable law, the Holder is entitled to exercise
this Warrant during the period commencing on the date of such notice to the
effective date of the event triggering such notice. Notwithstanding the
foregoing, the delivery of the notice described in this Section 5.5 is not
intended to and shall not bestow upon the Holder any voting rights whatsoever
with respect to outstanding unexercised Warrants.

 

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6.     NO IMPAIRMENT. The Company will not, by amendment of the Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in taking all such action as may be necessary or appropriate in
order to protect the rights of the Holder against impairment. Without limiting
the generality of the foregoing, the Company (a) will not increase the par value
of any shares of Common Stock receivable on the exercise of this Warrant above
the amount payable therefor on such exercise and (b) will take all such action
as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable shares of stock on the exercise of
this Warrant from time to time outstanding.

 

7.     NOTICES OF RECORD DATE. In the event of:

 

(a)     any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right;

 

(b)     any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or any consolidation or merger of
the Company with or into any other Person or any other Change of Control; or

 

(c)     any voluntary or involuntary dissolution, liquidation or winding-up of
the Company;

 

then, and in each such event, the Company will mail or cause to be mailed to the
Holder a notice specifying (i) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and stating the amount
and character of such dividend, distribution or right, or (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is anticipated to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up. Such notice shall be mailed at least
fifteen (15) days prior to the date specified in such notice on which any such
action is to be taken.

 

8.     RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT; REGULATORY
COMPLIANCE.

 

8.1.     Reservation of Stock Issuable on Exercise of Warrant. The Company shall
at all times while this Warrant shall be outstanding, reserve and keep available
out of its authorized but unissued Common Stock, such number of shares of Common
Stock as shall from time to time be sufficient to effect the exercise of all or
any portion of the Warrant Shares (disregarding for this purpose any and all
limitations of any kind on such exercise). The Company shall, from time to time
in accordance with the Delaware General Corporation Law, increase the authorized
number of shares of Common Stock or take other effective action if at any time
the unissued number of authorized shares shall not be sufficient to satisfy the
Company’s obligations under this Section 8.

 

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8.2.     Regulatory Compliance. If any shares of Common Stock to be reserved for
the purpose of exercise of the Warrant Shares require registration or listing
with or approval of any Governmental Authority, stock exchange or other
regulatory body under any federal or state law or regulation or otherwise before
such shares may be validly issued or delivered upon exercise, the Company shall,
at its sole cost and expense, in good faith and as expeditiously as possible,
secure such registration, listing or approval, as the case may be.

 

9.     DEFINITIONS. As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:

 

“Affiliate” means a Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
the Person specified.

 

“Aggregate Exercise Price” means, in connection with the exercise of this
Warrant at any time, an amount equal to the product obtained by multiplying (i)
the Exercise Price times (ii) the number of shares of Common Stock for which
this Warrant is being exercised at such time.

 

“Business Day” means any day other than a Saturday, Sunday or any other day on
which banks are permitted or required to be closed in New York City.

 

“Certificate of Incorporation” means the Company’s Certificate of Incorporation
as amended to date.

 

“Change of Control” has the meaning set forth in the Purchase Agreement.

 

“Common Stock” means (i) the Company’s Common Stock, $0.0001 par value per
share, and (ii) any other securities into which or for which any of the
securities described in clause (i) above have been converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time
to time, and the rules and regulations promulgated thereunder from time to time
in effect.

 

“Exercise Period” means the period commencing on the Issue Date and ending 11:59
P.M. (New York City time) on the five year anniversary of the Issue Date or
earlier closing of a Fundamental Transaction (other than a Fundamental
Transaction of the type described in clause (d) of the definition thereof
resulting in the conversion into or exchange for another security of the
Company).

 

“Exercise Price” means $1.16 per share, as may be adjusted pursuant to the terms
hereof.

 

“Exercise Shares” means the shares of Common Stock for which this Warrant is
then being exercised.

 

“Fair Market Value” means, with respect to any security or other property, the
fair market value of such security or other property as determined by the Board
of Directors, acting in good faith.

 

“Governmental Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including any
supra-national bodies such as the European Union or the European Central Bank).

