Exhibit 10.85

 

SECURITIES EXCHANGE AGREEMENT

 

This Securities Exchange Agreement (the “Agreement”) is entered into as of
November 12, 2009 by and among BIO-key International, Inc., a Delaware
corporation (the “Company”), The Shaar Fund, Ltd. (“Shaar”), Thomas J. Colatosti
(“TJC” and, together with Shaar, collectively the “Holders” and individually a
“Holder”).

 

Introduction

 

At the request of the Company, Shaar (a) has extended the due date of the
Company’s Eight Percent (8%) Promissory Note Due November 3, 2009, in the
principal amount of $1,000,000, pursuant to a Note Amendment and Extension
Agreement dated as of November 3, 2009 between the Company and Shaar, and
(b) has made a bridge loan to the Company in the principal amount of $750,000,
evidenced by the Company’s Six Percent (6%) Promissory Note dated November 12,
2009, and, in consideration thereof, the Company has agreed to enter into this
Agreement.

 

Shaar is the holder of 27,932 shares, and TJC is the holder of 2,625 shares
(collectively the “Exchanged Shares”), of the Company’s Series A Convertible
Preferred Stock, $0.0001 par value per share (the “Series A Preferred Stock”). 
The Company and the Holders desire to exchange (a) all dividends accrued and
unpaid on their Exchanged Shares for the Convertible Notes (as defined below) to
and including the Closing Date (as defined below), and the Company and (b) the
Exchanged Shares for the Company’s Series D Convertible Preferred Stock, $0.0001
par value per share (the “Series D Preferred Stock”), and the Warrants (as
defined below) on the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

 

1.                                      Exchange of the Exchanged Shares for the
Notes, the Series D Preferred Stock and the Warrants.

 

1.1.                            AUTHORIZATION OF THE NOTES.  THE COMPANY HAS
AUTHORIZED THE ISSUANCE OF  SEVEN PERCENT (7%) CONVERTIBLE PROMISSORY NOTES IN
THE RESPECTIVE  PRINCIPAL AMOUNTS SET FORTH IN SECTION 3.5 BELOW IN THE FORM
ATTACHED HERETO AS EXHIBIT A (THE “CONVERTIBLE NOTES”) TO SHAAR ON THE TERMS AND
CONDITIONS SET FORTH IN THIS AGREEMENT.  EACH HOLDER HEREBY CONSENTS TO THE
ISSUANCE OF HIS OR ITS CONVERTIBLE NOTE, AND THE INDEBTEDNESS REPRESENTED
THEREBY, ON THE TERMS AND  CONDITIONS SET FORTH IN THIS AGREEMENT.

 

1.2                               Authorization of the Series D Preferred
Stock.   The Company has authorized, approved and adopted the Certificate of
Designation of the Series D Preferred Stock of the Company, consisting of
100,000 shares, in the form attached hereto as Exhibit B (the “Series D
Certificate of Designation”), and has authorized the issuance of 27,932 shares
of the Series D Preferred Stock to Shaar and 2,625 shares of the Series D
Preferred Stock to TJC, in exchange for the Series A Preferred Stock owned by
the respective Holders.

 

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1.3                               Authorization of the Warrant.  The Company has
authorized the issuance of Warrants to purchase up to 5,000,000 shares of the
Company’s Common Stock, $0.0001 par value per share (“Common Stock”), in the
form attached hereto as Exhibit C (the “Warrants”), including up to 4,750,000
shares to Shaar and up to 250,000 shares to TJC on the terms and conditions set
forth in this Agreement.

 

1.4                               The Exchange.  In exchange for the delivery by
the Holders of the Exchanged Shares, the Company agrees, in full settlement of
the Company’s obligations (as of the Closing Date) under the Series A
Certificate of Designation (as defined below) and the Exchanged Shares, to issue
and deliver to the Holders his or its Convertible Note, the Series D Preferred
Stock and the Warrants (the “Exchange”).  Other than as set forth in this
Agreement, the Exchange shall be made without any additional consideration
payable to or by the Holders or the Company.  As used herein, “Series A
Certificate of Designation” means the Certificate of Designation of the Company
filed with the Secretary of State of the State of Delaware on July 28, 2004,
which provides for the designation of the rights and preferences of the Series A
Preferred Stock.

 

1.5                               Closing.  The closing of the Exchange on the
terms and conditions set forth in this Agreement (the “Closing”) shall take
place remotely via the exchange of documents and signatures at 10:00 a.m. EST on
the date that is five (5) days after the satisfaction or waiver of all of the
conditions set forth in Section 4 hereof, or on such other date as the parties
hereto may agree (the “Closing Date”).

 

1.6                               Closing Documents and Payments.  At the
Closing, (a) the Company shall deliver to the Holders the Convertible Notes, 
the Series D Preferred Stock and the Warrants and (b) each Holder shall deliver
to the Company stock certificate(s) representing its or his Exchanged Shares,
together with a duly executed transfer power transferring its or his Exchanged
Shares to the Company for cancellation.

 

2.                                      Representations and Warranties of the
Holder.  The Holders, severally and not jointly, each represents and warrants to
the Company as follows:

 

2.1.                            TITLE.  EACH HOLDER HAS GOOD TITLE TO HIS OR
ITS  EXCHANGED SHARES FREE AND CLEAR OF ANY AND ALL RESTRICTIONS, ENCUMBRANCES,
LIENS, RIGHTS, TITLE OR INTERESTS OF OTHERS, OTHER THAN RESTRICTIONS UNDER
APPLICABLE SECURITIES LAWS.

 

2.2.                            AUTHORITY.  EACH HOLDER HAS THE REQUISITE POWER
AND AUTHORITY TO ENTER INTO THIS AGREEMENT AND TO CONSUMMATE THE TRANSACTIONS
CONTEMPLATED HEREBY AND TO DELIVER HIS OR ITS EXCHANGED SHARES TO THE COMPANY IN
ACCORDANCE HEREWITH.

 

3.                                      Representations and Warranties of the
Company.  The Company represents and warrants to the Holder as follows:

 

3.1.                            ENTITY MATTERS.  THE COMPANY IS DULY ORGANIZED
AND VALIDLY EXISTING IN GOOD STANDING UNDER THE LAWS OF THE STATE OF DELAWARE,
HAS ALL REQUISITE POWER AND AUTHORITY TO CONDUCT ITS BUSINESS AND TO OWN ITS
PROPERTY AS THE SAME IS AND SHALL BE CONDUCTED OR OWNED, AND IS QUALIFIED TO DO
BUSINESS AS A FOREIGN CORPORATION IN ALL LOCATIONS REQUIRED UNDER THE LAWS OF
EACH

 

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JURISDICTION IN WHICH IT DOES BUSINESS AND UNDER WHICH THE FAILURE SO TO QUALIFY
AND REMAIN IN GOOD STANDING WOULD HAVE A MATERIAL ADVERSE EFFECT ON THE
COMPANY.  THE EXECUTION OF THIS AGREEMENT, THE CONVERTIBLE NOTES, THE SERIES D
PREFERRED STOCK AND THE WARRANTS (COLLECTIVELY, THE “EXCHANGE DOCUMENTS”) WILL
NOT VIOLATE THE COMPANY’S CERTIFICATE OF INCORPORATION OR BY-LAWS.

 

3.2.                            NO VIOLATION.  THE PERFORMANCE BY THE COMPANY OF
THE COMPANY’S OBLIGATIONS HEREUNDER OR UNDER ANY OTHER EXCHANGE DOCUMENT DOES
NOT CONSTITUTE A VIOLATION OF ANY LAW, ORDER, REGULATION, CONTRACT, OR AGREEMENT
TO WHICH THE COMPANY IS A PARTY OR BY WHICH THE COMPANY OR THE COMPANY’S
PROPERTY MAY BE BOUND AND DOES NOT REQUIRE ANY FILING OR REGISTRATION WITH, OR
ANY PERMIT, LICENSE, CONSENT, OR APPROVAL OF, ANY GOVERNMENTAL AGENCY OR
REGULATORY AUTHORITY, OTHER THAN THE FILING OF THE SERIES D CERTIFICATE OF
DESIGNATION WITH THE SECRETARY OF STATE OF THE STATE OF DELAWARE, OR THE WAIVER,
CONSENT OR APPROVAL OF ANY OTHER PARTY WHICH HAS NOT BEEN OR WILL NOT BE DULY
OBTAINED AS OF THE CLOSING DATE.

 

3.3.                            NO LITIGATION.  THERE IS NO LITIGATION OR
ARBITRATION PENDING OR, TO THE COMPANY’S KNOWLEDGE, THREATENED AGAINST THE
COMPANY WHICH, IF ADVERSELY DECIDED, COULD MATERIALLY IMPAIR THE ABILITY OF THE
COMPANY TO PAY AND PERFORM THE COMPANY’S OBLIGATIONS UNDER ANY EXCHANGE
DOCUMENT.

 

3.4.                            EXCHANGE DOCUMENTS ENFORCEABLE.  THE EXCHANGE
DOCUMENTS HAVE BEEN DULY AUTHORIZED, EXECUTED, AND DELIVERED BY THE COMPANY AND
ARE LEGAL, VALID, AND BINDING INSTRUMENTS, ENFORCEABLE AGAINST THE COMPANY IN
ACCORDANCE WITH THEIR RESPECTIVE TERMS, EXCEPT AS LIMITED BY APPLICABLE
BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM OR OTHER LAWS OF GENERAL
APPLICATION AFFECTING ENFORCEMENT OF CREDITORS’ RIGHTS AND GENERAL PRINCIPLES OF
EQUITY THAT RESTRICT THE AVAILABILITY OF EQUITABLE OR LEGAL REMEDIES.

 

3.5.                            AMOUNT OF NOTES.  THE PRINCIPAL AMOUNT OF THE
CONVERTIBLE NOTE TO BE ISSUED TO EACH HOLDER WILL BE EQUAL TO THE AGGREGATE
AMOUNT OF ALL ACCRUED AND UNPAID DIVIDENDS ON SUCH HOLDER’S EXCHANGED SHARES TO
AND INCLUDING THE CLOSING DATE.

 

4.                                      Conditions Precedent to the Holders’
Obligations.  it shall be a condition precedent to each of the Holders’
obligations under this Agreement that all of the following requirements are
satisfied:

 

4.1.                            REPRESENTATIONS AND WARRANTIES.  ALL
REPRESENTATIONS AND WARRANTIES MADE BY OR ON BEHALF OF THE COMPANY SHALL BE
TRUE, CORRECT AND COMPLETE IN ALL MATERIAL RESPECTS ON AND AS OF THE CLOSING
DATE.

 

4.2.                            SALE OF THE COMPANY’S LAW ENFORCEMENT DIVISION. 
THE CLOSING OF THE SALE OF THE COMPANY’S LAW ENFORCEMENT DIVISION TO INTERACT911
MOBILE SYSTEMS, INC. (THE “BUYER”) PURSUANT TO THAT CERTAIN ASSET PURCHASE
AGREEMENT DATED AS OF AUGUST 13, 2009 (AS AMENDED, RESTATED, SUPPLEMENTED OR
OTHERWISE MODIFIED FROM TIME TO TIME, THE “ASSET PURCHASE AGREEMENT”) BY AND
BETWEEN THE COMPANY AND THE BUYER SHALL HAVE OCCURRED.

 

4.3.                            REDEMPTION OF SERIES B AND SERIES C PREFERRED
STOCK.  ALL OUTSTANDING SHARES OF THE COMPANY’S SERIES B CONVERTIBLE PREFERRED
STOCK, $0.0001 PAR VALUE PER SHARE (“SERIES B PREFERRED STOCK”), AND SERIES C
CONVERTIBLE PREFERRED STOCK, $0.0001 PAR VALUE PER SHARE

 

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(“SERIES C PREFERRED STOCK”), SHALL HAVE BEEN REDEEMED IN ACCORDANCE WITH THE
TERMS OF SECTION 7(A) OF THE CERTIFICATE OF DESIGNATION FOR THE SERIES B
PREFERRED STOCK AND SECTION 7(A) OF THE CERTIFICATE OF DESIGNATION FOR THE
SERIES C PREFERRED STOCK, RESPECTIVELY.  THE PARTIES ACKNOWLEDGE AND AGREE THAT
IN THE EVENT THAT ANY HOLDER OF SERIES B PREFERRED STOCK OR SERIES C PREFERRED
STOCK (OTHER THAN THE HOLDERS) HAS HIS OR ITS SHARES REDEEMED ON TERMS MORE
FAVORABLE THAN THOSE CONTAINED IN THE CERTIFICATE OF DESIGNATION WITH RESPECT TO
SUCH SERIES, EACH HOLDER SHALL BE ENTITLED TO HAVE ITS OR HIS SHARES OF SERIES B
PREFERRED STOCK AND/OR SERIES C PREFERRED STOCK, AS APPLICABLE, REDEEMED ON THE
MOST FAVORABLE TERMS AFFORDED TO ANY OTHER SUCH HOLDER.

 

4.4.                            OFFICER’S CERTIFICATE.  AN OFFICER OF THE
COMPANY SHALL DELIVER TO THE HOLDERS A CERTIFICATE CERTIFYING THAT THE
CONDITIONS SPECIFIED IN SECTIONS 4.1, 4.2 AND 4.3 HEREOF HAVE BEEN SATISFIED.

 

4.5.                            ADDITIONAL CONDITIONS PRECEDENT.  EACH HOLDER
SHALL HAVE RECEIVED EACH OF THE FOLLOWING, AS APPLICABLE:

 

(A)                                  THE CONVERTIBLE NOTE EXECUTED AND DELIVERED
BY THE COMPANY IN FAVOR OF SUCH HOLDER;

 

(B)                                 CERTIFICATES FOR THEIR RESPECTIVE SHARES OF
SERIES D PREFERRED STOCK EXECUTED AND DELIVERED BY THE COMPANY;

 

(C)                                  THEIR RESPECTIVE WARRANTS EXECUTED AND
DELIVERED BY THE COMPANY; AND

 

(D)                                 SUCH OTHER AND FURTHER DOCUMENTS, AGREEMENTS
AND INSTRUMENTS AS THE HOLDERS OR THEIR COUNSEL MAY REASONABLY REQUIRE TO
EVIDENCE, CONFIRM OR GIVE EFFECT TO THE UNDERTAKINGS OF THE COMPANY SET FORTH
HEREIN.

 

5.                                      Miscellaneous.

 

5.1.         GOVERNING LAW.  THIS AGREEMENT AND EACH OTHER EXCHANGE AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.  ANY ACTION BROUGHT
BY ANY PARTY AGAINST ANOTHER CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT AND EACH OTHER EXCHANGE AGREEMENT SHALL BE BROUGHT ONLY IN THE STATE
COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK, IN
EACH CASE SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN.  ALL PARTIES
AND THE INDIVIDUALS EXECUTING THIS AGREEMENT AND THE OTHER EXCHANGE AGREEMENTS
ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS AND
WAIVE TRIAL BY JURY.  IN THE EVENT THAT ANY PROVISION OF THIS AGREEMENT OR ANY
OTHER EXCHANGE AGREEMENT DELIVERED IN CONNECTION HEREWITH IS INVALID OR
UNENFORCEABLE UNDER ANY APPLICABLE STATUTE OR RULE OF LAW, THEN SUCH PROVISION
SHALL BE DEEMED INOPERATIVE TO THE EXTENT THAT IT MAY CONFLICT THEREWITH AND
SHALL BE DEEMED MODIFIED TO CONFORM WITH SUCH STATUTE OR RULE OF LAW.  ANY SUCH
PROVISION WHICH MAY PROVE INVALID OR

 

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UNENFORCEABLE UNDER ANY LAW SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF
ANY OTHER PROVISION OF THIS AGREEMENT OR ANY OTHER EXCHANGE AGREEMENT.

 

5.2.                            TERMINATION.  THIS AGREEMENT SHALL TERMINATE AND
BE OF NO FURTHER FORCE OR EFFECT IF THE CLOSING (AS DEFINED IN THE ASSET
PURCHASE AGREEMENT) SHALL NOT HAVE BEEN CONSUMMATED BY JANUARY 31, 2010;
PROVIDED, HOWEVER, THAT IN SUCH EVENT, THE COMPANY AGREES TO ISSUE TO THE SHAAR
A WARRANT IN THE FORM OF THE WARRANT TO PURCHASE UP TO 2,000,000 SHARES OF
COMMON STOCK AT AN EXERCISE PRICE OF $0.30 PER SHARE.

 

5.3.                            SURVIVAL.  THE REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS MADE HEREIN SHALL SURVIVE ANY INVESTIGATION MADE BY THE
HOLDERS AND FOR ONE YEAR AFTER THE DATE OF THE CLOSING OF THE TRANSACTIONS
CONTEMPLATED HEREBY.  ALL STATEMENTS AS TO FACTUAL MATTERS CONTAINED IN ANY
CERTIFICATE OR OTHER INSTRUMENT DELIVERED BY OR ON BEHALF OF THE COMPANY
PURSUANT HERETO IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE
DEEMED TO BE REPRESENTATIONS AND WARRANTIES BY THE COMPANY HEREUNDER SOLELY AS
OF THE DATE OF SUCH CERTIFICATE OR INSTRUMENT, UNLESS OTHERWISE SPECIFIED
THEREIN.

