Exhibit 10.4
 
SECURITIES PURCHASE AGREEMENT
 
THIS SECURITIES PURCHASE AGREEMENT (“Agreement”) is made as of this 26th day of
February, 2013 by and among BIO-key International, Inc., a Delaware corporation
(the “Company”), and “________” (each an “Investor” and collectively the
“Investors”).
 
Recitals:
 
The Company desires to issue and sell to each Investor and each Investor desires
to purchase from the Company, such number of shares (the “Shares”) of common
stock, par value $0.0001 per share (the “Common Stock”), of the Company as is
set forth opposite such Investor’s name on Schedule I hereto under the column
titled “Purchased Shares” at a per share purchase price of $0.10.
 
NOW, THEREFORE, in consideration of the mutual promises made herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Company and the Investors hereby agree as follows:
 
1.           Definitions.  In addition to those terms defined above and
elsewhere in this Agreement, for the purposes of this Agreement, the following
terms shall have the meanings set forth in this Section 1:
 
“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person as such terms are used in and construed under Rule 405 under the 1933
Act.
 
“Action” has the meaning set forth in Section 4.7.
 
“Business Day” means a day, other than a Saturday or Sunday, on which banks in
New Jersey are open for the general transaction of business.
 
“Closing” means the closing of the transactions contemplated by this Agreement.
 
“Closing Date” means the date of the Closing.
 
“Commission” means the United States Securities and Exchange Commission or any
successor thereto.
 
“Common Stock” has the meaning set forth in the Recitals.
 
“Common Stock Equivalents” means any securities of the Company which would
entitle the holder thereof to acquire at any time Common Stock, including,
without limitation, any debt, preferred stock, rights, options, warrants or
other instrument that is at any time convertible into or exercisable or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
 
“GAAP” has the meaning set forth in Section 4.10.
 
 
 

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“Indemnified Party” has the meaning set forth in Section 6.1.
 
“Indemnifying Party” has the meaning set forth in Section 6.1.
 
“Losses” has the meaning set forth in Section 6.1.
 
“Material Adverse Effect” means a material adverse effect on (i) the assets,
liabilities, properties, results of operations, condition (financial or
otherwise), prospects or business of the Company, individually or taken as a
whole, or (ii) the ability of the Company to issue and sell the Shares
contemplated hereby.
 
“Per Share Price” has the meaning set forth in Section 6.4.
 
“Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein.
 
“Purchase Price” has the meaning set forth in the Recitals.
 
“Registration Statement” has the meaning set forth in Section 6.2.
 
“SEC Filings” has the meaning set forth in Section 4.10.
 
“Shares” has the meaning set forth in the Recitals.
 
“Trading Day” means a day on which the principal Trading Market is open for
trading.
 
“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the AMEX,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, the New York Stock Exchange or OTC Bulletin Board (or any successors to
any of the foregoing).
 
“Transfer” means to sell, assign, transfer or dispose of.
 
“1933 Act” means the Securities Act of 1933, as amended.
 
“1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
 
2.           Purchase and Sale of the Shares.  Subject to the terms and
conditions of this Agreement, at the Closing, each Investor shall purchase, and
the Company shall sell and issue to each Investor such number of Shares as is
set forth opposite such Investor’s name in Schedule I under the column titled
“Purchased Shares” in exchange for the aggregate purchase price set forth
opposite such Investor’s name in Schedule I under the column titled “Purchase
Price”.  Each Investor shall pay the applicable aggregate purchase price as set
forth on Schedule I in United States dollars by wire transfer of immediately
available funds to the Company’s account set forth on Schedule II attached
hereto.
 
 
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3.           Closing.  The Closing shall take place on the date hereof following
the satisfaction (or waiver) of the conditions to Closing set forth in Section 7
through an exchange of consideration and documents using wire transfers,
overnight courier service, electronic mail and/or facsimile transmission, or at
such other time and place and by such other means as the Company and the
Investors mutually agree upon.  At the Closing, the Company shall deliver to
each Investor a stock certificate, registered in the name of such Investor,
representing the Shares that such Investor is purchasing hereunder.
 