 

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“Issue Date” means May 6, 2020.

 

“Note” means the senior secured convertible promissory note issued by the
Company to the Holder pursuant to the Purchase Agreement.

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time in
effect.

 

“Subsidiary” means, as of any time of determination and with respect to any
Person, any United States corporation, partnership, limited liability company or
limited liability partnership, all of the stock (or other equity interest) of
every class of which, except directors’ qualifying shares (or any equivalent),
shall, at such time, be owned by such Person either directly or through
Subsidiaries and of which such Person or a Subsidiary shall have 100% control
thereof, except directors’ qualifying shares. Unless the context otherwise
clearly requires, any reference to a “Subsidiary” is a reference to a Subsidiary
of the Company.

 

“Trading Day” means a day on which the Common Stock is traded on a Trading
Market.

 

“Trading Market” means whichever of the New York Stock Exchange, NYSE American,
or the Nasdaq Stock Market (including the Nasdaq Capital Market), on which the
Common Stock is listed or quoted for trading on the date in question.

 

“VWAP” means, as of any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of one share of Common
Stock trading in the ordinary course of business on the applicable Trading Price
for such date (or the nearest preceding date) on such Trading Market as reported
by Bloomberg Financial L.P.; (b) if the Common Stock is not then listed on a
Trading Market and if the Common Stock is traded in the over-the-counter market,
as reported by the OTC Bulletin Board, the volume weighted average price of one
share of Common Stock for such date (or the nearest preceding date) on the OTC
Bulletin Board, as reported by Bloomberg Financial L.P.; (c) if the Common Stock
is not then listed or quoted on the OTC Bulletin Board and if prices for the
Common Stock is then reported in the “Pink Sheets” published by the Pink OTC
Markets Inc. (or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price of one share of Common Stock so
reported, as reported by Bloomberg Financial L.P.; or (d) in all other cases,
the fair market value of one share of Common Stock as determined by an
independent appraiser selected in good faith by the Holder and reasonably
acceptable to the Company (in each case rounded to four decimal places).

 

“Warrant Shares” means collectively the shares of Common Stock of the Company
issuable upon exercise of the Warrant in accordance with its terms, as such
number may be adjusted pursuant to the provisions thereof.

 

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10.     LIMITATION ON BENEFICIAL OWNERSHIP. Notwithstanding anything to the
contrary contained herein, the Holder shall not be entitled to receive shares of
Common Stock or other securities (together with Common Stock, “Equity
Interests”) upon exercise of this Warrant to the extent (but only to the extent)
that such exercise or receipt would cause the Holder Group to become, directly
or indirectly, a “beneficial owner” (within the meaning of Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder) of a number
of Equity Interests of a class that is registered under the Exchange Act which
exceeds the Maximum Percentage (as defined below) of the Equity Interests of
such class that are outstanding at such time. Any purported delivery of Equity
Interests in connection with the exercise of the Warrant prior to the
termination of this restriction in accordance herewith shall be void and have no
effect to the extent (but only to the extent) that such delivery would result in
the Holder Group becoming the beneficial owner of more than the Maximum
Percentage of the Equity Interests of a class that is registered under the
Exchange Act that is outstanding at such time. If any delivery of Equity
Interests owed to the Holder following exercise of this Warrant is not made, in
whole or in part, as a result of this limitation, the Company’s obligation to
make such delivery shall not be extinguished and the Company shall deliver such
Equity Interests as promptly as practicable after the Holder gives notice to the
Company that such delivery would not result in such limitation being triggered
or upon termination of the restriction in accordance with the terms hereof. To
the extent limitations contained in this Section 10 apply, the determination of
whether this Warrant is exercisable and of which portion of this Warrant is
exercisable shall be the sole responsibility and in the sole determination of
the Holder, and the submission of an Exercise Notice shall be deemed to
constitute the Holder’s determination that the issuance of the full number of
Warrant Shares requested in the Exercise Notice is permitted hereunder, and
neither the Company nor any Warrant agent shall have any obligation to verify or
confirm the accuracy of such determination. For purposes of this Section 10, (i)
the term “Maximum Percentage” shall mean 4.99%; provided, that if at any time
after the date hereof the Holder Group beneficially owns in excess of 4.99% of
any class of Equity Interests in the Company that is registered under the
Exchange Act (excluding any Equity Interests deemed beneficially owned by virtue
of this Warrant or the Note), then the Maximum Percentage shall automatically
increase to 9.99% so long as the Holder Group owns in excess of 4.99% of such
class of Equity Interests (and shall, for the avoidance of doubt, automatically
decrease to 4.99% upon the Holder Group ceasing to own in excess of 4.99% of
such class of Equity Interests); and (ii) the term “Holder Group” shall mean the
Holder plus any other Person with which the Holder is considered to be part of a
group under Section 13 of the Exchange Act or with which the Holder otherwise
files reports under Sections 13 and/or 16 of the Exchange Act. In determining
the number of Equity Interests of a particular class outstanding at any point in
time, the Holder may rely on the number of outstanding Equity Interests of such
class as reflected in (x) the Company’s most recent Annual Report on Form 10-K
or Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission, as the case may be, (y) a more recent public announcement by the
Company or (z) a more recent notice by the Company or its transfer agent to the
Holder setting forth the number of Equity Interests of such class then
outstanding. For any reason at any time, upon written or oral request of the
Holder, the Company shall, within one (1) Trading Day of such request, confirm
orally and in writing to the Holder the number of Equity Interests of any class
then outstanding. The provisions of this Section 10 shall be construed,
corrected and implemented in a manner so as to effectuate the intended
beneficial ownership limitation herein contained.

