**Exhibit10.86**

** **

**EXECUTION COPY**

 

**INTERACT911 MOBILE SYSTEMS, INC.**

** **

**GUARANTEEDSECURED PROMISSORY NOTE**

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THIS NOTE HAS NOT BEEN REGISTERED UNDER THESECURITIES ACT OF 1933 OR QUALIFIED UNDER ANY OTHER APPLICABLE SECURITIESLAWS.  THIS NOTE MAY NOT BETRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE MAKER IS SATISFIEDTHAT SUCH DISPOSITION DOES NOT VIOLATE APPLICABLE SECURITIES LAWS.  ANY TRANSFEREE OF THIS NOTE SHALL BE BOUND BYTHE PROVISIONS OF THE ASSET PURCHASE AGREEMENT, DATED AUGUST       ,2009, AMONG MAKER AND PAYEE, COPIES OF WHICH ARE ON FILE AT THE OFFICE OFMAKER.

 
| $4,000,000 | December     , 2009 |
|------------|----------------------------------------------|
|       | Winston-Salem, North Carolina                |

 

FOR VALUE RECEIVED, the undersigned, InterAct911Mobile Systems, Inc., a Delaware corporation (“**Maker**”),promises to pay to the order of BIO-key International, Inc., a Delawarecorporation (“**Payee**”), its successors andassigns, the principal sum of Four Million Dollars ($4,000,000) in three annualinstallments, as follows:  (1) OneMillion Three Hundred Thirty-Four Thousand Dollars ($1,334,000) on the firstanniversary of the date hereof, (2) One Million Three Hundred Thirty-ThreeThousand Dollars ($1,333,000) on the second anniversary of the date hereof, and(3) One Million Three Hundred Thirty-Three Thousand Dollars ($1,333,000)on the third anniversary of the date hereof, together with interest from thedate hereof on the principal sum from time to time outstanding at the rateprovided for below.

 

The principal amount of this Note shall bearinterest at a rate per annum equal to six percent (6%), compoundedannually.  Interest shall be payablequarterly in arrears in cash on January 1, April 1, July 1 and October 1of each year, commencing January 1, 2010. All payments hereunder shall be applied first to accrued interest andthen to the unpaid principal balance hereof in the inverse order of maturity.

 

This Note may be prepaid in whole or in part at anytime without premium or penalty.  Partialprepayments shall be applied to unpaid installments of principal to become duehereunder in the inverse order of their maturity.  All amounts not paid when due under this Noteshall bear interest until paid at a rate of twelve percent (12%) per year orthe maximum rate allowed by law, whichever is less.  Such interest shall be immediately due andpayable.

 

This Note is issued pursuant to, and is entitled tothe benefits of and subject to the terms and provisions of, that certain AssetPurchase Agreement, dated as of August 13, 2009 (as amended, restated,supplemented or otherwise modified from time to time, the “**AssetPurchase Agreement**”) by and between Maker and Payee.  All capitalized terms used herein withoutdefinition shall have the meanings given to them in the Asset PurchaseAgreement.  This Note is secured by theIP Security Agreement.

 

For purposes of this Note, an “**Event ofDefault**” shall be deemed to have occurred if:

 

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(a)           Makershall fail to pay any installment of principal or interest due to Payeehereunder within three (3) Business Days of the date due;

 

(b)           aChange of Control occurs;

 

(c)           Makershall (i) have entered involuntarily against it an order for relief underthe United States Bankruptcy Code, as amended, (ii) not pay, or admit inwriting its inability to pay, its debts generally as they become due, (iii) makea general assignment for the benefit of creditors, (iv) apply for, seek,consent to or acquiesce in, the appointment of a receiver, custodian, trustee,examiner, liquidator or similar official for it or any substantial part of itsproperty, (v) institute any proceeding seeking to have entered against itan order for relief under the United States Bankruptcy Code, as amended, toadjudicate it insolvent, or seeking dissolution, winding up, liquidation,reorganization, arrangement, adjustment or composition of it or its debts underany law relating to bankruptcy, insolvency or reorganization or relief ofdebtors or fail to file an answer or other pleading denying the materialallegations of any such proceeding filed against it, (vi) take any actionauthorizing of any matter described in parts (c)(i) through (c)(v) above,or (vii) fail to contest in good faith any appointment or proceedingdescribed in part (d) below;

 

(d)           acustodian, receiver, trustee, examiner, liquidator or similar official shall beappointed for Maker, or any substantial part of any of its property, or aproceeding described in part (c)(v) above shall be instituted againstMaker;

 

(e)           Makershall be dissolved or liquidated;

 

(f)            Makershall complete an underwritten public offering of its securities under theSecurities Act of 1933, as amended;

 

(g)           Makershall receive proceeds from equity capital financings after the date hereofthat collectively exceed Twenty Million Dollars ($20,000,000); or

 

(h)           thisNote or any of the documents contemplated hereby shall for any reason not be orshall cease to be in full force and effect or are declared to be null and void,or the Note shall for any reason fail to create a valid and perfected firstpriority lien in favor of the Payee in the Collateral (as defined in the IPSecurity Agreement) purported to be covered by the IP Security Agreement exceptas expressly permitted by the terms thereof, or Maker takes any action for thepurpose of terminating, repudiating or rescinding the Note or any document executedin connection herewith by it or any of its obligations hereunder or thereunder.