4.           Representations and Warranties of the Company.  The Company hereby
represents and warrants to the Investors on and as of date hereof, that, except
as disclosed in the SEC Filings:
 
4.1           Organization, Good Standing and Qualification.  The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to carry on its business as now conducted and to own its
properties.  The Company is not in violation or default of any of the provisions
of its certificate or articles of incorporation, operating agreement, bylaws or
other organizational or charter documents.  The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or its leasing of property
makes such qualification or licensing necessary, unless the failure to so
qualify would not reasonably be expected to have a Material Adverse Effect.
 
4.2           Authorization.  The Company has full power and authority and has
taken all requisite action on the part of the Company for (i) the authorization,
execution and delivery of this Agreement, (ii) the authorization of the
performance of all obligations of the Company hereunder, and (iii) the
authorization, issuance (or reservation for issuance) and delivery of the
Shares.  This Agreement constitutes the legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability, relating to or affecting
creditors’ rights generally.
 
4.3           Valid Issuance.  The Shares have been duly and validly authorized
and, when issued and paid for pursuant to this Agreement, will be validly
issued, fully paid and nonassessable, and shall be free and clear of all
encumbrances and restrictions, except for restrictions on transfer set forth in
this Agreement or imposed by applicable securities laws.
 
4.4           Consents.  The execution, delivery and performance by the Company
of this Agreement and the offer, issuance and sale of the Shares require no
consent of, action by or in respect of, no notice to, or filing with, any
Person, governmental body, agency, or official other than those filings that
have been made pursuant to applicable state securities laws and post-sale
filings pursuant to applicable state and federal securities laws which the
Company undertakes to file within the applicable time periods.
 
 
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4.5           No Conflict, Breach, Violation or Default.  The execution,
delivery and performance of this Agreement by the Company and the issuance and
sale of the Shares will not conflict with or result in a breach or violation of
any of the terms and provisions of, or constitute a default under (i) the
Company’s Certificate of Incorporation or the Company Bylaws, both as in effect
on the date hereof, or (ii)(a) any statute, rule, regulation or order of any
governmental agency or body, any exchange, or any court, domestic or foreign,
having jurisdiction over the Company or any of its respective assets or
properties, or (b) any agreement or instrument to which the Company is a party
or by which the Company is bound or to which any of their respective assets or
properties is subject, except for such conflicts, breaches, violations or
defaults which would not reasonably be expected to have a Material Adverse
Effect.
 
4.6           Certificates, Authorities and Permits.  The Company possess
adequate certificates, authorities or permits issued by appropriate governmental
agencies or bodies (including the Federal Communications Commission) necessary
to conduct the business now operated by it, and the Company has not received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company,
could reasonably be expected to have a Material Adverse Effect, individually or
in the aggregate.
 
4.7           Litigation.  There are no pending actions, suits or proceedings
before a court of competent jurisdiction or a tribunal (collectively, an
“Action”) against the Company which (i) adversely affects or challenges the
legality, validity or enforceability of this Agreement or the issuance of the
Shares or (ii) could, if there were an unfavorable decision, reasonably be
expected to have or result in, a Material Adverse Effect.  The Company is not
and has not been within the last five (5) years the subject of any Action
involving a claim of violation of or liability under federal or state securities
laws or a claim of breach of fiduciary duty.  To the knowledge of the Company,
there has not been and there is not pending or contemplated any investigation by
the Commission targeting the Company or any current or former director or
officer of the Company in respect of any actions by such director or officer
with respect to the Company.
 
4.8           Brokers and Finders.  No Person will have, as a result of the
issuance of the Shares, any valid right, interest or claim against or upon the
Company or any Investor for any commission, fee or other compensation pursuant
to any agreement, arrangement or understanding entered into by or on behalf of
the Company.
 
4.9           Private Placement.  Subject to the accuracy of the representations
and warranties of each Investor contained in Section 5 hereof, the offer and
sale of the Shares to the Investors as contemplated hereby is exempt from the
registration requirements of the 1933 Act.
 
