EXHIBIT 10.39


                              EMPLOYMENT AGREEMENT

     THIS AGREEMENT (along with all Exhibits attached hereto hereinafter
referred to as the "Agreement") made effective as of November 20th, 2001 by and
between SAC Technologies, Inc., dba BIO-key International, a Minnesota
corporation with its principal place of business at 1285 Corporate Center Drive,
Suite 175, Eagan, MN 55121 (the "Company") and Mira LaCous, residing at 1567
Antler Point, Eagan, MN 55122 (the "Employee").

                                   WITNESSETH:

     WHEREAS, the Company desires to secure the employment of the Employee as
Vice President in accordance with the provisions of this Agreement; and

     WHEREAS, the Employee desires and is willing to be employed by the Company
in accordance herewith.

     NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:

     1. Employment Term. This Agreement shall remain in force and effect for a
term commencing on the Effective Date hereof and expiring on the first (1st)
anniversary hereof (the "Initial Term"), or until the employment relationship is
terminated pursuant to Section 4 hereof. Upon the expiration of the Initial
Term, this Agreement will be renewed automatically for successive one-year
periods (each, a "Renewal Term"), unless sooner terminated in accordance with
the provisions of Section 4 or unless Company gives written notice of
non-renewal at least one (1) month prior to the date on which the Employee's
employment would otherwise end, in which case paragraph 4(e) takes effect.

     2. Duties; Exclusive Services and Best Efforts.

          (a) Duties. Employee shall hold the position of Vice President of
Technology and Development. At this position, the Employee will have the
responsibility for all core technology, software design and development,
customer support, professional services related to technology implementations,
and participation in corporate strategy activities for the Company including but
not limited to strategic planning, product roll out, beta test development,
budget forecasting as well as any duties assigned to the Employee as directed by
the Company's CEO. Employee working with the CEO will participate in negotiating
contracts and strategic alliances with outside vendors and prospective clients.


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          (b) Exclusive Services and Best Efforts. The Employee agrees to devote
her best efforts, energies and skill to the faithful, competent and diligent
discharge of the duties and responsibilities attributable to her position, and
to this end, will devote her fulltime attention to the business and affairs of
the Company. The Employee also agrees that she shall not take personal advantage
of any business opportunities that arise during her employment that may benefit
the Company. All material facts regarding such opportunities must be promptly
reported to the Company's CEO for consideration. In addition, the Company
acknowledges and agrees that the Employee shall be permitted to engage in and
pursue such contemporaneous activities and interests, as the Employee may
desire, for personal profit or otherwise, provided such activities do not
interfere with the Employee's performance of her duties and obligations
hereunder.

     3. Compensation. On and after the commencement of Employee's employment,
the Employee shall receive, for all services rendered to the Company hereunder,
the following:

          (a) Base Salary. The Employee shall be paid an initial base annual
salary equal to One Hundred Thousand Dollars ($100,000) paid at the rate of
$8,333 per month. The Employee's annual base salary shall be payable in equal
installments in accordance with the Company's general salary payment policies
but no less frequently than monthly. Employee's Base Salary may be increased
annually, or at such other intervals, as the CEO shall determine from time to
time.

          (b) Discretionary Bonus. In addition to Base Salary, a "Discretionary
Bonus" may be awarded to the Employee on the basis of merit performance on an
annual basis in the discretion of the Board of Directors or Compensation
Committee thereof; provided, however, that the failure of the Company to provide
any Discretionary Bonus shall not give rise to any claim against the Company.
The Discretionary Bonus shall not exceed fifty (50%) percent of the Employee's
Base Salary; the Company in its sole discretion shall determine the amount, if
any, and timing of any Discretionary Bonus.

          (c) Incentive Compensation. The Employee may be eligible for awards
from the Company's incentive compensation plans, including without limitation
any stock option plans applicable to high level executives of the Company, in
accordance with the terms thereof and on a basis commensurate with their
position and responsibilities. The Company in its sole discretion shall
determine any such compensation. Nothing herein shall affect any rights or
obligations of the Employee or the Company created pursuant to any stock option
plan or stock option agreement between the parties hereto.

          (d) Stock Options. For this Agreement, Employee shall be granted (i)
subject to the provisions of the Company's 1999 Stock Option Plan attached
hereto as Exhibit A, a stock option to purchase 200,000 shares of the Company's
Common Stock; and (ii) subject to the terms of stock option agreement in
substantially the form attached hereto as Exhibit B, a stock option to purchase
140,000 shares of the Company's Common Stock. Option to purchase Seventy-Five
thousand (75,000) shares shall vest on execution of this Agreement; and two
hundred and sixty-five


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thousand (265,000) shares shall vest in equal monthly installments over a
thirty-six (36) month period.

          (f) Benefits Plans. The Employee shall be eligible to participate in
any and all employee welfare and health benefit plans (including, but not
limited to, life insurance, health, medical and dental plans) and other employee
benefit plans, including but not limited to qualified pension plans, which may
be established by the Company from time to time for the benefit of other Company
employees of comparable status. The Employee shall be required to comply with
the conditions attendant to coverage by such preceding plans and policies and
shall comply with and be eligible for benefits only in accordance with the terms
and conditions of such plans as they may be amended from time to time. Nothing
in this Section shall be construed as requiring the Company to establish or
continue any particular benefit plan in discharge of its obligations under this
Agreement.

          (g) Vacation. The Employee shall be eligible for four (4) weeks of
paid vacation each year of her employment hereunder. Except as required by
applicable law, in no event shall the Employee be entitled to receive any cash
compensation in lieu of unused vacation time.

          (h) Expenses. Subject to and in accordance with the Company's policies
and procedures, and, upon presentation of pre-approved itemized accounts, the
Employee shall be reimbursed by the Company for reasonable and necessary
business-related expenses, which expenses are incurred by the Employee on behalf
of the Company.

          (i) Deductions from Salary and Benefits. The Company will withhold
from any salary or benefits payable to the Employee all federal, state, local,
and other taxes and other amounts as required by law, rule or regulation.

     4. Termination. Either may terminate this Agreement the Employee or the
Company at any time, subject only to the provisions of this Section 4.

          (a) Voluntary Termination. If Employee terminates her own employment,
the Company shall be released from any and all further obligations under this
Agreement, except that the Company shall be obligated to pay Employee her salary
and benefits owing to Employee through the effective date of termination.
Employee shall also be entitled to any reimbursement owed in accordance with
Section 3(h). Employee's obligations under Sections 5, 7, 8 and 9 hereof and
shall survive the termination of Employee's employment, and Employee shall
remain bound thereby.

          (b) Death. This Agreement shall terminate on the date of the
Employee's death, in which event salary, benefits, and reimbursable expenses
owing to the Employee through the date of the Employee's death shall be paid to
her estate.


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          (c) Disability. If, during the term of this Agreement, in the opinion
of the Company, the Employee, because of physical or mental illness or
incapacity or disability, shall become unable to perform substantially all of
the duties and services required of him under this Agreement for a period of
thirty (30) consecutive calendar days or sixty (60) days in the aggregate during
any twelve-month period, the Company may, upon at least ten (10) days prior
written notice given at any time after the expiration of such thirty (30) day or
sixty (60) day period, notify the Employee of its intention to terminate this
Agreement as of the date set forth in the notice. In case of such termination,
the Employee shall be entitled to receive salary, benefits, and reimbursable
expenses owing to the Employee through the date of termination. The Company
shall have no further obligation or liability to the Employee. The Employee's
obligations under Sections 5, 7 8 and 9 hereof shall survive the termination of
Employee's employment, and employee shall remain bound thereby.

          (d) Termination by Employer for Cause. The Company may terminate this
Agreement for "Cause" at any time. Upon such termination for "Cause", the
Company shall be released from any and all further obligations under this
Agreement, except that the Company shall be obligated to pay the Employee her
salary and benefits owing to the Employee through the effective date of such
termination. The Employee shall also be entitled to any reimbursement owed in
accordance with Section 3(h). The Employee's obligations under Sections 5, 7, 8
and 9 hereof shall survive the termination of Employee's employment, and
employee shall remain bound thereby.

          CAUSE. "Cause" for Termination shall include, but is not limited to,
the following conduct of the Employee:

               (i) Breach of any material provision of this Employment Agreement
by the Employee if not cured within two (2) weeks after receiving written notice
thereof;

               (ii) Misconduct as an Employee of the Company, including but not
limited to, misappropriating funds or property of the Company; any attempt to
obtain any personal profit from any transaction in which the Employee has an
interest that is adverse to the Company or any breach of the duty of loyalty and
fidelity to the Company; or any other act or omission of the Employee which
substantially impairs the Company's ability to conduct its ordinary business in
its usual manner;

               (iii) Material neglect or refusal to perform the duties assigned
to the Employee pursuant to this Employment Agreement if not cured within two
(2) weeks after receiving notice thereof;

               (iv) Conviction of a felony or plea of guilty or NOLO CONTENDERE
to a felony;

               (v) Acts of dishonesty or moral turpitude by the Employee that
are detrimental to the Company or any other act or omission which subjects the
Company or any of


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its affiliates to public disrespect, or scandal, or that causes the Company to
be in violation of governmental regulations that subjects the Company either to
sanctions by governmental authority or to civil liability to its employees or
third parties;

               (vi) Disclosure or use of confidential information of the
Company, other than as specifically authorized and required in the performance
of the Employee's duties.

          (e) Termination by Employer Without Cause. Upon termination of this
Agreement without Cause, the Company shall be released from any and all further
obligations under this Agreement, except that the Employee shall continue to be
paid or provided, as applicable, in the same manner as before termination, and
for a period of time ending nine (9) months from the date of termination of the
Employee without Cause, if, and only if, the Employee has completed twelve (12)
months of employment with Company and signs a valid general release of all
claims against the Company, its affiliates, subsidiaries, officers, directors
and agents, in a form provided by the Company. The Employee's obligations under
Sections 5, 7, 8 and 9 hereof shall survive the termination of the Employee's
employment, regardless of the circumstances of any such termination, and the
Employee shall remain bound thereby.

          (f) Termination by Mutual Agreement. This Agreement may be terminated
at any time by mutual agreement of the Employee and the Company.

          (g) Termination by Employee for Cause. Employee for Cause may
terminate this Agreement if Employee's current salary or benefits are reduced by
more than 30%. In the event the Employee terminates employment for Cause,
Employee shall continue to be paid or provided, as applicable, in the same
manner as before termination, and for a period of time ending two (2) months
from the date of termination by Employee without Cause, if, and only if, the
Employee signs a valid general release of all claims against the Company, its
affiliates, subsidiaries, officers, directors and agents, in a form provided by
the Company. The Employee's obligations under Sections 5, 7, 8 and 9 hereof and
shall survive the termination of the Employee's employment, regardless of the
circumstances of any such termination, and the Employee shall remain bound
thereby.

     5. Non-Competition and Business Opportunities.

          (a) Non-Competition. The Employee understands that the Company is in
the business of developing and licensing biometric identification technologies,
and distributing products incorporating such technologies, to original equipment
manufacturers and end users. The Employee agrees that during the period of her
employment hereunder and for a period of one (1) year thereafter, the Employee
will not directly or indirectly: (i) market, sell or perform services such as
are offered or conducted by the Company, its affiliates and subsidiaries during
the period of her employment, to any customer or client of the Company or
"Prospective Customer" or client of the Company; or (ii) engage, directly or
indirectly, whether as principal or as agent, officer, director, employee,
consultant, shareholder, or otherwise, alone or in association with any other
person, corporation or other entity, in any "Competing Business". For


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the purpose of this Section 5(a) "Prospective Customer" shall mean any person
with whom the Company has engaged in any discussion or negotiation regarding the
use of the Company's products or services. For purposes of this Section 5(a),
the term "shareholder" shall exclude any interest owned by Employer in a public
company to the extent the Employer owns less than ten percent (10%) of any such
company's outstanding common stock. For the further purposes of this Agreement,
the term "Competing Business" shall mean any person, corporation or other entity
developing and/or licensing biometric identification technologies or
distributing products incorporating such technologies to original equipment
manufacturers and end users at the time of such termination or non-renewal. Due
to the nature of the markets served and the technology and products to be
developed and marketed by the Company which are intended to be available on a
national basis, the restrictions set forth in this Section 5(a) can not be
limited to a specific geographic area within the United States.

          (b) Business Opportunities. The Employee agrees that during the period
of her employment hereunder, the Employee will not take personal advantage of
any business opportunities that are similar or substantially similar to the
business of the Company. In addition, all material facts regarding any such
business opportunities must be promptly and fully disclosed by the Employee to
the CEO as soon as the Employee becomes aware of any opportunity, and in no
event later than forty-eight (48) hours after learning of such opportunity.
Business opportunities covered by this Section 5(b) include opportunities
relating to the development and licensing of biometric
identification/verification technologies or the distribution of products
incorporating such technologies to original equipment manufacturers,
distributors and end users.

          (c) Non-Solicitation. The Employee agrees that during the period of
employment hereunder and for a period of one (1) year thereafter, the Employee
will not request or otherwise attempt to induce or influence, directly or
indirectly, any present customer, distributor or supplier, or Prospective
Customer, distributor or supplier, of the Company, or other persons sharing a
business relationship with the Company to cancel, to limit or postpone their
business with the Company, or otherwise take action which might be to the
material disadvantage of the Company. The Employee agrees that during the period
of employment hereunder and for a period of one (1) year thereafter, Employee
will not hire or solicit for employment, directly or indirectly, or induce or
actively attempt to influence, hire or solicit, any employee, agent, officer,
director, contractor, consultant or other business associate of the Company to
terminate his or her employment or discontinue such person's consultant,
contractor or other business association with the Company.

          (d) Scope. The parties hereto agree that, due to the nature of the
Company's business, the duration and scope of the non-competition and
non-solicitation provisions set forth above are reasonable. In the event that
any court determines that the duration or the geographic scope, or both, are
unreasonable and that such provisions are to that extent unenforceable, the
parties hereto agree that such provisions shall remain in full force and effect
for the greatest time period and in the greatest area that would not render it
unenforceable. The parties intend that the non-competition and non-solicitation
provisions herein shall be deemed to be a series of separate


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covenants, one for each and every county of each and every state of the United
States of America and each and every political subdivision of each and every
country outside the United States of America where this provision is intended to
be effective. The Employee agrees that damages are an inadequate remedy for any
breach of such provisions and that the Company, shall, whether or not it is
pursuing any potential remedies at law, be entitled to seek in any court of
competent jurisdiction, equitable relief in the form of preliminary and
permanent injunctions without bond or other security upon any actual or
threatened breach of either of these competition provisions. If the Employee
shall violate this Section 5, the duration of this Section 5 automatically shall
be extended as against the Employee for a period equal to the period during
which the Employee shall have been in violation of this Section 5. The covenants
contained in this Section 5 are deemed to be material and the Company is
entering into this Agreement relying on such covenants.

     6. Representations and Warranties of the Employee. The Employee, hereby
represents and warrants to the Company as follows: (i) The Employee has the
legal capacity and unrestricted right to execute and deliver this Agreement and
to perform all of her obligations hereunder; (ii) the execution and delivery of
this Agreement by the Employee and the performance of her obligations hereunder
will not violate or be in conflict with any fiduciary or other duty, instrument,
agreement, document, arrangement, or other understanding to which Employee is a
party or by which she is or may be bound or subject; and (iii) except as set
forth in Exhibit C attached hereto, the Employee is not a party to any
instrument, agreement, document, arrangement, including, but not limited to,
invention assignment agreement, confidential information agreement,
non-competition agreement, non-solicitation agreement, or other understanding
with any person (other than the Company) requiring or restricting the use or
disclosure of any confidential information or the provision of any employment,
consulting or other services.

     7. Disclosure of Innovations; Assignment of Ownership of Innovations;
Protection of Confidential Information. Employee hereby represents and warrants
to the Company that Employee understands that the Company is in the business of
developing and licensing biometric identification technologies, and distributing
products incorporating such technologies, to original equipment manufacturers,
distributors and end users (THE "COMPANY'S BUSINESS") and that Employee may have
access to, generate/create, or acquire information with respect to Confidential
Information (as defined below), including software, processes and methods,
development tools, scientific, technical and/or business innovations.

          (a) Disclosure of Innovations. Employee agrees to disclose in writing
to the Company all inventions, improvements and other innovations of any kind
that Employee may make, conceive, develop or reduce to practice, alone or
jointly with others, during the term of Employee's employment with the Company,
whether or not they are eligible for patent, copyright, trademark, trade secret
or other legal protection ("Innovations"). Examples of Innovations shall
include, but are not limited to, software, discoveries, research, inventions,
formulas, techniques, processes, know-how, marketing plans, new product plans,
production processes, advertising, packaging and marketing techniques and
improvements to computer hardware or software. Such


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innovations disclosed to the Company shall not be disclosed to any other person
or party without the written permission of the Employee.

          (b) Assignment of Ownership of Innovations. Employee acknowledges that
she has been employed by the Company since May 15, 2000 (the "Start Date").
Employee agrees that (i) all Innovations made, conceived, developed or reduced
to practice by Employee, either alone or together with others, at any time after
the Start Date and prior to the date hereof related to biometric
identification/verification technologies are; and (ii) all Innovations made,
conceived, developed or reduced to practice by Employee, either alone or
together with others, at any time on or after the Start Date will be the sole
and exclusive property of the Company and Employee hereby assigns all of
Employee's rights, title or interest in the Innovations and in all related
patents, copyrights, trademarks, trade secrets, rights of priority and other
proprietary rights to the Company, provided however, that Employee does not
assign to the Company any of Employee's rights in any Innovations (i) for which
no equipment, supplies, facility or trade secret information of the Company was
used; (ii) which was developed entirely on Employee's own time; (iii) which does
not relate directly to the Company's Business or to the Company's actual or
demonstrably anticipated research or development; and (iv) which does not result
from any work performed by Employee for the Company. At the Company's request
and expense, during and after the period of Employee's employment with the
Company, Employee will assist and cooperate with the Company in all respects and
will execute documents, and, subject to Employee's reasonable availability, give
testimony and take further acts requested by the Company to obtain, maintain,
perfect and enforce for the Company patent, copyright, trademark, trade secret
and other legal protection for the Innovations. Employee hereby appoints an
authorized officer of the Company as Employee's attorney-in-fact to execute
documents on her behalf for this purpose. Employee has attached hereto as
Exhibit D a list of Innovations as of the date hereof which belong to Employee
and which are not assigned to the Company hereunder (the "Prior Innovations"),
or, if no such list is attached, Employee represents that there are no Prior
Innovations.

          (c) Protection of Confidential Information of the Company. Employee
understands that Employee's work as an employee of the Company creates a
relationship of trust and confidence between Employee and the Company. During
and after the period of Employee's employment with the Company, Employee will
not use or disclose or allow anyone else to use or disclose any "Confidential
Information" (as defined below) relating to the Company, its products, services,
suppliers or customers except as may be necessary in the performance of
Employee's work for the Company or as may be specifically authorized in advance
by appropriate officers of the Company. "Confidential Information" shall
include, but not be limited to, information consisting of research and
development, patents, trademarks and copyrights and applications thereto,
technical information, computer programs, software, methodologies, innovations,
software tools, know-how, knowledge, designs, drawings, specifications,
concepts, data, reports, processes, techniques, documentation, pricing,
marketing plans, customer and prospect lists, trade secrets, financial
information, salaries, business affairs, suppliers, profits, markets, sales
strategies, forecasts, employee information and any other information not
available to the general public, whether written or oral, which Employee knows
or has reason to know the Company would like to treat as confidential for any
purpose, such as maintaining a competitive advantage or avoiding


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undesirable publicity. Employee will keep Confidential Information secret and
will not allow any unauthorized use of the same, whether or not any document
containing it is marked as confidential. These restrictions, however, will not
apply to Confidential Information that has become known to the public generally
through no fault or breach of Employee's or that the Company regularly gives to
third parties without restriction on use or disclosure. If Employee is
subpoenaed or ordered to disclose this information by a Court of competent
jurisdiction, Employee shall promptly inform the Company so that the Company can
determine whether it wants to attempt to quash the subpoena or order. If the
Employee has informed the Company, then it shall not constitute a breach of this
Employment Agreement when or if the Employee responds to or replies to a proper
subpoena or other order of the Court.

     8. WORK MADE FOR HIRE.

          (a) Work Made For Hire. Subject to Paragraph 7 (whose terms shall
control) Employee further recognizes and understands that Employee's duties at
the Company may include the preparation of materials, including without
limitation written or graphic materials, and that any such materials conceived
or written by Employee shall be done as "work made for hire" as defined and used
in the Copyright Act of 1976, 17 U.S.C. ss.ss. 1 et seq. In the event of
publication of such materials, Employee understands that since the work is a
"work made for hire", the Company will solely retain and own all rights in said
materials, including right of copyright. In the event that any of such works
shall be deemed by a court of competent jurisdiction not to be a "work made for
hire," this Agreement shall operate as an irrevocable assignment by Employee to
the Company of all right, title and interest in and to such works, including,
without limitation, all worldwide copyright interests therein, in perpetuity.
The fact that such copyrightable works are created by Employee outside of the
Company's facilities or other than during Employee's working hours with the
Company shall not diminish the Company's right with respect to such works which
otherwise fall within this paragraph. Employee agrees to execute and deliver to
the Company such further instruments or documents as may be requested by the
Company in order to effectuate the purposes of this paragraph.

          (b) Disclosure of Works and Inventions/Assignment of Patents. Subject
to Paragraph 7 (whose terms shall control), in consideration of the promises set
forth herein, Employee agrees to disclose promptly to the Company, or to such
person whom the Company may expressly designate for this specific purpose (its
"Designee"), any and all works, inventions, discoveries and improvements
authored, conceived or made by Employee during the period of employment
commencing from the Start Date and related to the business or activities of the
Company, and Employee hereby assigns and agrees to assign all of Employee's
interest in the foregoing to the Company or to its Designee. Employee agrees
that, whenever she is requested to do so by the Company, Employee shall execute
any and all applications, assignments or other instruments which the Company
shall deem necessary to apply for and obtain Letters Patent or Copyrights of the
United States or any foreign country or to otherwise protect the Company's
interest therein. Such obligations shall continue beyond the termination or
nonrenewal of Employee's employment or service with respect to any works,
inventions, discoveries and/or improvements that are authored, conceived of, or
made by Employee during the period of


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Employee's employment or service, and shall be binding upon Employee's
successors, assigns, executors, heirs, administrators or other legal
representatives.

     9. Company Property. All records, files, lists, including computer
generated lists, drawings, documents, software, documents, equipment, models,
binaries, object modules, libraries, source code and similar items relating to
the Company's business that the Employee shall prepare or receive from the
Company and all Confidential Information shall remain the Company's sole and
exclusive property ("Company Business Property"). Upon termination of this
Agreement, the Employee shall promptly return to the Company all property of the
Company in her possession, including Company Business Property. The Employee
further represents that she will not copy or cause to be copied, print out, or
cause to be printed out any Company Business Property other than as specifically
authorized and required in the performance of the Employee's duties. The
Employee additionally represents that, upon termination of her employment with
the Company, she will not retain in her possession any such Company Business
Property.