 

11.     REGISTRATION AND TRANSFER OF WARRANT.

 

11.1.     Registration of Warrant. The Company shall register and record
transfers, exchanges, reissuances and cancellations of this Warrant, upon the
records to be maintained by the Company for that purpose, in the name of the
record holder hereof from time to time. The Company may deem and treat the
registered holder of this Warrant as the absolute owner hereof for the purpose
of any exercise hereof or any distribution to the Holder, and for all other
purposes, absent actual notice to the contrary. The Company shall be entitled to
rely, and held harmless in acting or refraining from acting in reliance upon,
any notices, instructions or documents it believes in good faith to be from an
authorized representative of the Holder.

 

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11.2     Transferability. This Warrant and all rights hereunder (including,
without limitation, any registration rights) are transferable, in whole or in
part, upon surrender of this Warrant at the principal office of the Company or
its designated agent, together with a written assignment of this Warrant
substantially in the form of assignment (the “Assignment Notice”) attached
hereto duly executed by the Holder or its agent or attorney. The Company may
require the transferor thereof to provide to the Company an opinion of counsel
selected by the transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of the transferred Warrant under the 1933 Act. Upon
such surrender, the Company shall execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees, as applicable, and in the denomination
or denominations specified in such Assignment Notice, and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. This Warrant, if properly assigned
in accordance herewith, may be exercised by a new holder for the purchase of
Exercise Shares without having a new Warrant issued.

 

11.3.     New Warrants. This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 11.2, as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver
a new Warrant or Warrants in exchange for this Warrant or Warrants to be divided
or combined in accordance with such notice. All Warrants issued on transfers or
exchanges shall be dated the original Issue Date and shall be identical with
this Warrant except as to the number of Exercise Shares issuable pursuant
thereto.

 

12.     LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Exercise Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of this Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.

 

13.     REMEDIES. The Company stipulates that the remedies at law of the Holder
in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.

 

14.     NO RIGHTS AS A STOCKHOLDER. Except as otherwise specifically provided
herein, the Holder, solely in such Person’s capacity as a holder of this
Warrant, shall not be entitled to vote or receive dividends or be deemed the
holder of share capital of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the Holder, solely in such
Person’s capacity as the Holder of this Warrant, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the Holder of the Exercise Shares.