4.10         SEC Filings.  The Company has filed all reports, schedules, forms,
statements and other documents required to be filed by the Company under the
1933 Act and the 1934 Act, including pursuant to Section 13(a) or 15(d) thereof,
for the twelve (12) months immediately preceding the date hereof (the foregoing
materials, including the exhibits thereto and documents incorporated by
reference therein being collectively referred to herein as the “SEC Filings”) on
a timely basis or has received a valid extension of such time of filing and has
filed any such SEC Filings prior to the expiration of any such extension.  As of
their respective dates, the SEC Filings complied in all material respects with
the requirements of the 1933 Act and the 1934 Act, as applicable, and none of
the SEC Filings, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.  The financial statements of the Company
included in the SEC Filings comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing.  Such financial statements
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods involved
(“GAAP”), except as may be otherwise specified in such financial statements or
the notes thereto and except that unaudited financial statements may not contain
all footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
 
 
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4.11           Capitalization.  The capitalization of the Company is as set
forth in the Company’s Annual Report on Form 10-K filed on April 4, 2012.  The
Company has not issued any capital stock since April 4, 2012, other than
pursuant to the exercise of employee and director stock options under the
Company’s equity compensation plans, the issuance of employee and director
equity compensation under the Company’s equity compensation plans and the
issuance of shares of Common Stock to employees and directors pursuant to the
Company’s equity compensation plans.  No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by this Agreement.  Except as a result of the
purchase and sale of the Shares, there are no outstanding options, warrants,
scrip rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe for
or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company is or may become bound to
issue additional shares of Common Stock or Common Stock Equivalents.  The
issuance and sale of the Shares will not obligate the Company to issue shares of
Common Stock or other securities to any Person (other than the Investor) and
will not result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under any of such securities.  All
of the outstanding shares of capital stock of the Company are validly issued,
fully paid and nonassessable, have been issued in compliance with all federal
and state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities.  Except for agreements filed as exhibits to the SEC
Filings, there are no stockholders agreements, voting agreements or other
similar agreements with respect to the Company’s capital stock to which the
Company is a party or, to the knowledge of the Company, between or among any of
the Company’s stockholders.
 
4.12           Material Changes; Undisclosed Events or Liabilities.  Since the
date of the latest audited financial statements included within the SEC Filings,
except as disclosed in a subsequent SEC Filing filed prior to the date hereof,
(i) there has been no event, occurrence or development that has had or that
could reasonably be expected to result in a Material Adverse Effect, (ii) the
Company has not incurred any liabilities (contingent or otherwise) other than
(A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or disclosed in
filings made with the Commission, (iii) the Company has not altered its method
of accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans.
 
 
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4.13           Compliance.  The Company is not: (i) in default under or in
violation of (and no event has occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by the Company
under), nor has the Company received notice of a claim that it is in default
under or that it is in violation of, any indenture, loan or credit agreement or
any other material written agreement or written instrument to which it is a
party or by which it or any of its properties is bound (whether or not such
default or violation has been waived), (ii) in violation of any judgment, decree
or order of any court, arbitrator or governmental body in which the Company is
named as a party, or (iii) in violation of any statute, rule, ordinance or
regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws applicable to its business and all such
laws that affect the environment, except in each case as could not reasonably be
expected to have or result in a Material Adverse Effect.
 
4.14           Listing and Maintenance Requirements.  The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the 1934 Act, and the Company
has taken no action designed to terminate the registration of the Common Stock
under the 1934 Act nor has the Company received any written notification that
the Commission is contemplating terminating such registration.  The Company has
not, in the 12 months preceding the date hereof, received written notice from
any Trading Market on which the Common Stock is or has been listed or quoted to
the effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is in compliance with all such
listing and maintenance requirements in all material respects.
 
5.           Representations, Warranties and Agreements of the Investors.  Each
Investor, severally and not jointly with the other Investors, hereby represents
and warrants to the Company on and as of the date hereof that:
 
5.1           Authorization.  The execution, delivery and performance by such
Investor of this Agreement has been duly authorized and will constitute the
valid and legally binding obligation of such Investor, enforceable against such
Investor in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors’ rights generally.
 