 

As used herein, “**Change of Control**” means (i) any merger, consolidation,share exchange, business combination, issuance of securities, acquisition ofsecurities, tender offer, exchange offer or other similar transaction (A) inwhich Maker is a constituent corporation, (B) in which a Person or “group”(as defined in the Securities Exchange Act of 1934, as amended, and the rules promulgatedthereunder) of Persons directly or indirectly acquires beneficial or recordownership of securities representing more than 50% of the outstanding votingsecurities of Maker, or (C) in which Maker issues securities representingmore than 50% of the outstanding securities of any class of voting securitiesof Maker or (ii) any sale, lease, exchange, transfer, license, acquisition

 

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or disposition of any assetsthat constitute more than 50% of the assets of Maker on a consolidated basis.

 

Upon the occurrence of an Event of Default, Payeemay, at its option, upon written notice to Maker, declare the entire amount ofunpaid principal of this Note, together with any accrued and unpaid interestthereon, immediately due and payable; provided, that if an Event ofDefault of the type described in parts (b), (c) or (d) above hasoccurred, the entire amount of unpaid principal of this Note, together with anyaccrued and unpaid interest thereon, shall become immediately due and payablewithout any action on the part of Payee, and Maker shall immediately pay toPayee all amounts due and payable with respect to such outstanding principalamount, together with all accrued interest thereon.  No remedy herein conferred upon Payee isintended to be exclusive of any other remedy, and each and every such remedyshall be cumulative and shall be in addition to every other remedy givenhereunder or now or hereafter existing at law or in equity or by statute orotherwise.

 

If this Note is not paid at maturity, whether byacceleration or otherwise, Maker shall pay all costs and expenses of collectionand enforcement, including court costs and reasonable attorneys’ fees.

 

Payments of principal and interest on this Noteshall be made in such coin or currency of the United States of America as ofthe time of payment shall be legal tender for public and private debts andshall be made to Payee at 33349 Highway 138, Wall, New Jersey 07719 or at suchother place as the holder hereof may from time to time in writing direct.

 

All notices, claims, demands and othercommunications given or delivered under this Note shall be in writing and shallbe delivered in accordance with the Asset Purchase Agreement.

 

This Note may not be negotiated, transferred,pledged or assigned by Payee without the written consent of Maker, whichconsent shall not be unreasonably withheld or delayed.

 

Each party signing or endorsing this Note waivespresentment, demand, protest, notice of dishonor and all other demands andnotices in connection with the delivery acceptance, performance or enforcementof this Note to the extent permitted by applicable law.

 

Upon receipt of evidence satisfactory to the Makerof the loss, theft, destruction or mutilation of this Note and, in the case ofany such loss, theft or destruction, upon delivery of indemnity reasonablysatisfactory to the Maker, or in case of such mutilation, upon surrender andcancellation of this Note, the Maker will issue a new note, of like tenor, inlieu, and dated the date, of such lost, stolen, destroyed or mutilated Note.

 

This Note shall be governed by the laws of the Stateof Delaware.

 

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IN WITNESS WHEREOF, the undersigned has caused thisNote to be executed as of the date first written above.

 
|      | InterAct911 Mobile Systems, Inc. |
|-----------|---------------------------------------|
|      |                                  |
|      | By:                                   |   |   |
|      |                                  | President |   |
|      |                                  |
|      |                                  |
| ATTEST:   |                                  |
|      |                                  |
|      |                                  |
|      |                                  |
| Secretary |                                  |

 

**SIGNATUREPAGE TO PROMISSORY NOTE**

 

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**GUARANTY**

 

FOR VALUE RECEIVED, each of InterAct911 Corporation,a Delaware corporation, and SilkRoad Equity LLC, a Delaware limited liabilitycompany (each a “**Guarantor**”), hereby irrevocablyand unconditionally guarantees to the holder of the Note upon which thisGuaranty is endorsed, the due and punctual payment of the principal of andinterest (including any additional interest required to be paid according tothe terms of said Note) on this Note as well as all costs and expenses ofcollection and enforcement, when and as the same shall become due and payable,all in accordance with the terms of the Note.

 

Each Guarantor hereby agrees that its obligationshereunder shall be unconditional, irrespective of the validity, regularity orenforceability of the Note; the absence of any action to enforce the same; anywaiver or consent by the holder of the Note with respect to any provisionsthereof; any dispute, claim, counterclaim, defense or other right which theGuarantor may have to assert against the Payee; or any other circumstance whichmight otherwise constitute a legal or equitable discharge or defense of aguarantor.  Each Guarantor hereby waivesdiligence, presentment, demand of payment, filing of claims with a court in theevent of insolvency or bankruptcy of the Maker, any right to require aproceeding first against the Maker, protest, notice and all demands whatsoever andcovenants that this Guaranty will not be discharged, except by completeperformance of the obligations contained in the Note and in this Guaranty.

 

Each Guarantor hereby certifies and warrants thatall acts, conditions and things required to be done and performed and to havehappened precedent to the creation and issuance of this Guaranty to constitutethe same, the valid, binding and enforceable obligation of the Guarantor havebeen done and performed in due compliance with all applicable laws.  This Guaranty shall be governed by andconstrued in accordance with the laws of the State of Delaware.

 

IN WITNESS WHEREOF, each of the undersigned hascaused this Guaranty to be executed as of the         day of December, 2009 in its name by a person thereunto duly authorized.

 
|      |   | InterAct911  Corporation |
|-----------|--------|--------------------------|
|      |   |                     |
|      |   |                     |
|      |   | By:                      |   |
| ATTEST:   |   |                     |
|      |   |                     |
|      |   |                     |
| Secretary |   |                     |
|      |   |                     |
|      |   | SilkRoad  Equity, LLC    |
|      |   |                     |
|      |   |                     |
|      |   | By:                      |   |
| ATTEST:   |   |                     |
|      |   |                     |
|      |   |                     |

 

**SIGNATUREPAGE TO GUARANTY**

 

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