Exhibit 10.2

 

EXHIBIT A

 

NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE
EXERCISABLE 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 OR BLUE SKY LAWS.  THESE SECURITIES AND THE SECURITIES ISSUABLE
UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

BIO-KEY INTERNATIONAL, INC.

 

WARRANT

 

Warrant No. [  ]

 

Dated:  March 31, 2004

 

BIO-key International, Inc., a Minnesota corporation (the “Company”), hereby
certifies that, for value received, [Name of Holder] or its registered assigns
(the “Holder”), is entitled to purchase from the Company up to a total of
[          ] shares of common stock, $.01 par value per share (the “Common
Stock”), of the Company (each such share, a “Warrant Share” and all such shares,
the “Warrant Shares”) at an exercise price equal to $1.755 per share (as
adjusted from time to time as provided in Section 9, the “Exercise Price”), at
any time and from time to time from and after the date hereof and through and
including the date that is five (5) years from the Effective Date (the
“Expiration Date”), and subject to the following terms and conditions.  This
Warrant (this “Warrant”) is one of a series of similar warrants issued pursuant
to that certain Securities Purchase Agreement, dated as of the date hereof, by
and among the Company and the Purchasers identified therein (the “Purchase
Agreement”).  All such warrants are referred to herein, collectively, as the
“Warrants.”

 

1.             DEFINITIONS.  IN ADDITION TO THE TERMS DEFINED ELSEWHERE IN THIS
WARRANT, CAPITALIZED TERMS THAT ARE NOT OTHERWISE DEFINED HEREIN HAVE THE
MEANINGS GIVEN TO SUCH TERMS IN THE PURCHASE AGREEMENT.

 

2.             REGISTRATION OF WARRANT.  THE COMPANY SHALL REGISTER THIS
WARRANT, UPON RECORDS TO BE MAINTAINED BY THE COMPANY FOR THAT PURPOSE (THE
“WARRANT REGISTER”), IN THE NAME OF THE RECORD HOLDER HEREOF FROM TIME TO TIME. 
THE COMPANY MAY DEEM AND TREAT THE REGISTERED HOLDER

 

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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.

 

3.             REGISTRATION OF TRANSFERS.  THE COMPANY SHALL REGISTER THE
TRANSFER OF ANY PORTION OF THIS WARRANT IN THE WARRANT REGISTER, UPON SURRENDER
OF THIS WARRANT, WITH THE FORM OF ASSIGNMENT ATTACHED HERETO DULY COMPLETED AND
SIGNED, TO THE TRANSFER AGENT OR TO THE COMPANY AT ITS ADDRESS SPECIFIED
HEREIN.  UPON ANY SUCH REGISTRATION OR TRANSFER, A NEW WARRANT TO PURCHASE
COMMON STOCK, IN SUBSTANTIALLY THE FORM OF THIS WARRANT (ANY SUCH NEW WARRANT, A
“NEW WARRANT”), EVIDENCING THE PORTION OF THIS WARRANT SO TRANSFERRED SHALL BE
ISSUED TO THE TRANSFEREE AND A NEW WARRANT EVIDENCING THE REMAINING PORTION OF
THIS WARRANT NOT SO TRANSFERRED, IF ANY, SHALL BE ISSUED TO THE TRANSFERRING
HOLDER.  THE ACCEPTANCE OF THE NEW WARRANT BY THE TRANSFEREE THEREOF SHALL BE
DEEMED THE ACCEPTANCE BY SUCH TRANSFEREE OF ALL OF THE RIGHTS AND OBLIGATIONS OF
A HOLDER OF A WARRANT.

 

4.             EXERCISE AND DURATION OF WARRANTS.

 

(A)           THIS WARRANT SHALL BE EXERCISABLE BY THE REGISTERED HOLDER AT ANY
TIME AND FROM TIME TO TIME ON OR AFTER THE DATE HEREOF TO AND INCLUDING THE
EXPIRATION DATE.  AT 6:30 P.M., NEW YORK CITY TIME ON THE EXPIRATION DATE, THE
PORTION OF THIS WARRANT NOT EXERCISED PRIOR THERETO SHALL BE AND BECOME VOID AND
OF NO VALUE; PROVIDED THAT, IF THE AVERAGE OF THE CLOSING PRICES FOR THE FIVE
TRADING DAYS IMMEDIATELY PRIOR TO (BUT NOT INCLUDING) THE EXPIRATION DATE
EXCEEDS THE EXERCISE PRICE ON THE EXPIRATION DATE, THEN THIS WARRANT SHALL BE
DEEMED TO HAVE BEEN EXERCISED IN FULL (TO THE EXTENT NOT PREVIOUSLY EXERCISED)
ON A “CASHLESS EXERCISE” BASIS AT 6:30 P.M. NEW YORK CITY TIME ON THE EXPIRATION
DATE IF A “CASHLESS EXERCISE” MAY OCCUR AT SUCH TIME PURSUANT TO SECTION 10
BELOW.  NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THE EXPIRATION DATE
SHALL BE EXTENDED FOR EACH DAY FOLLOWING THE EFFECTIVE DATE THAT THE
REGISTRATION STATEMENT IS NOT EFFECTIVE.

 

(B)           A HOLDER MAY EXERCISE THIS WARRANT BY DELIVERING TO THE COMPANY
(I) AN EXERCISE NOTICE, IN THE FORM ATTACHED HERETO (THE “EXERCISE NOTICE”),
APPROPRIATELY COMPLETED AND DULY SIGNED, AND (II) PAYMENT OF THE EXERCISE PRICE
FOR THE NUMBER OF WARRANT SHARES AS TO WHICH THIS WARRANT IS BEING EXERCISED
(WHICH MAY TAKE THE FORM OF A “CASHLESS EXERCISE” IF SO INDICATED IN THE
EXERCISE NOTICE AND IF A “CASHLESS EXERCISE” MAY OCCUR AT SUCH TIME PURSUANT TO
THIS SECTION 10 BELOW), AND THE DATE SUCH ITEMS ARE DELIVERED TO THE COMPANY (AS
DETERMINED IN ACCORDANCE WITH THE NOTICE PROVISIONS HEREOF) IS AN “EXERCISE
DATE.”  THE HOLDER SHALL NOT BE REQUIRED TO DELIVER THE ORIGINAL WARRANT IN
ORDER TO EFFECT AN EXERCISE HEREUNDER.  EXECUTION AND DELIVERY OF THE EXERCISE
NOTICE SHALL HAVE THE SAME EFFECT AS CANCELLATION OF THE ORIGINAL WARRANT AND
ISSUANCE OF A NEW WARRANT EVIDENCING THE RIGHT TO PURCHASE THE REMAINING NUMBER
OF WARRANT SHARES.