 

15.     NOTICES. All notices, requests, demands and other communications that
are required or may be given pursuant to the terms of this Warrant shall be in
writing and shall be deemed delivered (i) on the date of delivery when delivered
by hand on a Business Day during normal business hours or, if delivered on a day
that is not a Business Day or after normal business hours, then on the next
Business Day, (ii) on the date of transmission when sent by facsimile
transmission or email during normal business hours on a Business Day with
telephone confirmation of receipt or, if transmitted on a day that is not a
Business Day or after normal business hours, then on the next Business Day, or
(iii) on the second Business Day after the date of dispatch when sent by a
reputable courier service that maintains records of receipt. The addresses for
notice shall be as set forth in the Purchase Agreement.

 

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16.     CONSENT TO AMENDMENTS. Any term of this Warrant may be amended, and the
Company may take any action herein prohibited, or compliance therewith may be
waived, only if the Company shall have obtained the written consent (and not
without such written consent) to such amendment, action or waiver from the
Holder. No course of dealing between the Company and the Holder nor any delay in
exercising any rights hereunder shall operate as a waiver of any rights of the
Holder.

 

17.     MISCELLANEOUS. In case any provision of this Warrant shall be invalid,
illegal or unenforceable, or partially invalid, illegal or unenforceable, the
provision shall be enforced to the extent, if any, that it may legally be
enforced and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. If any
provision of this Warrant is found to conflict with the Purchase Agreement, the
provisions of this Warrant shall prevail. If any provision of this Warrant is
found to conflict with the Note, the provisions of the Note shall prevail. THIS
WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF
THE PARTIES SHALL BE GOVERNED BY, THE INTERNAL LAW OF THE STATE OF DELAWARE
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD PERMIT
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. The
headings in this Warrant are for purposes of reference only, and shall not limit
or otherwise affect any of the terms hereof.

 

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
duly authorized officer.

 

Dated as of May 6, 2020

 

BIO-KEY INTERNATIONAL, INC.

 

 

 

By:                                                                           

          

Name:                                                                      

 

Title:                                                                        

 

 

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FORM OF SUBSCRIPTION

 

(To be signed only on exercise

of Common Stock Purchase Warrant)

 

TO:        BIO-key International, Inc.

 

1.     The undersigned Holder of the attached Warrant hereby elects to exercise
its purchase right under such Warrant to purchase shares of Common Stock of
BIO-key International, Inc., a Delaware corporation (the “Company”), as follows
(check one or more, as applicable):

 

 

☐

to exercise the Warrant to purchase __________ shares of Common Stock and to pay
the Aggregate Exercise Price therefor by wire transfer of United States funds to
the account of the Company, which transfer has been made prior to or as of the
date of delivery of this Form of Subscription pursuant to the instructions of
the Company;

          and/or

 

 

☐

to exercise the Warrant with respect to ____________ shares of Common Stock
pursuant to the net exercise provisions specified in Section 2.3 of the Warrant.

 

2.     In exercising this Warrant, the undersigned Holder hereby confirms and
acknowledges that the shares of Common Stock are being acquired solely for the
account of the undersigned and not as a nominee for any other party, and for
investment, and that the undersigned shall not offer, sell or otherwise dispose
of any such shares of Common Stock except under circumstances that will not
result in a violation of the Securities Act or any state securities laws. The
undersigned hereby further confirms and acknowledges that it is an “accredited
investor”, as that term is defined under the Securities Act.

 

3.     Please issue a stock certificate or certificates representing the
appropriate number of shares of Common Stock in the name of the undersigned or
in such other name(s) as is specified below:

 

  Name:        Address:                       TIN:    

 

 

                                                                               
  

(Signature must conform exactly to name of

Holder as specified on the face of the Warrant)

Dated:                                          

 

 

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FORM OF ASSIGNMENT

(To be signed only on transfer of Warrant)

 

 

For value received, the undersigned hereby sells, assigns, and transfers unto
________________ the right represented by the within Warrant to purchase
             shares of Common Stock of BIO-key International, Inc., a Delaware
corporation, to which the within Warrant relates, and appoints _________________
attorney to transfer such right on the books of BIO-key International, Inc.,
with full power of substitution in the premises.

 

 

 

[insert name of Holder]

 

 

 

 

 

 

 

 

 

 

 

Dated:                                       

 

By:

/s/ 

 

         

 

 

Title:

 

 

 

 

 

 

 

    [insert address of Holder]                       Signed in the presence of: