**Exhibit10.99**

December 29, 2006

BIO-key International, Inc.

300 Nickerson Road

Marlborough, MA 01752

Attention: Chief Financial Officer

Ladies and Gentlemen:

Reference is madeto (i) the Secured Convertible Note issued by BIO-key International, Inc., a Delawarecorporation (the “Borrower”), to Laurus Master Fund, Ltd. (“Laurus”)on September 29, 2004 in the aggregate original principal amount of $5,000,000(as amended, modified and/or supplemented from time to time, the “2004 Note”)pursuant to the Securities Purchase Agreement dated as of September 29, 2004 byand between the Borrower and Laurus (as amended, modified and/or supplementedfrom time to time, the “2004 Purchase Agreement”); and (ii) the SecuredConvertible Note issued by the Borrower to Laurus on June 8, 2005 in theaggregate original principal amount of $2,000,000 (as amended, modified and/orsupplemented from time to time, the “2005 Note,” and together with the2004 Note, the “Notes”) pursuant to the Securities Purchase Agreementdated as of June 8, 2005 by and between the Borrower and Laurus (as amended,modified and/or supplemented from time to time, the “2005 Purchase Agreement,”and together with the 2004 Purchase Agreement, the “Purchase Agreements”).  All capitalized terms not otherwise definedherein shall have the respective meanings given to them in the Notes.

Laurus and theBorrower desire to amend the Notes to provide that, as to the Principal Amountand all interest and fees thereon due and payable under each of the 2004 Noteand the 2005 Note for the month of January 2007 (collectively, the “JanuaryNotes Payment”), a portion of such January Notes Payment, consisting solelyof $150,000 in Principal Amount thereof, shall be paid in 568,182 registeredand effective shares of Common Stock. The balance of such January Notes Payment, consisting of all remainingPrincipal Amount thereof and all interest and fees thereon, shall be paid incash in the aggregate amount of $152,310.94. The parties hereto also desire to amend each of the Notes and thePurchase Agreements to irrevocably terminate all rights and obligations of anyparty hereto to convert all or any portion of the outstanding Principal Amountof the Notes, together with any interest and fees due thereon, into shares ofthe Borrower’s common stock, $.0001 par value per share (“Common Stock”),subject to the terms and conditions contained herein.  In addition, the Borrower has agreed to issue1,000,000 shares of Common Stock (the “Shares”) to Laurus, with certainregistration rights to be granted to Laurus with respect to the Shares, subjectto the terms and conditions contained herein.

NOW, THEREFORE, inconsideration of the mutual promises set forth herein, and for other good andvaluable consideration, the receipt and sufficiency of which are herebyacknowledged, the parties hereby agree as follows:

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1.                                       JanuaryNotes Payment. With respect to the Notes, the parties to this letteragreement hereby agree that (i) $150,000 of the January Notes Payment,consisting solely of Principal Amount thereof, shall be paid in 568,182registered and effective shares of Common Stock (the “Share Payment”)and (ii) the balance of the January Notes Payment, consisting of all remainingPrincipal Amount thereof and all interest and fees thereon, shall be paid incash in the aggregate amount of $152,310.94. Notwithstanding the foregoing, the limitations set forth in Section 3.2of each Note shall continue to apply.

2.                                       Terminationof Conversion Rights and Obligations. Subject to the terms and conditions hereof, the parties to this letteragreement hereby agree that as of the date hereof, except as may be necessaryto allow solely for the conversion of the Share Payment, each Note and eachPurchase Agreement is hereby amended as applicable to irrevocably terminate allrights and obligations of any party hereto to convert all or any portion of theoutstanding principal amount of the Notes, together with any interest and feesdue thereon, into shares of Common Stock.

3.                                       Issuanceof Shares.

(a)                                  TheBorrower will issue the Shares to Laurus, upon at least 61 days’ prior writtennotice delivered by Laurus to the Borrower, in exchange for the fullsatisfaction of all of the Borrower’s default interest obligations to Laurusexisting as of the date hereof, which obligations are hereby acknowledged to beequal to $622,764.21, that have been incurred by the Borrower as a result ofany Event of Default caused by the failure of the Borrower’s registrationstatement (Registration No. 333-126492) to be declared effective by theSecurities and Exchange Commission (the “SEC”) on or prior to theEffectiveness Date under the Registration Rights Agreement dated as of June 8,2005 by and between the Borrower and Laurus and the Registration RightsAgreement dated as of May 31, 2005 by and among the Borrower, The Shaar Fund,Ltd. and the other Purchasers party thereto, in each case as amended, modifiedand/or supplemented from time to time. Laurus further acknowledges and agrees that no such default obligationsshall continue to accrue from and after the date hereof solely with respect toany such existing Event of Default.  TheBorrower shall deliver to Laurus an original, newly issued stock certificateevidencing the Shares within five business days after the date of suchissuance.  Prior to such issuance, theparties acknowledge and agree that Laurus is not a beneficial owner, as definedby Rule 13d-3 of the Securities Exchange Act of 1934 (the “Exchange Act”),of any of the Shares.