 

5.             DELIVERY OF WARRANT SHARES.

 

(A)           UPON EXERCISE OF THIS WARRANT, THE COMPANY SHALL PROMPTLY (BUT IN
NO EVENT LATER THAN THREE TRADING DAYS AFTER THE EXERCISE DATE) ISSUE OR CAUSE
TO BE ISSUED AND CAUSE TO BE DELIVERED TO OR UPON THE WRITTEN ORDER OF THE
HOLDER AND IN SUCH NAME OR NAMES AS THE HOLDER MAY DESIGNATE, A CERTIFICATE FOR
THE WARRANT SHARES ISSUABLE UPON SUCH EXERCISE, FREE OF RESTRICTIVE LEGENDS
UNLESS A REGISTRATION STATEMENT COVERING THE RESALE OF THE WARRANT SHARES AND

 

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NAMING THE HOLDER AS A SELLING STOCKHOLDER THEREUNDER IS NOT THEN EFFECTIVE AND
THE WARRANT SHARES ARE NOT FREELY TRANSFERABLE WITHOUT VOLUME RESTRICTIONS
PURSUANT TO RULE 144 UNDER THE SECURITIES ACT.  THE HOLDER, OR ANY PERSON SO
DESIGNATED BY THE HOLDER TO RECEIVE WARRANT SHARES, SHALL BE DEEMED TO HAVE
BECOME HOLDER OF RECORD OF SUCH WARRANT SHARES AS OF THE EXERCISE DATE.  THE
COMPANY SHALL, UPON REQUEST OF THE HOLDER, USE ITS BEST EFFORTS TO DELIVER
WARRANT SHARES HEREUNDER ELECTRONICALLY THROUGH THE DEPOSITORY TRUST CORPORATION
OR ANOTHER ESTABLISHED CLEARING CORPORATION PERFORMING SIMILAR FUNCTIONS.

 

(B)           THIS WARRANT IS EXERCISABLE, EITHER IN ITS ENTIRETY OR, FROM TIME
TO TIME, FOR A PORTION OF THE NUMBER OF WARRANT SHARES.  UPON SURRENDER OF THIS
WARRANT FOLLOWING ONE OR MORE PARTIAL EXERCISES, THE COMPANY SHALL ISSUE OR
CAUSE TO BE ISSUED, AT ITS EXPENSE, A NEW WARRANT EVIDENCING THE RIGHT TO
PURCHASE THE REMAINING NUMBER OF WARRANT SHARES.

 

(C)           IN ADDITION TO ANY OTHER RIGHTS AVAILABLE TO A HOLDER, IF THE
COMPANY FAILS TO DELIVER TO THE HOLDER A CERTIFICATE REPRESENTING WARRANT SHARES
BY THE THIRD TRADING DAY AFTER THE DATE ON WHICH DELIVERY OF SUCH CERTIFICATE IS
REQUIRED BY THIS WARRANT, AND IF AFTER SUCH THIRD TRADING DAY THE HOLDER
PURCHASES (IN AN OPEN MARKET TRANSACTION OR OTHERWISE) SHARES OF COMMON STOCK TO
DELIVER IN SATISFACTION OF A SALE BY THE HOLDER OF THE WARRANT SHARES THAT THE
HOLDER ANTICIPATED RECEIVING FROM THE COMPANY (A “BUY-IN”), THEN THE COMPANY
SHALL, WITHIN THREE TRADING DAYS AFTER THE HOLDER’S REQUEST AND IN THE HOLDER’S
DISCRETION, EITHER (I) PAY CASH TO THE HOLDER IN AN AMOUNT EQUAL TO THE HOLDER’S
TOTAL PURCHASE PRICE (INCLUDING BROKERAGE COMMISSIONS, IF ANY) FOR THE SHARES OF
COMMON STOCK SO PURCHASED (THE “BUY-IN PRICE”), AT WHICH POINT THE COMPANY’S
OBLIGATION TO DELIVER SUCH CERTIFICATE (AND TO ISSUE SUCH COMMON STOCK) SHALL
TERMINATE, OR (II) PROMPTLY HONOR ITS OBLIGATION TO DELIVER TO THE HOLDER A
CERTIFICATE OR CERTIFICATES REPRESENTING SUCH COMMON STOCK AND PAY CASH TO THE
HOLDER IN AN AMOUNT EQUAL TO THE EXCESS (IF ANY) OF THE BUY-IN PRICE OVER THE
PRODUCT OF (A) SUCH NUMBER OF SHARES OF COMMON STOCK, TIMES (B) THE CLOSING
PRICE ON THE DATE OF THE EVENT GIVING RISE TO THE COMPANY’S OBLIGATION TO
DELIVER SUCH CERTIFICATE.

 

(D)           THE COMPANY’S OBLIGATIONS TO ISSUE AND DELIVER WARRANT SHARES IN
ACCORDANCE WITH THE TERMS HEREOF ARE ABSOLUTE AND UNCONDITIONAL, IRRESPECTIVE OF
ANY ACTION OR INACTION BY THE HOLDER TO ENFORCE THE SAME, ANY WAIVER OR CONSENT
WITH RESPECT TO ANY PROVISION HEREOF, THE RECOVERY OF ANY JUDGMENT AGAINST ANY
PERSON OR ANY ACTION TO ENFORCE THE SAME, OR ANY SETOFF, COUNTERCLAIM,
RECOUPMENT, LIMITATION OR TERMINATION, OR ANY BREACH OR ALLEGED BREACH BY THE
HOLDER OR ANY OTHER PERSON OF ANY OBLIGATION TO THE COMPANY OR ANY VIOLATION OR
ALLEGED VIOLATION OF LAW BY THE HOLDER OR ANY OTHER PERSON, AND IRRESPECTIVE OF
ANY OTHER CIRCUMSTANCE WHICH MIGHT OTHERWISE LIMIT SUCH OBLIGATION OF THE
COMPANY TO THE HOLDER IN CONNECTION WITH THE ISSUANCE OF WARRANT SHARES. 
NOTHING HEREIN SHALL LIMIT A HOLDER’S RIGHT TO PURSUE ANY OTHER REMEDIES
AVAILABLE TO IT HEREUNDER, AT LAW OR IN EQUITY INCLUDING, WITHOUT LIMITATION, A
DECREE OF SPECIFIC PERFORMANCE AND/OR INJUNCTIVE RELIEF WITH RESPECT TO THE
COMPANY’S FAILURE TO TIMELY DELIVER CERTIFICATES REPRESENTING SHARES OF COMMON
STOCK UPON EXERCISE OF THE WARRANT  AS REQUIRED PURSUANT TO THE TERMS HEREOF.