5.2           Purchase Entirely for Own Account.  The Shares will be acquired
for such Investor’s own account, not as nominee or agent, and not with a view to
the resale or distribution of any part thereof in violation of the 1933 Act, and
such Investor has no present intention of selling, granting any participation
in, or otherwise distributing the same in violation of the 1933 Act; provided,
however, by making the representations herein, such Investor does not agree, or
make any representation or warranty, to hold any of the Shares for any minimum
or other specific term and reserves the right to dispose of the Shares at any
time in accordance with or pursuant to a registration statement or an exemption
under the 1933 Act but subject at all times to the transfer restrictions set
forth in Section 8.  Such Investor is acquiring the Shares hereunder in the
ordinary course of its business. Such Investor is not a registered broker dealer
or an entity engaged in the business of being a broker dealer.
 
 
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5.3           Investment Experience.  Such Investor acknowledges that it can
bear the economic risk and complete loss of its investment in the Shares and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment contemplated
hereby.
 
5.4           Disclosure of Information.  Such Investor has had an opportunity
to receive all additional information related to the Company requested by it and
to ask questions of and receive answers from the Company regarding the Company,
its business and the terms and conditions of the offering of the Shares.
 
5.5           Restricted Securities.  Such Investor understands that the Shares
are characterized as “restricted securities” under the U.S. federal securities
laws inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the 1933 Act only in
certain limited circumstances.
 
5.6           Legends.
 
(a)           It is understood that, except as provided below, certificates
evidencing the Shares may bear the following or any similar legend:
 
“The securities represented hereby may not be transferred unless (A)(i) such
securities have been registered for sale pursuant to the Securities Act of 1933,
as amended, or (ii) the Company has received an opinion of counsel satisfactory
to it that such transfer may lawfully be made without registration under the
Securities Act of 1933 or qualification under applicable state securities laws
and (B) such transfer is in compliance with the terms of the Purchase Agreement
between the Company and the Investor, including the transfer restrictions set
forth in Section 8 thereof.”
 
(b)           If required by the authorities of any state in connection with the
issuance of sale of the Shares, the legend required by such state authority.
 
(c)           Such Investor acknowledges and agrees that the Shares are subject
to the transfer restrictions set forth in Section 8 of this Agreement.
 
5.7           Accredited Investor.  Such Investor is an “accredited investor” as
defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act.
 
5.8           No General Solicitation.  Such Investor did not learn of the
investment in the Shares as a result of any “general advertising” or “general
solicitation” as those terms are contemplated in Regulation D, as amended, under
the 1933 Act.
 
 
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5.9           Brokers and Finders.  No Person will have, as a result of the
issuance of the Shares, any valid right, interest or claim against or upon the
Company or such Investor for any commission, fee or other compensation pursuant
to any agreement, arrangement or understanding entered into by or on behalf of
such Investor.
 
5.10         Restriction on Hedging.  Such Investor will not engage in, and has
not engaged in prior to the Closing Date, any hedging or other transaction which
is designed to or reasonably expected to lead to or result in a sale or
disposition of shares of Common Stock even if such securities would be disposed
of by someone other than such Investor. Such prohibited hedging or other
transactions would include without limitation any short position or sale or any
purchase, sale or grant of any right (including without limitation any put
option or put equivalent position or call option or call equivalent position)
with respect to any of the shares of Common Stock or with respect to any
security that includes, relates to, or derives any significant part of its value
from such shares.
 