 

5.4.                            SUCCESSORS.  EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED HEREIN, THE PROVISIONS HEREOF SHALL INURE TO THE BENEFIT OF, AND BE
BINDING UPON, THE SUCCESSORS, HEIRS, EXECUTORS AND ADMINISTRATORS OF THE PARTIES
HERETO.  NO HOLDER MAY ASSIGN ITS RIGHTS HEREUNDER TO A COMPETITOR OF THE
COMPANY.  THE COMPANY MAY NOT ASSIGN ITS RIGHTS OR DELEGATE ITS OBLIGATIONS
HEREUNDER TO A THIRD PARTY WITHOUT OBTAINING THE CONSENT OF THE HOLDERS, SUCH
CONSENT NOT TO BE UNREASONABLY WITHHELD OR DELAYED.

 

5.5.                            ENTIRE AGREEMENT.  THIS AGREEMENT, THE OTHER
EXCHANGE DOCUMENTS, THE EXHIBITS AND SCHEDULES HERETO AND THERETO AND THE OTHER
DOCUMENTS DELIVERED PURSUANT HERETO CONSTITUTE THE FULL AND ENTIRE UNDERSTANDING
AND AGREEMENT BETWEEN THE PARTIES WITH REGARD TO THE SUBJECTS HEREOF AND NO
PARTY SHALL BE LIABLE OR BOUND TO ANY OTHER IN ANY MANNER BY ANY
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS EXCEPT AS SPECIFICALLY SET
FORTH HEREIN AND THEREIN.

 

5.6.                            OMITTED.

 

5.7.                            AMENDMENTS AND WAIVERS.  THIS AGREEMENT MAY BE
AMENDED OR MODIFIED ONLY UPON THE WRITTEN CONSENT OF THE COMPANY AND SHAAR.

 

5.8.                            DELAYS OR OMISSIONS.  IT IS AGREED THAT NO DELAY
OR OMISSION TO EXERCISE ANY RIGHT, POWER OR REMEDY ACCRUING TO ANY PARTY, UPON
ANY BREACH, DEFAULT OR NONCOMPLIANCE BY ANOTHER PARTY UNDER THIS AGREEMENT OR
THE OTHER EXCHANGE DOCUMENTS, SHALL IMPAIR ANY SUCH RIGHT, POWER OR REMEDY, NOR
SHALL IT BE CONSTRUED TO BE A WAIVER OF ANY SUCH BREACH, DEFAULT OR
NONCOMPLIANCE, OR ANY ACQUIESCENCE THEREIN, OR OF OR IN ANY SIMILAR BREACH,
DEFAULT OR NONCOMPLIANCE THEREAFTER OCCURRING.  ALL REMEDIES, EITHER UNDER THIS
AGREEMENT OR THE OTHER EXCHANGE DOCUMENTS, BY LAW OR OTHERWISE AFFORDED TO ANY
PARTY, SHALL BE CUMULATIVE AND NOT ALTERNATIVE.

 

5.9.                            NOTICES.  ALL NOTICES AND OTHER COMMUNICATIONS
GIVEN OR MADE PURSUANT TO THIS AGREEMENT SHALL BE IN WRITING AND SHALL BE DEEMED
EFFECTIVELY GIVEN UPON THE EARLIER OF ACTUAL RECEIPT OR:  (A) PERSONAL DELIVERY
TO THE PARTY TO BE NOTIFIED, (B) WHEN SENT, IF SENT BY ELECTRONIC

 

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MAIL OR FACSIMILE DURING NORMAL BUSINESS HOURS OF THE RECIPIENT, AND IF NOT SENT
DURING NORMAL BUSINESS HOURS, THEN ON THE RECIPIENT’S NEXT BUSINESS DAY,
(C) FIVE (5) DAYS AFTER HAVING BEEN SENT BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, POSTAGE PREPAID, OR (D) ONE (1) BUSINESS DAY AFTER DEPOSIT
WITH A NATIONALLY RECOGNIZED OVERNIGHT COURIER, FREIGHT PREPAID, SPECIFYING NEXT
BUSINESS DAY DELIVERY, WITH WRITTEN VERIFICATION OF RECEIPT.  ALL COMMUNICATIONS
SHALL BE SENT TO THE RESPECTIVE PARTIES AT THE FOLLOWING ADDRESSES OR TO SUCH
OTHER E-MAIL ADDRESS, FACSIMILE NUMBER OR ADDRESS AS SUBSEQUENTLY MODIFIED BY
WRITTEN NOTICE GIVEN IN ACCORDANCE WITH THIS SECTION:

 

If to the Company or to TJC, to: or c/o

 

BIO-key International, Inc.