 

6.             CHARGES, TAXES AND EXPENSES.   ISSUANCE AND DELIVERY OF
CERTIFICATES FOR SHARES OF COMMON STOCK UPON EXERCISE OF THIS WARRANT SHALL BE
MADE WITHOUT CHARGE TO THE HOLDER FOR ANY ISSUE OR TRANSFER TAX, WITHHOLDING
TAX, TRANSFER AGENT FEE OR OTHER INCIDENTAL TAX OR EXPENSE IN RESPECT OF THE
ISSUANCE OF SUCH CERTIFICATES, ALL OF WHICH TAXES AND EXPENSES SHALL BE PAID BY
THE

 

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COMPANY; PROVIDED, HOWEVER, THAT THE COMPANY SHALL NOT BE REQUIRED TO PAY ANY
TAX WHICH MAY BE PAYABLE IN RESPECT OF ANY TRANSFER INVOLVED IN THE REGISTRATION
OF ANY CERTIFICATES FOR WARRANT SHARES OR WARRANTS IN A NAME OTHER THAN THAT OF
THE HOLDER OR AN AFFILIATE THEREOF.  THE HOLDER SHALL BE RESPONSIBLE FOR ALL
OTHER TAX LIABILITY THAT MAY ARISE AS A RESULT OF HOLDING OR TRANSFERRING THIS
WARRANT OR RECEIVING WARRANT SHARES UPON EXERCISE HEREOF.

 

7.             REPLACEMENT OF WARRANT.  IF THIS WARRANT IS MUTILATED, LOST,
STOLEN OR DESTROYED, THE COMPANY SHALL ISSUE OR CAUSE TO BE ISSUED IN EXCHANGE
AND SUBSTITUTION FOR AND UPON CANCELLATION HEREOF, OR IN LIEU OF AND
SUBSTITUTION FOR THIS WARRANT, A NEW WARRANT, BUT ONLY UPON RECEIPT OF EVIDENCE
REASONABLY SATISFACTORY TO THE COMPANY OF SUCH LOSS, THEFT OR DESTRUCTION AND
CUSTOMARY AND REASONABLE BOND OR INDEMNITY, IF REQUESTED.  APPLICANTS FOR A NEW
WARRANT UNDER SUCH CIRCUMSTANCES SHALL ALSO COMPLY WITH SUCH OTHER REASONABLE
REGULATIONS AND PROCEDURES AND PAY SUCH OTHER REASONABLE THIRD-PARTY COSTS AS
THE COMPANY MAY PRESCRIBE.

 

8.             RESERVATION OF WARRANT SHARES.  THE COMPANY COVENANTS THAT IT
WILL AT ALL TIMES RESERVE AND KEEP AVAILABLE OUT OF THE AGGREGATE OF ITS
AUTHORIZED BUT UNISSUED AND OTHERWISE UNRESERVED COMMON STOCK, SOLELY FOR THE
PURPOSE OF ENABLING IT TO ISSUE WARRANT SHARES UPON EXERCISE OF THIS WARRANT AS
HEREIN PROVIDED, THE NUMBER OF WARRANT SHARES WHICH ARE THEN ISSUABLE AND
DELIVERABLE UPON THE EXERCISE OF THIS ENTIRE WARRANT, FREE FROM PREEMPTIVE
RIGHTS OR ANY OTHER CONTINGENT PURCHASE RIGHTS OF PERSONS OTHER THAN THE HOLDER
(AFTER GIVING EFFECT TO THE ADJUSTMENTS AND RESTRICTIONS OF SECTION 9, IF ANY).
THE COMPANY COVENANTS THAT ALL WARRANT SHARES SO ISSUABLE AND DELIVERABLE SHALL,
UPON ISSUANCE AND THE PAYMENT OF THE APPLICABLE EXERCISE PRICE IN ACCORDANCE
WITH THE TERMS HEREOF, BE DULY AND VALIDLY AUTHORIZED, ISSUED AND FULLY PAID AND
NONASSESSABLE.  THE COMPANY WILL TAKE ALL SUCH ACTION AS MAY BE NECESSARY TO
ASSURE THAT SUCH SHARES OF COMMON STOCK MAY BE ISSUED AS PROVIDED HEREIN WITHOUT
VIOLATION OF ANY APPLICABLE LAW OR REGULATION, OR OF ANY REQUIREMENTS OF ANY
SECURITIES EXCHANGE OR AUTOMATED QUOTATION SYSTEM UPON WHICH THE COMMON STOCK
MAY BE LISTED.

 

9.             CERTAIN ADJUSTMENTS.  THE EXERCISE PRICE AND NUMBER OF WARRANT
SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO ADJUSTMENT FROM
TIME TO TIME AS SET FORTH IN THIS SECTION 9.

 

(A)           STOCK DIVIDENDS AND SPLITS.  IF THE COMPANY, AT ANY TIME WHILE
THIS WARRANT IS OUTSTANDING, (I) PAYS A STOCK DIVIDEND ON ITS COMMON STOCK OR
OTHERWISE MAKES A DISTRIBUTION ON ANY CLASS OF CAPITAL STOCK THAT IS PAYABLE IN
SHARES OF COMMON STOCK, (II) SUBDIVIDES OUTSTANDING SHARES OF COMMON STOCK INTO
A LARGER NUMBER OF SHARES, OR (III) COMBINES OUTSTANDING SHARES OF COMMON STOCK
INTO A SMALLER NUMBER OF SHARES, THEN IN EACH SUCH CASE THE EXERCISE PRICE SHALL
BE MULTIPLIED BY A FRACTION OF WHICH THE NUMERATOR SHALL BE THE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING IMMEDIATELY BEFORE SUCH EVENT AND OF WHICH THE
DENOMINATOR SHALL BE THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
IMMEDIATELY AFTER SUCH EVENT.  ANY ADJUSTMENT MADE PURSUANT TO CLAUSE (I) OF
THIS PARAGRAPH SHALL BECOME EFFECTIVE IMMEDIATELY AFTER THE RECORD DATE FOR THE
DETERMINATION OF STOCKHOLDERS ENTITLED TO RECEIVE SUCH DIVIDEND OR DISTRIBUTION,
AND ANY ADJUSTMENT PURSUANT TO CLAUSE (II) OR (III) OF THIS PARAGRAPH SHALL
BECOME EFFECTIVE IMMEDIATELY AFTER THE EFFECTIVE DATE OF SUCH SUBDIVISION OR
COMBINATION.

 

(B)           PRO RATA DISTRIBUTIONS.  IF THE COMPANY, AT ANY TIME WHILE THIS
WARRANT IS OUTSTANDING, DISTRIBUTES GENERALLY TO ALL HOLDERS OF COMMON STOCK (I)
EVIDENCES OF ITS

 

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INDEBTEDNESS, (II) ANY SECURITY (OTHER THAN A DISTRIBUTION OF COMMON STOCK
COVERED BY THE PRECEDING PARAGRAPH), (III) RIGHTS OR WARRANTS TO SUBSCRIBE FOR
OR PURCHASE ANY SECURITY, OR (IV) ANY OTHER ASSET (IN EACH CASE, “DISTRIBUTED
PROPERTY”), THEN IN EACH SUCH CASE THE EXERCISE PRICE IN EFFECT IMMEDIATELY
PRIOR TO THE RECORD DATE FIXED FOR DETERMINATION OF STOCKHOLDERS ENTITLED TO
RECEIVE SUCH DISTRIBUTION SHALL BE ADJUSTED (EFFECTIVE ON SUCH RECORD DATE) TO
EQUAL THE PRODUCT OF SUCH EXERCISE PRICE TIMES A FRACTION OF WHICH THE
DENOMINATOR SHALL BE THE AVERAGE OF THE CLOSING PRICES FOR THE FIVE TRADING DAYS
IMMEDIATELY PRIOR TO (BUT NOT INCLUDING) SUCH RECORD DATE AND OF WHICH THE
NUMERATOR SHALL BE SUCH AVERAGE LESS THE THEN FAIR MARKET VALUE OF THE
DISTRIBUTED PROPERTY DISTRIBUTED IN RESPECT OF  ONE OUTSTANDING SHARE OF COMMON
STOCK, AS DETERMINED BY THE COMPANY’S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
THAT REGULARLY EXAMINE THE FINANCIAL STATEMENTS OF THE COMPANY, (AN
“APPRAISER”).  IN SUCH EVENT, THE HOLDER, AFTER RECEIPT OF THE DETERMINATION BY
THE APPRAISER, SHALL HAVE THE RIGHT TO SELECT AN ADDITIONAL APPRAISER (WHICH
SHALL BE A NATIONALLY RECOGNIZED ACCOUNTING FIRM), IN WHICH CASE SUCH FAIR
MARKET VALUE SHALL BE DEEMED TO EQUAL THE AVERAGE OF THE VALUES DETERMINED BY
EACH OF THE APPRAISER AND SUCH APPRAISER.  AS AN ALTERNATIVE TO THE FOREGOING
ADJUSTMENT TO THE EXERCISE PRICE, AT THE REQUEST OF THE HOLDER DELIVERED BEFORE
THE 90TH DAY AFTER SUCH RECORD DATE, THE COMPANY WILL DELIVER TO SUCH HOLDER,
WITHIN FIVE TRADING DAYS AFTER SUCH REQUEST (OR, IF LATER, ON THE EFFECTIVE DATE
OF SUCH DISTRIBUTION), THE DISTRIBUTED PROPERTY THAT SUCH HOLDER WOULD HAVE BEEN
ENTITLED TO RECEIVE IN RESPECT OF THE WARRANT SHARES FOR WHICH THIS WARRANT
COULD HAVE BEEN EXERCISED IMMEDIATELY PRIOR TO SUCH RECORD DATE.  IF SUCH
DISTRIBUTED PROPERTY IS NOT DELIVERED TO A HOLDER PURSUANT TO THE PRECEDING
SENTENCE, THEN UPON EXPIRATION OF OR ANY EXERCISE OF THE WARRANT THAT OCCURS
AFTER SUCH RECORD DATE, SUCH HOLDER SHALL REMAIN ENTITLED TO RECEIVE, IN
ADDITION TO THE WARRANT SHARES OTHERWISE ISSUABLE UPON SUCH EXERCISE (IF
APPLICABLE), SUCH DISTRIBUTED PROPERTY.

 

(C)           FUNDAMENTAL TRANSACTIONS.  IF, AT ANY TIME WHILE THIS WARRANT IS
OUTSTANDING, (I) THE COMPANY EFFECTS ANY MERGER OR CONSOLIDATION OF THE COMPANY
WITH OR INTO ANOTHER PERSON, (II) THE COMPANY EFFECTS ANY SALE OF ALL OR
SUBSTANTIALLY ALL OF ITS ASSETS IN ONE OR A SERIES OF RELATED TRANSACTIONS,
(III) 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 (IV)
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 (OTHER THAN AS A RESULT OF A
SUBDIVISION OR COMBINATION OF SHARES OF COMMON STOCK COVERED BY SECTION 9(A)
ABOVE) (IN ANY SUCH CASE, A “FUNDAMENTAL TRANSACTION”), THEN THE HOLDER SHALL
HAVE THE RIGHT THEREAFTER TO RECEIVE, UPON EXERCISE OF THIS WARRANT, THE SAME
AMOUNT AND KIND OF SECURITIES, CASH OR PROPERTY AS IT WOULD HAVE BEEN ENTITLED
TO RECEIVE UPON THE OCCURRENCE OF SUCH FUNDAMENTAL TRANSACTION IF IT HAD BEEN,
IMMEDIATELY PRIOR TO SUCH FUNDAMENTAL TRANSACTION, THE HOLDER OF THE NUMBER OF
WARRANT SHARES THEN ISSUABLE UPON EXERCISE IN FULL OF THIS WARRANT (THE
“ALTERNATE CONSIDERATION”).  THE AGGREGATE EXERCISE PRICE FOR THIS WARRANT WILL
NOT BE AFFECTED BY ANY SUCH FUNDAMENTAL TRANSACTION, BUT THE COMPANY SHALL
APPORTION SUCH AGGREGATE 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 ANY EXERCISE OF THIS WARRANT FOLLOWING SUCH FUNDAMENTAL
TRANSACTION.  AT THE HOLDER’S REQUEST, ANY SUCCESSOR TO THE COMPANY OR SURVIVING
ENTITY IN SUCH FUNDAMENTAL TRANSACTION SHALL ISSUE TO THE HOLDER A NEW WARRANT
CONSISTENT WITH

 

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THE FOREGOING PROVISIONS AND EVIDENCING THE HOLDER’S RIGHT TO PURCHASE THE
ALTERNATE CONSIDERATION FOR THE AGGREGATE EXERCISE PRICE UPON EXERCISE THEREOF. 
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 PARAGRAPH (C) AND INSURING THAT THE WARRANT
(OR ANY SUCH REPLACEMENT SECURITY) WILL BE SIMILARLY ADJUSTED UPON ANY
SUBSEQUENT TRANSACTION ANALOGOUS TO A FUNDAMENTAL TRANSACTION. IF ANY
FUNDAMENTAL TRANSACTION CONSTITUTES OR RESULTS IN A CHANGE OF CONTROL, THEN AT
THE REQUEST OF THE HOLDER DELIVERED BEFORE THE 90TH DAY AFTER SUCH FUNDAMENTAL
TRANSACTION, THE COMPANY (OR ANY SUCH SUCCESSOR OR SURVIVING ENTITY) WILL
PURCHASE THE WARRANT FROM THE HOLDER FOR A PURCHASE PRICE, PAYABLE IN CASH
WITHIN FIVE TRADING DAYS AFTER SUCH REQUEST (OR, IF LATER, ON THE EFFECTIVE DATE
OF THE FUNDAMENTAL TRANSACTION), EQUAL TO THE BLACK-SCHOLES VALUE OF THE
REMAINING UNEXERCISED PORTION OF THIS WARRANT ON THE DATE OF SUCH REQUEST.