6.           Other Agreements of the Parties.
 
6.1           Indemnification.
 
(a)           Subject to the provisions of this Section 6.1, each Investor
severally with respect to the Company on the one hand, and the Company with
respect to each Investor on the other hand (each an “Indemnifying Party”), will
indemnify and hold the Company or such Investor, respectively, and such other
party’s directors, officers, shareholders, members, partners, employees and
agents, each Person who controls the such other party (within the meaning of
Section 15 of the 1933 Act and Section 20 of the 1934 Act), and the directors,
officers, shareholders, agents, members, partners or employees of such
controlling persons (each, an “Indemnified Party”) harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees and costs of investigation (“Losses”) that any such
Indemnified Party may suffer or incur as a result of or relating to any breach
of any of the representations, warranties, covenants or agreements made by the
respective Indemnifying Party in this Agreement.  If any action shall be brought
against any Indemnified Party in respect of which indemnity may be sought
pursuant to this Agreement, such Indemnified Party shall promptly notify the
applicable Indemnifying Party in writing, and such Indemnifying Party shall have
the right to assume the defense thereof with counsel of its own choosing
reasonably acceptable to the Indemnified Party.  Any Indemnified Party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party.  An Indemnifying Party will not be liable to
any Indemnified Party under this Agreement (x) for any Losses constituting
consequential damages, punitive or exemplary damages, special damages, lost
profits, incidental damages, indirect damages or other similar items, except to
the extent awarded to a third party; (y) for any settlement by an Indemnified
Party effected without such Indemnifying Party’s prior written consent; or (z)
to the extent, but only to the extent that a loss, claim, damage or liability is
attributable to the breach by an Indemnified Party or its Affiliate of any of
the representations, warranties, covenants or agreements made by such
Indemnified Party or its Affiliate in this Agreement, any violations by the
Indemnified Party or its Affiliate of state or federal securities laws or any
conduct by the Indemnified Party or its Affiliate which constitutes fraud, gross
negligence, willful misconduct or malfeasance.
 
 
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(b)           If the Closing occurs, the Company shall not be liable to any
Investor for any Losses for breach of the representations and warranties of the
Company contained herein (y) unless and until the aggregate claims therefor
exceed $50,000, or (z) for an aggregate amount in excess of such Investor’s
aggregate purchase price as set forth on Schedule I under the column titled
“Purchase Price”.
 
6.2           Registration.  Upon written request of the Investors holding at
least a majority of the shares of Common Stock issued pursuant to this
Agreement, the Company agrees to file with the Commission a registration
statement (the “Registration Statement”) to register the Common Stock within
thirty (30) days from the date of such requesr.  The Company will use its best
efforts to cause the Registration Statement to be declared effective within
sixty (60) days (or 90 days in the event of review by the Commission) following
the date of such request.
 
6.3           Listing of Common Stock.  The Company hereby agrees to use its
commercially reasonable efforts to maintain the listing or quotation of the
Common Stock on the OTC Bulletin Board, and the Company shall promptly apply to
list or quote all of the Shares. The Company agrees, if the Company applies to
have the Common Stock traded on any other Trading Market, it will then include
in such application all of the Shares, and will take such other action as is
necessary to cause all of the Shares to be listed or quoted on such Trading
Market as promptly as possible.
 
6.4           Anti-Dilution.  If at any time within six (6) months from the
Closing Date the Company sells or issues any Common Stock or Common Stock
Equivalents (other than sales or issuances to directors, officers, employees or
independent contractors in the ordinary course of business for compensation
purposes and stock splits and stock dividends payable in respect of the Common
Stock) having a purchase, exercise or conversion price per share of Common Stock
less than the purchase price per Share paid by the Investors under this
Agreement (appropriately adjusted to account for any stock split, stock dividend
or similar change affecting the Common Stock) (such price per share, as amended
by reason of any adjustment or adjustments under this Section 6.4, the “Per
Share Price”), then in such event the Per Share Price shall automatically be
reduced to a price (calculated to the nearest one-hundredth of a cent)
determined in accordance with the following formula, and the Company shall issue
to each Investor concurrently with such Additional Issuance a number of
additional validly issued, fully paid and nonassessable shares of Common Stock
such that the aggregate number of shares of Common Stock issued to each Investor
pursuant to this Agreement shall equal the result obtained by dividing each
Investor’s aggregate purchase price as set forth on Schedule I hereto under the
column titled “Purchase Price” by the Per Share Price:
 
CP2 = CP1*  (A + B) ÷ (A + C).
 