(b)                                 Thisletter agreement, including but not limited to the issuance of securitiescontemplated hereunder (the “Securities”), is made with Laurus inreliance upon Laurus’ representation to the Borrower, which by Laurus’execution of this letter agreement, Laurus hereby confirms, that the Securitiesto be acquired by Laurus will be acquired for investment for Laurus’ ownaccount, not as a nominee or agent, and not with a view to the resale ordistribution of any part thereof, and that Laurus has no present intention ofselling, granting any participation in, or otherwise distributing thesame.  By executing this letteragreement, Laurus further represents that Laurus does not presently have anycontract, undertaking, agreement or arrangement with any person to sell, transferor grant participations to such person or to any third person, with respect toany of the Securities.  Laurus has notbeen formed for the specific purpose of acquiring the Securities.  Laurus agrees and 

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acknowledges that it has had an opportunity to discussthe Borrower’s business, management, financial affairs and the terms andconditions of the offering of the Securities with the Borrower’smanagement.  Laurus understands that theSecurities have not been, and will not be, registered under the Securities Actof 1933, as amended (the “Securities Act”), by reason of a specificexemption from the registration provisions of the Securities Act which dependsupon, among other things, the bona fide nature of the investment intent and theaccuracy of Laurus’ representations as expressed herein.  Laurus understands that the Securities are “restrictedsecurities” under applicable U.S. federal and state securities laws and that,pursuant to these laws, Laurus must hold the****Securitiesindefinitely unless they are registered with the SEC and qualified by stateauthorities, or an exemption from such registration and qualificationrequirements is available.  Laurus herebyrepresents and warrants to the Borrower that Laurus is an “accredited investor”as defined in Rule 501(a) of Regulation D promulgated under the Securities Actand has knowledge and experience in financial and business matters such that itis capable of evaluating the merits and risks of the investment to be madehereunder.  Laurus acknowledges that theBorrower has no obligation to register or qualify the Securities for resaleexcept as is otherwise set forth in this letter agreement.  Laurus further acknowledges that if anexemption from registration or qualification is available, it may be conditionedon various requirements including, but not limited to, the time and manner ofsale, the holding period for the Securities, and on requirements relating tothe Borrower which are outside of Laurus’ control, and which the Borrower isunder no obligation**and may not beable to satisfy.

(c)                                  Laurusunderstands that the Shares shall bear substantially the following legend:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOTBEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEENACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALEOR DISTRIBUTION THEREOF.  THESE SHARESMAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED WITHOUT AN EFFECTIVEREGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORMSATISFACTORY TO THE BORROWER THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THESECURITIES ACT OF 1933, AS AMENDED.”

Certificatesevidencing the Shares shall not be required to contain the legend set forthabove or any other legend (i) while a registration statement covering theresale of such Shares is effective under the Securities Act; provided that theholder thereof covenants that in connection with each sale of such securities,a copy of the final prospectus that forms a part of such registration statementwill be delivered in accordance with the provisions of Section 5(b)(2) of theSecurities Act, and the rules and regulations promulgated thereunder, or (ii)following any sale of such Shares pursuant to Rule 144 under the SecuritiesAct, or (iii) if such Shares are eligible for sale under Rule 144(k) under theSecurities Act, or (iv) if such legend is not required under applicablerequirements of the Securities Act (including judicial interpretations andpronouncements issued by the Staff of the SEC). The Borrower shall cause its counsel to issue the legal opinion topermit the removal of the legend as permitted in the immediately precedingsentence to the Borrower’s transfer agent on the effective date of 

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theregistration statement covering the resale of the Shares.  Following the effective date of suchregistration statement or at such earlier time as a legend is no longerrequired for the Shares, the Borrower will no later than three trading daysfollowing the delivery by Laurus to the Borrower or the Borrower’s transferagent of a legended certificate representing such Shares, deliver or cause tobe delivered to Laurus a certificate representing such Shares that is free fromall restrictive and other legends.

4.                                       RegistrationRights.  If the Borrower proposes toregister (including, for this purpose, a registration effected by the Borrowerfor stockholders other than Laurus) any of its stock or other securities underthe Securities Act in connection with any public offering of such securitiessolely for cash, the Borrower shall, at such time, promptly give Laurus noticeof such registration.  Upon the requestof Laurus given within 20 days after such notice is given by the Borrower, theBorrower shall cause to be registered all of the Shares that Laurus hasrequested to be included in such registration. The Borrower shall have the right to terminate or withdraw anyregistration initiated by it under this Section 4 before the effective date ofsuch registration, whether or not Laurus has elected to include the Shares insuch registration.  The expenses of suchwithdrawn registration shall be borne by the Borrower.

5.                                       Conditionto Effectiveness.  Unless waived inwriting by Laurus, the effectiveness of Sections 2 through 4 of this letteragreement is subject to the Borrower’s receipt of at least $2,000,000 in grossproceeds from the new issuance of its equity securities to one or moreinvestors within ninety (90) days from the date hereof.

6.                                       NoOther Amendments; Further Assurances. Except as expressly set forth in this letter agreement, no other term orprovision of any of the Notes or the Purchase Agreements is hereby amended oraffected in any way, and the Notes and the Purchase Agreements shall remain infull force and effect after the date hereof. This letter agreement, together with the Notes and the PurchaseAgreements, embodies the entire agreement and understanding among the partieshereto with respect to the subject matter hereof and supersedes all prioragreements and understandings relating to such subject matter.  The parties hereto agree to execute all such further instruments and agreements asmay be necessary in order to more fully and effectively consummate thetransactions contemplated hereby.

7.                                       GoverningLaw.  This letter agreement shall begoverned by and construed in accordance with the laws of the State of New York,without regard to principles of conflicts of laws.

8.                                       FacsimileSignatures; Counterparts.  Thisletter agreement may be executed by facsimile signatures and in any number ofcounterparts, each of which shall be an original, but all of which togethershall constitute one instrument.

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IN WITNESSWHEREOF, each of the undersigned has executed this letter agreement as a sealedinstrument as of the date first written above.
|   | LAURUS MASTER FUND, LTD. |
|--------|--------------------------|
|   |                     |
|   | By:                      |   |
|   | Name:                    |
|   | Title:                   |

 

 

Acknowledged andAgreed:

BIO-KEYINTERNATIONAL, INC.
| By:    |   |   |
|--------|--------|--------|
| Name:  |
| Title: |

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