 

(D)           SUBSEQUENT EQUITY SALES.

 

(I)            IF, AT ANY TIME ON OR PRIOR TO MARCH 31, 2005, THE COMPANY OR ANY
SUBSIDIARY ISSUES ADDITIONAL SHARES OF COMMON STOCK OR RIGHTS, WARRANTS, OPTIONS
OR OTHER SECURITIES OR DEBT CONVERTIBLE, EXERCISABLE OR EXCHANGEABLE FOR SHARES
OF COMMON STOCK OR OTHERWISE ENTITLING ANY PERSON TO ACQUIRE SHARES OF COMMON
STOCK (COLLECTIVELY, “COMMON STOCK EQUIVALENTS”) AT AN EFFECTIVE NET PRICE TO
THE COMPANY PER SHARE OF COMMON STOCK (THE “EFFECTIVE PRICE”) LESS THAN THE
EXERCISE PRICE (AS ADJUSTED HEREUNDER TO SUCH DATE), THEN THE EXERCISE PRICE
SHALL BE REDUCED TO EQUAL THE EFFECTIVE PRICE.  FOR PURPOSES OF THIS PARAGRAPH,
IN CONNECTION WITH ANY ISSUANCE OF ANY COMMON STOCK EQUIVALENTS, (A) THE MAXIMUM
NUMBER OF SHARES OF COMMON STOCK POTENTIALLY ISSUABLE AT ANY TIME UPON
CONVERSION, EXERCISE OR EXCHANGE OF SUCH COMMON STOCK EQUIVALENTS (THE “DEEMED
NUMBER”) SHALL BE DEEMED TO BE OUTSTANDING UPON ISSUANCE OF SUCH COMMON STOCK
EQUIVALENTS, (B) THE EFFECTIVE PRICE APPLICABLE TO SUCH COMMON STOCK SHALL EQUAL
THE MINIMUM DOLLAR VALUE OF CONSIDERATION PAYABLE TO THE COMPANY TO PURCHASE
SUCH COMMON STOCK EQUIVALENTS AND TO CONVERT, EXERCISE OR EXCHANGE THEM INTO
COMMON STOCK (NET OF ANY DISCOUNTS, FEES, COMMISSIONS AND OTHER EXPENSES),
DIVIDED BY THE DEEMED NUMBER, AND (C) NO FURTHER ADJUSTMENT SHALL BE MADE TO THE
EXERCISE PRICE UPON THE ACTUAL ISSUANCE OF COMMON STOCK UPON CONVERSION,
EXERCISE OR EXCHANGE OF SUCH COMMON STOCK EQUIVALENTS.

 

(II)           IF, AT ANY TIME WHILE THIS WARRANT IS OUTSTANDING, THE COMPANY OR
ANY SUBSIDIARY ISSUES COMMON STOCK EQUIVALENTS WITH AN EFFECTIVE PRICE OR A
NUMBER OF UNDERLYING SHARES THAT FLOATS OR RESETS OR OTHERWISE VARIES OR IS
SUBJECT TO ADJUSTMENT BASED (DIRECTLY OR INDIRECTLY) ON MARKET PRICES OF THE
COMMON STOCK (A “FLOATING PRICE SECURITY”), THEN FOR PURPOSES OF APPLYING THE
PRECEDING PARAGRAPH IN CONNECTION WITH ANY SUBSEQUENT EXERCISE, THE EFFECTIVE
PRICE WILL BE DETERMINED SEPARATELY ON EACH EXERCISE DATE AND WILL BE DEEMED TO
EQUAL THE LOWEST EFFECTIVE PRICE AT WHICH ANY HOLDER OF SUCH FLOATING PRICE
SECURITY IS ENTITLED TO ACQUIRE COMMON STOCK ON SUCH EXERCISE DATE (REGARDLESS
OF WHETHER ANY SUCH HOLDER ACTUALLY ACQUIRES ANY SHARES ON SUCH DATE).

 

(III)          NOTWITHSTANDING THE FOREGOING, NO ADJUSTMENT WILL BE MADE UNDER
THIS PARAGRAPH (D) IN RESPECT OF ANY EXCLUDED STOCK.

 

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(E)           NUMBER OF WARRANT SHARES.  SIMULTANEOUSLY WITH ANY ADJUSTMENTS TO
THE EXERCISE PRICE PURSUANT TO PARAGRAPHS (A) OR (B) OF THIS SECTION, THE NUMBER
OF WARRANT SHARES THAT MAY BE PURCHASED UPON EXERCISE OF THIS WARRANT SHALL BE
INCREASED PROPORTIONATELY, SO THAT AFTER SUCH ADJUSTMENT THE AGGREGATE EXERCISE
PRICE PAYABLE HEREUNDER FOR THE INCREASED NUMBER OF WARRANT SHARES SHALL BE THE
SAME AS THE AGGREGATE EXERCISE PRICE IN EFFECT IMMEDIATELY PRIOR TO SUCH
ADJUSTMENT.

 

(F)            CALCULATIONS.  ALL CALCULATIONS UNDER THIS SECTION 9 SHALL BE
MADE TO THE NEAREST CENT OR THE NEAREST 1/100TH OF A SHARE, AS APPLICABLE.  THE
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AT ANY GIVEN TIME SHALL NOT INCLUDE
SHARES OWNED OR HELD BY OR FOR THE ACCOUNT OF THE COMPANY, AND THE DISPOSITION
OF ANY SUCH SHARES SHALL BE CONSIDERED AN ISSUE OR SALE OF COMMON STOCK.

 

(G)           NOTICE OF ADJUSTMENTS.  UPON THE OCCURRENCE OF EACH ADJUSTMENT
PURSUANT TO THIS SECTION 9, THE COMPANY AT ITS EXPENSE WILL PROMPTLY COMPUTE
SUCH ADJUSTMENT IN ACCORDANCE WITH THE TERMS OF THIS WARRANT AND PREPARE A
CERTIFICATE SETTING FORTH SUCH ADJUSTMENT, INCLUDING A STATEMENT OF THE ADJUSTED
EXERCISE PRICE AND ADJUSTED NUMBER OR TYPE OF WARRANT SHARES OR OTHER SECURITIES
ISSUABLE UPON EXERCISE OF THIS WARRANT (AS APPLICABLE), DESCRIBING THE
TRANSACTIONS GIVING RISE TO SUCH ADJUSTMENTS AND SHOWING IN DETAIL THE FACTS
UPON WHICH SUCH ADJUSTMENT IS BASED.  UPON WRITTEN REQUEST, THE COMPANY WILL
PROMPTLY DELIVER A COPY OF EACH SUCH CERTIFICATE TO THE HOLDER AND TO THE
COMPANY’S TRANSFER AGENT.