For purposes of the foregoing formula, the following definitions shall apply:
 
(a)           “CP2” shall mean the Per Share Price in effect immediately after
such Additional Issuance;
 
 
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(b)           “CP1” shall mean the Per Share Price in effect immediately prior
to such Additional Issuance;
 
(c)           “A” shall mean the number of shares of Common Stock outstanding
immediately prior to such Additional Issuance (treating for this purpose as
outstanding all shares of Common Stock issuable upon exercise of any rights,
options or warrants to subscribe for, purchase or otherwise acquire Common Stock
outstanding immediately prior to such Additional Issuance);
 
(d)           “B” shall mean the number of shares of Common Stock that would
have been issued if the Additional Issuance had been made at a price per share
equal to CP1 (determined by dividing the aggregate consideration received by the
Company in respect of such issue by CP1); and
 
(e)           “C” shall mean the number of such shares of Common Stock issued in
the Additional Issuance.
 
7.           Conditions to Closing.
 
7.1           Conditions to an Investor’s Obligations. The obligations of each
Investor to purchase its portion of the Shares at the Closing is subject to the
fulfillment, on or prior to the Closing Date, of the following conditions, any
of which may be waived by an Investor and such waiver shall not be effective
against any other Investor unless it consents thereto:
 
(a)           The representations and warranties made by the Company in Section
4 hereof shall be true and correct in all material respects at all times prior
to and on the Closing Date.
 
(b)           The Company shall have obtained in a timely fashion any and all
consents, approvals and waivers necessary or appropriate for consummation of the
purchase and sale of the Shares, and all of which shall be and remain so long as
necessary in full force and effect.
 
(c)           No judgment, writ, order, injunction, award or decree of or by any
court, or judge, justice or magistrate, or any order of or by any governmental
authority, shall have been issued, and no action or proceeding shall have been
instituted by any governmental authority, or self-regulatory organization
enjoining or preventing the consummation of the transactions contemplated
hereby.
 
(d)           The Company shall, concurrently with the Closing, close on an
equity investment in and loan to the Company by InterDigital in the aggregate
amount of $1,000,000 in connection with a strategic partnership involving
research and development cooperation and potential licensing of Company patents
relating to the mobile market.
 
7.2           Conditions to Obligations of the Company. The Company’s obligation
to sell and issue the Shares to the Investors at the Closing is subject to the
fulfillment to the satisfaction of the Company on or prior to the Closing Date
of the following conditions, any of which (other than subsection (b) below) may
be waived by the Company:
 
 
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(a)           The representations and warranties made by such Investor in
Section 5 hereof shall be true and correct at all times prior to and on the
Closing Date.
 
(b)           Such Investor shall have delivered its respective aggregate
purchase price as set forth on Schedule I under the column titled “Purchase
Price” to the Company.
 
(c)           No judgment, writ, order, injunction, award or decree of or by any
court, or judge, justice or magistrate, or any order of or by any governmental
authority, shall have been issued, and no action or proceeding shall have been
instituted by any governmental authority, or self-regulatory organization
enjoining or preventing the consummation of the transactions contemplated
hereby.
 
8.           Transfer Restrictions.  The Shares may not be Transferred by such
Investor prior to the six-month anniversary of the Closing Date.  Following the
six-month anniversary of the Closing Date, such Investor may, subject to
compliance with applicable securities laws, Transfer Shares.  Such Investor
acknowledges and agrees that the Company shall issue to its transfer agent such
instructions, directions and stop transfer orders as are necessary to implement
the provision of this Section 8.
 
9.           Miscellaneous.
 
9.1           Survival.  All representations and warranties contained in this
Agreement shall be deemed to be representations and warranties as of the date
hereof, and such representations and warranties, together with the right to
assert a claim in respect thereof, shall expire on the twelve month anniversary
of the Closing Date.  The covenants and agreements contained in this Agreement
shall survive the Closing Date until the expiration of the applicable statute of
limitations.
 