     10. Cooperation. The Employee and Company agree that during the term of
Employee's employment they shall, at the request of the other Party, render all
assistance and perform all lawful acts that each Party considers necessary or
advisable in connection with any litigation involving either Party or any
director, officer, employee, shareholder, agent, representative, consultant,
client, or vendor of the Company.

     11. Employment Dispute Settlement Procedure/Waiver of Rights. The Employee
and the Company each agree that, in the event either party (or its
representatives, successors or assigns) brings an action in a court of competent
jurisdiction relating to the Employee's recruitment, employment with, or
termination of employment from the Company, each party in such action agrees to
waive his, her or its right to a trial by jury, and further agrees that no
demand, request or motion will be made for trial by jury.

The parties hereto further agree that, in the event that either seeks relief in
a court of competent jurisdiction for a dispute covered by this Agreement, any
other Agreement between the Employee and the Company or which relates to the
Employee's recruitment, employment with, or termination of employment from the
Company, the defendant or third-party defendant in such action may, at any time
within sixty (60) days of the service of the complaint, third-party complaint or
cross-claim upon such party, at his, her or its option, require all or part of
the dispute to be arbitrated by one arbitrator in accordance with the rules of
the American Arbitration Association. The parties agree that the option to
arbitrate any dispute is governed by the Federal Arbitration Act. The parties
understand and agree that, if the other party exercises his, her or its option,
any dispute arbitrated will be heard solely by the arbitrator, and not by a
court. Judgment upon the award rendered, however, may be entered in any court of
competent jurisdiction. The cost of such arbitration shall be borne equally by
the parties. The terms of this paragraph does not require the parties to use
neutrals or mediators who are members of the American Arbitration Association.


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This dispute resolution agreement will cover all matters directly or indirectly
related to the Employee's recruitment, employment or termination of employment
by the Company; including, but not limited to, claims involving laws against
discrimination whether brought under federal and/or state law and/or local law,
and/or claims involving co-employees but excluding Worker's Compensation Claims.
Nothing contained in this Section 11 shall limit the right of the Company to
enforce by court injunction or other equitable relief the Employee's obligations
under Sections 5, 7, 8 and 9 hereof.

           The right to a trial, and to a trial by jury, is of value.

                  THE EMPLOYEE MAY WISH TO CONSULT AN ATTORNEY
                  PRIOR TO SIGNING THIS AGREEMENT. IF SO, THE
                  EMPLOYEE SHOULD TAKE A COPY OF THIS AGREEMENT
                  WITH HER.

     12. Choice of Law and Jurisdiction. This Agreement shall be construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of Minnesota. Each of the parties hereto hereby irrevocably
consents and submits to the exclusive jurisdiction of the state courts of the
State of Minnesota, and of the United States District Court for the District of
Minnesota in connection with any suit, action, or other proceeding concerning
this Agreement or enforcement of Sections 5, 7, 8 and 9 hereof. The Employee
waives the right to a jury trial and agrees to accept service of process by
certified mail at the Employee's last known address, if there is proof of
receipt by the Employee (at a minimum, return receipt requested).

     13. Successors and Assigns. The Employee hereunder, may assign neither this
Agreement, nor any of the Employee's rights, powers, duties or obligations. This
Agreement shall be binding upon and inure to the benefit of the Employee and her
heirs and legal representatives and the Company and its successors. Successors
of the Company shall include, without limitation, any company or companies,
individuals, groups, associations, partnerships, firm, venture or other entity
or party acquiring, directly or indirectly, all or substantially all of the
assets of the Company, whether by merger, consolidation, purchase, lease or
otherwise. Any such successor referred to in this paragraph shall thereafter be
deemed "the Company" for the purpose hereof. All covenants and restrictions upon
the Employee hereunder, including, but not limited to Sections 5, 7, 8 and 9
hereof, are specifically assignable by the Company.