 

(H)           NOTICE OF CORPORATE EVENTS.  IF THE COMPANY (I) DECLARES A
DIVIDEND OR ANY OTHER DISTRIBUTION OF CASH, SECURITIES OR OTHER PROPERTY IN
RESPECT OF ITS COMMON STOCK, INCLUDING WITHOUT LIMITATION ANY GRANTING OF RIGHTS
OR WARRANTS TO SUBSCRIBE FOR OR PURCHASE ANY CAPITAL STOCK OF THE COMPANY OR ANY
SUBSIDIARY, (II) AUTHORIZES OR APPROVES, ENTERS INTO ANY AGREEMENT CONTEMPLATING
OR SOLICITS STOCKHOLDER APPROVAL FOR ANY FUNDAMENTAL TRANSACTION OR (III)
AUTHORIZES THE VOLUNTARY DISSOLUTION, LIQUIDATION OR WINDING UP OF THE AFFAIRS
OF THE COMPANY, THEN THE COMPANY SHALL DELIVER TO THE HOLDER A NOTICE DESCRIBING
THE MATERIAL TERMS AND CONDITIONS OF SUCH TRANSACTION, AT LEAST 20 CALENDAR DAYS
PRIOR TO THE APPLICABLE RECORD OR EFFECTIVE DATE ON WHICH A PERSON WOULD NEED TO
HOLD COMMON STOCK IN ORDER TO PARTICIPATE IN OR VOTE WITH RESPECT TO SUCH
TRANSACTION, AND THE COMPANY WILL TAKE ALL STEPS REASONABLY NECESSARY IN ORDER
TO INSURE THAT THE HOLDER IS GIVEN THE PRACTICAL OPPORTUNITY TO EXERCISE THIS
WARRANT PRIOR TO SUCH TIME SO AS TO PARTICIPATE IN OR VOTE WITH RESPECT TO SUCH
TRANSACTION; PROVIDED, HOWEVER, THAT THE FAILURE TO DELIVER SUCH NOTICE OR ANY
DEFECT THEREIN SHALL NOT AFFECT THE VALIDITY OF THE CORPORATE ACTION REQUIRED TO
BE DESCRIBED IN SUCH NOTICE.

 

10.           PAYMENT OF EXERCISE PRICE.  THE HOLDER SHALL PAY THE EXERCISE
PRICE IN IMMEDIATELY AVAILABLE FUNDS; PROVIDED, HOWEVER, THAT THE HOLDER MAY
SATISFY ITS OBLIGATION TO PAY THE EXERCISE PRICE THROUGH A “CASHLESS EXERCISE,”
AT ANY TIME THAT THE REGISTRATION STATEMENT COVERING THE RESALE OF WARRANT
SHARES IS NOT EFFECTIVE, IN WHICH EVENT THE COMPANY SHALL ISSUE TO THE HOLDER
THE NUMBER OF WARRANT SHARES DETERMINED AS FOLLOWS:

 

 

X = Y [(A-B)/A]

where:

 

 

X = the number of Warrant Shares to be issued to the Holder.

 

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Y = the number of Warrant Shares with respect to which this Warrant is being
exercised.

 

 

 

A = the average of the Closing Prices for the five Trading Days immediately
prior to (but not including) the Exercise Date.

 

 

 

B = the Exercise Price.

 

FOR PURPOSES OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT, IT IS INTENDED,
UNDERSTOOD AND ACKNOWLEDGED THAT THE WARRANT SHARES ISSUED IN A CASHLESS
EXERCISE TRANSACTION SHALL BE DEEMED TO HAVE BEEN ACQUIRED BY THE HOLDER, AND
THE HOLDING PERIOD FOR THE WARRANT SHARES SHALL BE DEEMED TO HAVE COMMENCED, ON
THE DATE THIS WARRANT WAS ORIGINALLY ISSUED PURSUANT TO THE PURCHASE AGREEMENT.

 

11.           CALL RIGHT.  SUBJECT TO THE PROVISIONS OF THIS SECTION 11, IF THE
AVERAGE OF THE VWAP FOR ANY 10 (TEN) CONSECUTIVE TRADING DAYS EXCEEDS 250% OF
THE EXERCISE PRICE (THE “THRESHOLD PRICE”), THEN THE COMPANY WILL HAVE THE
RIGHT, BUT NOT OBLIGATION (THE “CALL RIGHT”), ON 45 TRADING DAYS PRIOR WRITTEN
NOTICE TO THE HOLDER, TO REDEEM UP TO 50% OF THE  UNEXERCISED PORTION OF THIS
WARRANT FOR WHICH AN EXERCISE NOTICE HAS NOT YET BEEN DELIVERED (THE “CALL
AMOUNT”).

 

(A)           TO EXERCISE THIS CALL RIGHT, THE COMPANY SHALL DELIVER TO THE
HOLDER (A) AN IRREVOCABLE WRITTEN NOTICE (A “CALL NOTICE”), INDICATING THE CALL
AMOUNT AND (B) AN EXCHANGE WARRANT (AS DEFINED BELOW).  THE DATE THAT THE
COMPANY DELIVERS THE CALL NOTICE TO THE HOLDERS WILL BE REFERRED TO AS THE “CALL
DATE.” WITHIN FORTY-FIVE (45) TRADING DAYS OF RECEIPT OF THE CALL NOTICE, THE
HOLDER SHALL EXERCISE THIS WARRANT FOR UP TO THE CALL AMOUNT IN ACCORDANCE WITH
SECTION 4(B) ABOVE.  ANY PORTION OF THE CALL AMOUNT THAT IS NOT EXERCISED BY
6:30 P.M. (NEW YORK CITY TIME) ON THE 45TH TRADING DAY FOLLOWING THE DATE OF
RECEIPT OF THE CALL NOTICE (THE “REDEMPTION DATE”) SHALL BE CANCELLED.  ANY
UNEXERCISED PORTION OF THIS WARRANT TO WHICH THE CALL NOTICE DOES NOT PERTAIN
(THE “REMAINING PORTION”) WILL BE UNAFFECTED BY SUCH CALL NOTICE.  THE COMPANY
COVENANTS AND AGREES THAT IT WILL HONOR ANY EXERCISE NOTICE WITH RESPECT TO THE
CALL AMOUNT THAT ARE TENDERED FROM THE CALL DATE THROUGH AND INCLUDING 6:30 P.M.
(NEW YORK CITY TIME) ON THE REDEMPTION DATE.