9.2           Successors and Assigns.  The provisions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties.  Neither the Company nor any Investor may assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of the other party; provided, however, that any Investor may
assign some or all of its rights hereunder to any Affiliate of such Investor
without the consent of the Company.  Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement.
 
9.3           Counterparts; Faxes.  This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  In the event that any
signature is delivered by facsimile transmission or by an e-mail which contains
a portable document format (.pdf) file of an executed signature page, such
signature page shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force
and effect as if such signature page were an original thereof.
 
9.4           Titles and Subtitles.  The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
 
 
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9.5           Notices.  Any notices, demands and communications to a party
hereunder shall be in writing and shall be deemed to have been duly given and
received (a) if delivered personally, as of the date received, (b) if delivered
by certified mail, return receipt requested, three business days after being
mailed, (c) if delivered by a nationally recognized overnight delivery service,
two business days after being entrusted to such delivery service, or (d) if sent
via facsimile, electronic mail or similar electronic transmission, as of the
date received, to such party at its address set forth below (or such other
address as it may from time to time designate in writing to the other parties
hereto):
 
If to the Company:
 
BIO-key International, Inc.
3349 Highway 138
Building D, Suite A
Wall, NJ 07719
Attention:  Mike DePasquale, President and CEO
Fax:  (732) 359-1101
 
With a copy to:
 
Choate, Hall & Stewart LLP
Two International Place
Boston, MA  02110
Telephone:  (617) 248-5000
Facsimile:  (617) 248-4000
Attention:  Charles J. Johnson, Esq.
 
If to an Investor, to such Investors at the address set forth for such Investor
on the signature page or Schedule I hereto, or to such e-mail address, facsimile
number or address as subsequently modified by written notice given in accordance
with this Section 9.5.
 
9.6           Expenses.  The Company and each Investor shall each bear their own
expenses in connection with the negotiation, preparation, execution and delivery
of this Agreement.
 
9.7           Amendments and Waivers.  No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and the Investors who purchase at least a majority of
the total Shares issued hereunder, or in the case of a waiver, by the party
against whom enforcement of any such waived provision is sought.  No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right.  Any
amendment or waiver effected in accordance with this Section 9.7 shall be
binding upon each holder of the Shares at the time outstanding, each future
holder of the Shares, and the Company.
 
 
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9.8           Publicity.  No public release or announcement concerning the
transactions contemplated hereby shall be issued by the Company or the Investors
without the prior consent of the Company (in the case of a release or
announcement by any Investor) or the Investors (in the case of a release or
announcement by the Company) (which consents shall not be unreasonably
withheld), except as such release or announcement may be required by law or the
applicable rules or regulations of any securities exchange or securities market
on which the Shares are then listed and trading.
 
9.9           Severability.  Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.  To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
 
9.10         Entire Agreement.  This Agreement, including Schedule I and
Schedule II and any other exhibits or schedules hereto, constitute the entire
agreement among the parties hereof with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter hereof and
thereof.  Prior drafts or versions of this Agreement shall not be used to
interpret this Agreement.
 
9.11         Further Assurances.  The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
 
9.12         Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.  This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof.  Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the courts of the State of New York located in New York, New
York and the United States District Court for the Southern District of New York
located in New York, New York for the purpose of any suit, action, proceeding or
judgment relating to or arising out of this Agreement and the transactions
contemplated hereby.  Service of process in connection with any such suit,
action or proceeding may be served on each party hereto anywhere in the world by
the same methods as are specified for the giving of notices under this
Agreement.  Each of the parties hereto irrevocably consents to the jurisdiction
of any such court in any such suit, action or proceeding and to the laying of
venue in such court.  Each party hereto irrevocably waives any objection to the
laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.  EACH PARTY
HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
 
[Signature page follows.]
 
 
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IN WITNESS WHEREOF, the parties have caused their duly authorized officers to
execute this Purchase Agreement as of the date first above written.
 

 
BIO-KEY INTERNATIONAL, INC.
                           
By:
      Name: Michael DePasquale     Title: Chief Executive Officer              
             
INVESTORS:  “____________”