     14. Waiver. Any waiver or consent from the Company with respect to any term
or provision of this Agreement or any other aspect of the Employee's conduct or
employment shall be effective only in the specific instance and for the specific
purpose for which given and shall not be deemed, regardless of frequency given,
to be a further or continuing waiver or consent. The failure or delay of the
Company at any time or times to require performance of, or to exercise any of
its powers, rights or remedies with respect to any term or provision of this
Agreement or any other aspect of the Employee's conduct or employment in no
manner (except as otherwise expressly provided herein) shall affect the
Company's right at a later time to enforce any such term or provision.


<PAGE>


         15. Notices. All notices, requests, demands, and other communications
hereunder must be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class,
registered mail, return receipt requested, postage and registry fees prepaid, to
the applicable party and addressed as follows:

                  (a)      If to the Company:

                           SAC Technologies, Inc., dba: BIO-key International
                           1285 Corporate Center Drive, Suite 175
                           Eagan, MN 55121
                           Attn:  Chief Executive Officer
                           With a copy to:

                           Buchanan Ingersoll Professional Corporation
                           Eleven Penn Center
                           1845 Market Street
                           Philadelphia, PA   19103
                           Attn:  Vincent A. Vietti, Esquire

                  (b)      If to the Employee:

                           Mira LaCous
                           1567 Antler Point
                           Eagan, MN  55122

The parties agree to give notice of any change of address within 15 days of the
change of address.


     16. Construction of Agreement.

          (a) Severability. In the event that any one or more of the provisions
of this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality or enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

          (b) Headings. The descriptive headings of the several paragraphs of
this Agreement are inserted for convenience of reference only and shall not
constitute a part of this Agreement.

     17. Entire Agreement and Amendments. This Agreement, including all Exhibits
which shall form parts hereof, contains the entire agreement of the parties
concerning the Employee's employment and all promises, representations,
understandings, arrangements and prior agreements on such subject are merged
herein and superseded hereby. The provisions of this Agreement may not be
amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of any
amendment,


<PAGE>


modification, repeal, waiver, extension or discharge is sought. No person acting
other than pursuant to a resolution of the Board of Directors shall have
authority on behalf of the Company to agree to amend, modify, repeal, waive,
extend or discharge any provision of this Agreement or anything in reference
thereto or to exercise any of the Company's rights to terminate or to fail to
extend this Agreement.

     18. Survival. The Employee's obligations under Paragraphs 5, 7, 8 and 9
shall survive and continue pursuant to the terms and conditions of this
Agreement following specific termination.

     19. Understanding. The Employee represents and agrees that she fully
understands her rights to discuss all aspects of this Agreement with her private
attorney, that to the extent she desires, she availed himself of this right,
that she has carefully read and fully understands all of the provisions of this
Agreement, that she is competent to execute this Agreement, that her decision to
execute this Agreement has not been obtained by any duress and that she freely
and voluntarily enters into this Agreement, and that she has read this document
in its entirety and fully understands the meaning, intent, and consequences of
this Agreement.

     20. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.

     21. Injunctive Relief. The Employee hereby agrees and acknowledges that in
the event of a breach or anticipatory breach of this Agreement by the Employee,
the Company may suffer irreparable harm and monetary damages alone would not
adequately compensate the Company. Accordingly, the Company will therefore be
entitled to injunctive relief to enforce this Agreement.


<PAGE>


     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and attested by its duly authorized officers, and the Employee has set her hand,
all as of the day and year first above written.

ATTEST:                                         SAC TECHNOLOGIES, INC.



__________________________                      By:_____________________________

                                                   Name:________________________

                                                   Title:_______________________


WITNESS:                                        EMPLOYEE


__________________________                      ________________________________
                                                Mira LaCous

                                                ________________________________
                                                Date