 

(B)           NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THIS
WARRANT, THE COMPANY MAY NOT REQUIRE THE CANCELLATION OF ANY UNEXERCISED CALL
AMOUNT (AND ANY CALL NOTICE WILL BE VOID), UNLESS FROM THE BEGINNING OF THE TEN
(10) CONSECUTIVE TRADING DAYS USED TO DETERMINE WHETHER THE COMMON STOCK HAS
ACHIEVED THE THRESHOLD PRICE THROUGH THE REDEMPTION DATE (THE “CALL PERIOD”) (I)
THE VWAP FOR EACH TRADING DAY DURING SUCH CALL PERIOD EXCEEDS THE THRESHOLD
PRICE, (II) THE COMPANY SHALL HAVE HONORED IN ACCORDANCE WITH THE TERMS OF THIS
WARRANT ANY EXERCISE NOTICE DELIVERED BY 6:30 P.M. (NEW YORK CITY TIME) ON THE
REDEMPTION DATE, AND (III) THE REGISTRATION STATEMENT SHALL BE EFFECTIVE AS TO
ALL WARRANT SHARES AND THE PROSPECTUS THEREUNDER AVAILABLE FOR USE BY THE HOLDER
FOR THE RESALE ALL SUCH WARRANT SHARES.

 

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12.           LIMITATION ON EXERCISE.

 

(a)           Notwithstanding anything to the contrary contained herein, the
number of shares of Common Stock that may be acquired by the Holder upon any
exercise of this Warrant (or otherwise in respect hereof) shall be limited to
the extent necessary to insure that, following such exercise (or other
issuance), the total number of shares of Common Stock then beneficially owned by
such Holder and its Affiliates and any other Persons whose beneficial ownership
of Common Stock would be aggregated with the Holder’s for purposes of Section
13(d) of the Exchange Act, does not exceed 4.999% (the “Maximum Percentage”) of
the total number of issued and outstanding shares of Common Stock (including for
such purpose the shares of Common Stock issuable upon such exercise).  For such
purposes, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder. 
Each delivery of an Exercise Notice hereunder will constitute a representation
by the Holder that it has evaluated the limitation set forth in this paragraph
and determined that issuance of the full number of Warrant Shares requested in
such Exercise Notice is permitted under this paragraph.  The Company’s
obligation to issue shares of Common Stock in excess of the limitation referred
to in this Section shall be suspended (and shall not terminate or expire
notwithstanding any contrary provisions hereof) until such time, if any, as such
shares of Common Stock may be issued in compliance with such limitation, but in
no event later than the Expiration Date.  By written notice to the Company, the
Holder may waive the provisions of this Section or increase or decrease the
Maximum Percentage to any other percentage specified in such notice, but (i) any
such waiver or increase will not be effective until the 61st day after such
notice is delivered to the Company, and (ii) any such waiver or increase or
decrease will apply only to the Holder and not to any other holder of Warrants.

 

(b)           Notwithstanding anything to the contrary contained herein, if the
Trading Market is the New York Stock Exchange or any other market or exchange
with similar applicable rules, then the maximum number of shares of Common Stock
that the Company may issue pursuant to the Transaction Documents at an effective
purchase price less than the Closing Price on the Trading Day immediately
preceding the Closing Date equals 19.99% of the outstanding shares of Common
Stock immediately preceding the Closing Date  (the “Issuable Maximum”), unless
the Company obtains stockholder approval in accordance with the rules and
regulations of such Trading Market.  If, at the time any Holder requests an
exercise of any of the Warrants, the Actual Minimum (excluding any shares issued
or issuable at an effective purchase price in excess of the Closing Price on the
Trading Day immediately preceding the Closing Date) exceeds the Issuable Maximum
(and if the Company has not previously obtained the required stockholder
approval), then the Company shall issue to the Holder requesting such exercise a
number of shares of Common Stock not exceeding such Holder’s pro-rata portion of
the Issuable Maximum (based on such Holder’s share (vis-à-vis other Holders) of
the aggregate purchase price paid under the Purchase Agreement and taking into
account any Warrant Shares previously issued to such Holder).  For the purposes
hereof, “Actual Minimum” shall mean, as of any date, the maximum aggregate
number of shares of Common Stock then issued or potentially issuable in the
future pursuant to the Transaction Documents, including any Underlying Shares
issuable upon exercise in full of all Warrants, without giving effect to (x) any
limits on the number of shares of Common Stock that may be owned by a Holder at
any one time, or (y) any additional Underlying Shares that could be issuable as
a result of any future possible adjustments made under Section 9(d).

 

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13.           FRACTIONAL SHARES.  THE COMPANY SHALL NOT BE REQUIRED TO ISSUE OR
CAUSE TO BE ISSUED FRACTIONAL WARRANT SHARES ON THE EXERCISE OF THIS WARRANT. 
IF ANY FRACTION OF A WARRANT SHARE WOULD, EXCEPT FOR THE PROVISIONS OF THIS
SECTION, BE ISSUABLE UPON EXERCISE OF THIS WARRANT, THE NUMBER OF WARRANT SHARES
TO BE ISSUED WILL BE ROUNDED UP TO THE NEAREST WHOLE SHARE.

 

14.           NOTICES.  ANY AND ALL NOTICES OR OTHER COMMUNICATIONS OR
DELIVERIES HEREUNDER (INCLUDING WITHOUT LIMITATION ANY EXERCISE NOTICE) SHALL BE
IN WRITING AND SHALL BE DEEMED GIVEN AND EFFECTIVE ON THE EARLIEST OF (I) THE
DATE OF TRANSMISSION, IF SUCH NOTICE OR COMMUNICATION IS DELIVERED VIA FACSIMILE
AT THE FACSIMILE NUMBER SPECIFIED IN THIS SECTION PRIOR TO 6:30 P.M. (NEW YORK
CITY TIME) ON A TRADING DAY, (II) THE NEXT TRADING DAY AFTER THE DATE OF
TRANSMISSION, IF SUCH NOTICE OR COMMUNICATION IS DELIVERED VIA FACSIMILE AT THE
FACSIMILE NUMBER SPECIFIED IN THIS SECTION ON A DAY THAT IS NOT A TRADING DAY OR
LATER THAN 6:30 P.M. (NEW YORK CITY TIME) ON ANY TRADING DAY, (III) THE TRADING
DAY FOLLOWING THE DATE OF MAILING, IF SENT BY NATIONALLY RECOGNIZED OVERNIGHT
COURIER SERVICE, OR (IV) UPON ACTUAL RECEIPT BY THE PARTY TO WHOM SUCH NOTICE IS
REQUIRED TO BE GIVEN.  THE ADDRESS FOR SUCH NOTICES OR COMMUNICATIONS SHALL BE
AS SET FORTH IN THE PURCHASE AGREEMENT.

