Document:

EXHIBIT 10.18

                          REGISTRATION RIGHTS AGREEMENT

         THIS REGISTRATION RIGHTS AGREEMENT, dated March 3, 2004 (this
"Agreement"), is made by and between BIO-KEY INTERNATIONAL, INC., a Minnesota
corporation, with headquarters located at 1285 Corporate Center Drive, Suite
175, Eagan, Minnesota 55121 (the "Company"), and each entity named on a
signature page hereto (each, an "Investor") (each agreement with an Investor
being deemed a separate and independent agreement between the Company and such
Investor, except that each Investor acknowledges and consents to the rights
granted to each other Investor under such agreement).

                              W I T N E S S E T H:

         WHEREAS, upon the terms and subject to the conditions of (i) the
Securities Exchange Agreement, dated as of a date even herewith, between the
Investor and the Company (the "Exchange Agreement"), and (ii) the Preferred
Stock (terms not otherwise defined herein shall have the meanings ascribed to
them in the Exchange Agreement), the Company has agreed to issue to the Investor
certain convertible securities of the Company which are convertible into shares
of the Company's common stock, par value $.01 per share (the "Common Stock");
and

         WHEREAS, to induce the Investor to execute and deliver the Exchange
Agreement the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "Securities
Act"), with respect to the Common Stock; and

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investor hereby agree as follows:

         1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:

            (a) "Investor" means the Investor and any permitted transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof and who holds Common Stock, Warrants or
Registrable Securities.

            (b) "Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (ii) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.
<PAGE>

            (c) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").

            (d) "Registrable Securities" means (i) the Common Stock issuable
pursuant to conversion of the Preferred Stock or dividends issued thereon, (ii)
the Common Stock issuable pursuant to conversion of the Company's Series B 9%
Convertible Preferred Stock or dividends issued thereon, (iii) the Common Stock
issuable upon exercise of Four Million (4,000,000) warrants expiring November
26, 2006, (iv) the Common Stock issuable upon exercise of One Hundred and Thirty
One Thousand, Two Hundred and Fifty (131,250) warrants expiring June 30, 2004
and (v) the Common Stock issuable upon conversion of that certain Secured Note
in the principal amount of up to $2,125,000.00, dated March 3, 2004.

            (e) "Registration Statement" means a registration statement of the
Company under the Securities Act other than registration statements on SEC Forms
S-8, S-4 or any similar or successor forms.

         2. REGISTRATION.

            (a) INCIDENTAL REGISTRATION.

                  (i) Right to Include Common Stock. If the Company at any time
         proposes to register any of its shares of Common Stock or other
         securities convertible or exchangeable into Common Stock under the
         Securities Act, whether or not for sale for its own account, the
         Company will given written notice at least thirty (30) days prior to
         the anticipated effective date of the registration statement filed or
         to be filed in connection with such registration to all holders of
         Registrable Securities of its intention to issue shares of its Common
         Stock under the Securities Act and of such holders' rights under this
         Section 2(a). Upon the written request of any such holders of
         Registrable Securities made within fifteen (15) days of the date of the
         foregoing notice from the Company (the "Incidental Registration
         Inclusion Date") (which request shall specify the aggregate number of
         the Registrable Securities requested to be registered and will also
         specify the intended method of disposition thereof), the Company will
         effect the registration under the Securities Act of all Registrable
         Securities which the Company has been so requested to register by the
         holders thereof (an "Incidental Registration"), to the extent required
         to permit the public disposition (in accordance with such intended
         methods thereof) of the Registrable Securities to be so registered;
         PROVIDED that (i) if, any time after giving written notice of its
         intention to register shares of Common Stock and prior to the effective
         date of the Registration Statement filed in connection with such
         registration, the Company shall determine for any reason not to
         register the Common Stock, the Company shall give written notice of
         such determination to each holder of Registrable Securities and,
         thereupon, shall be relieved of its obligation to register any
         Registrable Securities in connection with such registration (but not
         from its obligation to pay the Registration Expenses in connection
         therewith); and (ii) if a registration requested pursuant to this
         Section 2(a) shall involve an underwritten public offering, any holder
         of Registrable Securities requesting to be included in such
         registration may elect, in writing at least twenty-five (25) days prior
         to the effective date of the Registration Statement filed in
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         connection with such registration, not to register such securities in
         connection with such registration.

                  (ii) Priority in Incidental Registrations. If a registration
         pursuant to Section 2(a)(i) involves an underwritten offering and the
         managing underwriter advises the Company in writing that, in its
         opinion, the total number of shares of Common Stock to be included in
         such registration, including the Registrable Securities requested to be
         included pursuant to this Section 2(a), exceeds the maximum number of
         shares of Common Stock specified by the managing underwriter that may
         be distributed without materially adversely affecting the price, timing
         or distribution of such shares of Common Stock, then the Company shall
         include in such registration only such maximum number of Registrable
         Securities, which, in the reasonable opinion of such underwriter, can
         be sold in the following order of priority: (A) first, all of the
         shares of Common Stock that the Company proposes to sell for its own
         account, if any; (B) second, all of the shares of Common Stock being
         registered by holder(s) of Registrable Securities pursuant to a Demand
         Registration; and (C) third, the Registrable Securities of the
         holder(s) of Registrable Securities requested and permitted to be
         included in such Incidental Registration. To the extent that shares of
         Common Stock to be included in the Incidental Registration must be
         allocated among the holder(s) of Registrable Securities pursuant to
         clause (B) above, such units shall be allocated pro rata among the
         holder(s) of Registrable Securities based on the number of shares of
         Common Stock that such holder(s) of Registrable Securities shall have
         requested to be included therein. To the extent shares of that Common
         Stock to be included in the Incidental Registration must be allocated
         among the holders of Registrable Securities pursuant to clause (C)
         above, such units shall be allocated pro rata among the holder(s) of
         Registrable Securities based on the number of shares of Common Stock
         that such holder(s) of Registrable Securities shall have requested to
         be included therein.