 

 

3349 Highway 138

 

 

Building D, Suite B

 

 

Wall, NJ 07719

 

 

Attn: Chief Executive Officer

 

 

Facsimile: [                            ]

 

 

 

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

 

Choate, Hall & Stewart LLP
Two International Place
Boston, MA 02110
Attention: Charles J. Johnson, Esq.
Facsimile: (617) 248-4000

 

 

 

If to Shaar, to:

 

The Shaar Fund Ltd.

 

 

c/o Maarten Robberts

 

 

SS&C Fund Services N.V.

 

 

Pareraweg 45

 

 

Curacao, Netherlands Antilles

 

 

Facsimile: (599-9) 434-3560

 

 

 

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

 

MELTZER, LIPPE, GOLDSTEIN & BREITSTONE, LLP
190 WILLIS AVENUE
MINEOLA, NY 11501
ATTENTION: IRA R. HALPERIN, ESQ.
FACSIMILE: (516) 747-0653

 

5.10.                     TITLES AND SUBTITLES.  THE TITLES OF THE SECTIONS AND
SUBSECTIONS OF THIS AGREEMENT ARE FOR CONVENIENCE OF REFERENCE ONLY AND ARE NOT
TO BE CONSIDERED IN CONSTRUING THIS AGREEMENT.

 

5.11.                     FACSIMILE SIGNATURES; COUNTERPARTS.  THIS AGREEMENT
MAY BE EXECUTED BY FACSIMILE SIGNATURES AND IN ANY NUMBER OF COUNTERPARTS, EACH
OF WHICH SHALL BE AN ORIGINAL, BUT ALL OF WHICH TOGETHER SHALL CONSTITUTE ONE
INSTRUMENT.

 

5.12.                     BROKER’S FEES.  EACH PARTY HERETO REPRESENTS AND
WARRANTS THAT NO AGENT, BROKER, INVESTMENT BANKER, PERSON OR FIRM ACTING ON
BEHALF OF OR UNDER THE AUTHORITY OF SUCH PARTY HERETO IS OR WILL BE ENTITLED TO
ANY BROKER’S OR FINDER’S FEE OR ANY OTHER COMMISSION DIRECTLY OR INDIRECTLY IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREIN.  EACH PARTY HERETO FURTHER
AGREES TO

 

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INDEMNIFY EACH OTHER PARTY FOR ANY CLAIMS, LOSSES OR EXPENSES INCURRED BY SUCH
OTHER PARTY AS A RESULT OF THE REPRESENTATION BY SUCH PARTY IN THIS SECTION 5.12
BEING UNTRUE.

 

5.13.                     CONSTRUCTION.  EACH PARTY ACKNOWLEDGES THAT ITS LEGAL
COUNSEL PARTICIPATED IN THE PREPARATION OF THIS AGREEMENT AND THE OTHER EXCHANGE
DOCUMENTS AND, THEREFORE, STIPULATES THAT THE RULE OF CONSTRUCTION THAT
AMBIGUITIES ARE TO BE RESOLVED AGAINST THE DRAFTING PARTY SHALL NOT BE APPLIED
IN THE INTERPRETATION OF THIS AGREEMENT TO FAVOR ANY PARTY AGAINST THE OTHER.

 

[Signature pages follow]

 

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IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as a
sealed instrument as of the date first written above.

 

 

THE COMPANY:

 

 

 

BIO-KEY INTERNATIONAL, INC.

 

 

 

 

 

By:

/s/ Thomas J. Colatosti

 

 

Name: Thomas J. Colatosti

 

 

Title: Chairman

 

8

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THE HOLDERS:

 

 

 

THE SHAAR FUND, LTD.

 

 

 

 

 

By:

SS&C Fund Services N.V.

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

 

/s/ Thomas J. Colatosti

 

 

Thomas J. Colatosti

 

9

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Exhibit A

 

Form of Convertible Note

 

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Exhibit B

 

Form of Series D Certificate of Designation

 

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Exhibit C

 

Form of Warrant

 

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