 

15.           WARRANT AGENT.  THE COMPANY SHALL SERVE AS WARRANT AGENT UNDER
THIS WARRANT.  UPON 30 DAYS’ NOTICE TO THE HOLDER, THE COMPANY MAY APPOINT A NEW
WARRANT AGENT.  ANY CORPORATION INTO WHICH THE COMPANY OR ANY NEW WARRANT AGENT
MAY BE MERGED OR ANY CORPORATION RESULTING FROM ANY CONSOLIDATION TO WHICH THE
COMPANY OR ANY NEW WARRANT AGENT SHALL BE A PARTY OR ANY CORPORATION TO WHICH
THE COMPANY OR ANY NEW WARRANT AGENT TRANSFERS SUBSTANTIALLY ALL OF ITS
CORPORATE TRUST OR STOCKHOLDERS SERVICES BUSINESS SHALL BE A SUCCESSOR WARRANT
AGENT UNDER THIS WARRANT WITHOUT ANY FURTHER ACT.  ANY SUCH SUCCESSOR WARRANT
AGENT SHALL PROMPTLY CAUSE NOTICE OF ITS SUCCESSION AS WARRANT AGENT TO BE
MAILED (BY FIRST CLASS MAIL, POSTAGE PREPAID) TO THE HOLDER AT THE HOLDER’S LAST
ADDRESS AS SHOWN ON THE WARRANT REGISTER.

 

16.           MISCELLANEOUS.

 

(A)           SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH ON THE FIRST
PAGE HEREOF, THIS WARRANT MAY BE ASSIGNED BY THE HOLDER.  THIS WARRANT MAY NOT
BE ASSIGNED BY THE COMPANY EXCEPT TO A SUCCESSOR IN THE EVENT OF A FUNDAMENTAL
TRANSACTION.  THIS WARRANT SHALL BE BINDING ON AND INURE TO THE BENEFIT OF THE
PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.  SUBJECT TO THE
PRECEDING SENTENCE, NOTHING IN THIS WARRANT SHALL BE CONSTRUED TO GIVE TO ANY
PERSON OTHER THAN THE COMPANY AND THE HOLDER ANY LEGAL OR EQUITABLE RIGHT,
REMEDY OR CAUSE OF ACTION UNDER THIS WARRANT.  THIS WARRANT MAY BE AMENDED ONLY
IN WRITING SIGNED BY THE COMPANY AND THE HOLDER AND THEIR SUCCESSORS AND
ASSIGNS.

 

(B)           THE COMPANY WILL NOT, BY AMENDMENT OF ITS GOVERNING DOCUMENTS 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 THE TAKING OF 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 (I) WILL NOT INCREASE THE PAR VALUE OF
ANY WARRANT SHARES ABOVE THE AMOUNT PAYABLE THEREFOR ON SUCH EXERCISE, (II) WILL
TAKE ALL SUCH ACTION AS MAY BE REASONABLY

 

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

 

NECESSARY OR APPROPRIATE IN ORDER THAT THE COMPANY MAY VALIDLY AND LEGALLY ISSUE
FULLY PAID AND NONASSESSABLE WARRANT SHARES ON THE EXERCISE OF THIS WARRANT, AND
(III) WILL NOT CLOSE ITS STOCKHOLDER BOOKS OR RECORDS IN ANY MANNER WHICH
INTERFERES WITH THE TIMELY EXERCISE OF THIS WARRANT.

 

(C)           GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL.  ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.  EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND 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 (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION
DOCUMENTS), 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
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 VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW.  THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.

 

(D)           THE HEADINGS HEREIN ARE FOR CONVENIENCE ONLY, DO NOT CONSTITUTE A
PART OF THIS WARRANT AND SHALL NOT BE DEEMED TO LIMIT OR AFFECT ANY OF THE
PROVISIONS HEREOF.

 

(E)           IN CASE ANY ONE OR MORE OF THE PROVISIONS OF THIS WARRANT SHALL BE
INVALID OR UNENFORCEABLE IN ANY RESPECT, THE VALIDITY AND ENFORCEABILITY OF THE
REMAINING TERMS AND PROVISIONS OF THIS WARRANT SHALL NOT IN ANY WAY BE AFFECTED
OR IMPAIRED THEREBY AND THE PARTIES WILL ATTEMPT IN GOOD FAITH TO AGREE UPON A
VALID AND ENFORCEABLE PROVISION WHICH SHALL BE A COMMERCIALLY REASONABLE
SUBSTITUTE THEREFOR, AND UPON SO AGREEING, SHALL INCORPORATE SUCH SUBSTITUTE
PROVISION IN THIS WARRANT.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its authorized officer as of the date first indicated above.

 

 

 

BIO-KEY INTERNATIONAL, INC.

 

 

 

 

 

By:

 

 

 

Name: Michael W. DePasquale

 

Title: Chief Executive Officer

 

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

 

FORM OF EXERCISE NOTICE

 

(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)

 

To:  [COMPANY]

 

The undersigned is the Holder of Warrant No.                (the “Warrant”)
issued by [Company], a Delaware corporation (the “Company”).  Capitalized terms
used herein and not otherwise defined have the respective meanings set forth in
the Warrant.

 

1.             THE WARRANT IS CURRENTLY EXERCISABLE TO PURCHASE A TOTAL OF
                               WARRANT SHARES.

 

2.             THE UNDERSIGNED HOLDER HEREBY EXERCISES ITS RIGHT TO PURCHASE
                               WARRANT SHARES PURSUANT TO THE WARRANT.

 

3.             THE HOLDER INTENDS THAT PAYMENT OF THE EXERCISE PRICE SHALL BE
MADE AS (CHECK ONE):

 

                “Cash Exercise” under Section 10

 

                “Cashless Exercise” under Section 10

 

4.             IF THE HOLDER HAS ELECTED A CASH EXERCISE, THE HOLDER SHALL PAY
THE SUM OF $                     TO THE COMPANY IN ACCORDANCE WITH THE TERMS OF
THE WARRANT.

 

5.             PURSUANT TO THIS EXERCISE, THE COMPANY SHALL DELIVER TO THE
HOLDER                                WARRANT SHARES IN ACCORDANCE WITH THE
TERMS OF THE WARRANT.

 

6.             FOLLOWING THIS EXERCISE, THE WARRANT SHALL BE EXERCISABLE TO
PURCHASE A TOTAL OF                             WARRANT SHARES.

 

 

Dated:

 

,

 

 

Name of Holder:

 

 

 

 

 

(Print)

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

 

 

 

 

(Signature must conform in all respects to name of holder as specified on the
face of the Warrant)

 

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

 

FORM OF ASSIGNMENT

 

[To be completed and signed only upon 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 [Company] to which the within Warrant relates and appoints
                                    attorney to transfer said right on the books
of [Company] with full power of substitution in the premises.

 

Dated:

 

,

 

 

 

 

 

 

 

 

 

(Signature must conform in all respects to name of holder as specified on the
face of the Warrant)

 

 

 

 

 

 

Address of Transferee

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In the presence of:

 

 

 

 

 

 

 

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