**Exhibit 10.14**

 

**AMENDMENT NO. 1TO**

**SUBORDINATEDSECURED PROMISSORY NOTE**

 

This Amendment No. 1 to SubordinatedSecured Promissory Note (the “Amendment”) is entered into by and amongBIO-key International, Inc., a Delaware corporation (“BIO-key”), PublicSafety Group, Inc., a Delaware corporation (“PSG” and, togetherwith BIO-key, the “Makers”), and Aether Systems, Inc., a Delawarecorporation (“Aether”), and is effective as of the 23rd day of January,2006.

 

WHEREAS, the Makers issued a SubordinatedSecured Convertible Note to Aether on September 30, 2004 in the aggregateoriginal principal amount of $6,884,588 (the “Note”; all capitalizedterms used herein without definition shall have the meanings set forth in theNote)

 

WHEREAS, the Makers have received consent toamend the Note from Laurus Master Fund, Ltd. (“Laurus”) as required by Section 5.3of that certain Intercreditor Agreement by and among Laurus, Aether, BIO-keyand PSG dated as of September 30, 2004; and

 

WHEREAS, the parties now wish to amend the Noteas set forth in this Amendment.

 

NOW, THEREFORE, in consideration of themutual promises set forth herein, and for other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the parties hereby agree as follows:

 

1.                                       MaximumPrincipal Amount. The Note is hereby amended by deleting all referencestherein to “$6,884,588”, and replacing them with “$7,884,588”.

 

2.                                       InterestPayments. No interest shall accrue on the Note following the date of thisAmendment with respect to amounts in excess of $6,884,588, unless and only tothe extent that BIO-key receives payment from Aether pursuant to paragraph 2 ofthe letter agreement dated as of January    , 2006 by andbetween BIO-key and Aether (the “Letter Agreement”).

 

3.                                       Extension ofHamilton LC.

 

(a)                                  IfAether, in its sole discretion, agrees to extend the Hamilton LC beyond December 31,2006 and to extend the payment date under the Note to correspond to suchextension, then BIO-key hereby agrees to pay Aether a letter of credit feeequal to 2% of the amount of the Hamilton LC (the “LC Extension Fee”),which shall be payable on the effective date of such extension by Aether. IfAether should decide to extend the Hamilton LC for more than six months (eitherin a single extension or as a result of multiple extensions), an additional LCExtension Fee will be due and payable on each six-month anniversary of suchextension period following December 31, 2006, and each LC Extension Feeshall be deemed earned when due and shall not be subject to any pro-ration orreduction if the Hamilton LC or the Note is terminated, expires, is drawn uponor is reduced in amount any time prior to six months following the date ofpayment of an LC Extension Fee. For the avoidance of doubt, the LC ExtensionFee shall be in addition to, and not in lieu of, the Hamilton Fees.Notwithstanding anything to the contrary in this paragraph 3(a), if (i) BIO-keyis able to reduce the amount outstanding under the Hamilton LC by at leastfifty-percent (50%) as of September 30, 2006 and (ii) BIO-key hastimely made all payments required under the Note and the Sublease in accordancewith the terms of such agreements, the initial LC Extension Fee shall be equalto 1% of the amount of the Hamilton LC (the “Reduced LC Extension Fee”).If BIO-key qualifies for the Reduced LC Extension Fee and if Aether shoulddecide to extend the Hamilton LC for more than six months (either in a singleextension or as a result of multiple extensions), BIO-key will be required topay the full LC Extension Fee on each six-month anniversary of such extensionperiod following December 31, 2006.

 

(b)                                 IfAether, in its sole discretion, agrees to extend the Hamilton LC beyond December 31,2006, the termination date of the Note shall be automatically extended to suchdate that is thirty (30) days following the extended expiration date of theHamilton LC. In the case of multiple extensions of the Hamilton LC by Aether,the termination date of the Note shall automatically be extended to such datethat is thirty (30) days following such extended expiration date of theHamilton LC.

 

(c)                                  Inno event shall the Note terminate less than thirty (30) days after theexpiration of the Hamilton LC.

 

4.                                       No OtherAmendments. Except as expressly set forth in this Amendment, no other termor provision of the Note is hereby amended or affected in any way, and the Noteshall remain in full force and effect after the date hereof.

 

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5.                                       Governing Law.This Amendment shall be governed by and construed in accordance with the lawsof the State of New York, without regard to principles of conflicts of laws.

 

6.                                       FacsimileSignatures; Counterparts. This Amendment may be executed by facsimilesignatures and in any number of counterparts, each of which shall be anoriginal, but all of which together shall constitute one instrument.

 

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