                  (iii) Selection of Underwriters. If any Incidental
         Registration is an underwritten offering, the Company will have the
         right to select the investment banker(s) for the offering, which
         investment banker(s) will be nationally recognized, subject to the
         approval by the holders of a majority of the Registrable Securities,
         which will not be unreasonably withheld.

            (b) DEMAND REGISTRATION.

                  (i) Right to Demand Registration. Subject to Section 2(b)(ii)
         below, the holders of at least twenty (20%) percent (or such lesser
         amount of Registrable Securities then held by all holders of
         Registrable Securities in the aggregate) of the aggregate Registrable
         Securities shall be entitled to make written requests ("Demand
         Registration Requests") at any time and from time to time, to the
         Company for registration with the SEC under and in accordance with the
         provisions of the Securities Act (including, but not limited to,
         registrations under Rule 415 promulgated under the Securities Act) (a
         "Demand Registration") (which Demand Registration Request shall specify
         the intended number of Registrable Securities to be disposed of by such
         holders); PROVIDED that (i) the Company may, if the Board of Directors
         so determines in the exercise of its reasonable judgment, that due to a
         pending or contemplated acquisition or disposition or public offering
         it would be inadvisable to effect such Demand Registration at such
         time, defer such Demand Registration for a single period not to exceed
         ninety (90) days.) Within ten (10) days after receipt of the
<PAGE>

         Demand Registration Request, the Company will serve written notice of
         such Demand Registration Request to all holders of Registrable
         Securities and, subject to paragraph (ii) below, the Company will
         include in such registration all Registrable Securities of such holders
         with respect to which the Company has received written requests for
         inclusion therein from such holders within fifteen (15) business days
         after duly given to the applicable holder of the notice from the
         Company (such date, the "Demand Registration Inclusion Date"). All
         requests made pursuant to this paragraph 2(b) will specify the
         aggregate number of the Registrable Securities requested to be
         registered.

                  (ii) Priority in Demand Registrations. Except for shares of
         Common Stock issued upon exercise of options issued to employees and
         consultants of the Company or in accordance with the existing
         registration rights of the holders listed on Schedule A attached
         hereto, the Company will not include in any Demand Registration any
         securities which are not Registrable Securities without the prior
         written consent of at least a majority of the Registrable Securities,
         included in such registration. If any of the Registrable Securities
         proposed to be registered pursuant to a Demand Registration are to be
         sold in a firm commitment underwritten offering and the managing
         underwriter of a Demand Registration advise the Company and the holders
         of such Registrable Securities in writing that in its reasonable
         opinion the number of shares of Common Stock proposed to be sold in
         such Demand Registration exceeds the maximum number of shares of stock
         specified by the managing underwriter that may be distributed without
         materially adversely affecting the price, timing or distribution of the
         shares of Common Stock, the Company shall include in such registration
         only such maximum number of Registrable Securities which, in the
         reasonable opinion of such underwriter can be sold in the following
         order of priority: (A) first, the number of Registrable Securities
         requested to be included in such registration, pro rata if necessary;
         (B) second, the number of shares of Common Stock requested to be
         included in such registration by the Company and (C) third, any other
         shares of Common Stock requested to be included by employees or
         consultants or the holders listed on Schedule A attached hereto.

                  (iii) Selection of Underwriters. In the case of a Demand
         Registration for an underwritten offering, the party requesting such
         Demand Registration (and if more than one party requests such Demand
         Registration, the party requesting inclusion of the greater number of
         Registrable Securities in such offering) will have the right to select
         the investment banker(s), which investment banker(s) will be nationally
         recognized, subject to the Company's approval, which will not be
         unreasonably withheld.

         3. OBLIGATIONS OF THE COMPANY. In connection with the registration of
the Registrable Securities, the Company shall do each of the following.

            (a) Prepare promptly, and file with the SEC by a date thirty (30)
days following the Incidental Registration Inclusion Date or Demand Registration
Inclusion Date, as applicable (the "Required Filing Date"), a Registration
Statement with respect to not less than the number of Registrable Securities
provided in Section 2(a) or 2(b) above, as applicable, and thereafter use its
best efforts to cause such Registration Statement relating to Registrable
Securities to become effective as soon as possible thereafter and keep the
Registration Statement effective at all times during the period (the
"Registration Period") continuing until the earliest of (i) the date that is
three (3) years after the last day of the calendar month following the month in
which the Effective Date
<PAGE>

occurs, (ii) the date when the Investors may sell all Registrable Securities
under Rule 144 or (iii) the date the Investors no longer own any of the
Registrable Securities, which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading;

            (b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;

            (c) The Company shall permit a single firm of counsel designated by
the Investors to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time (but not less than five (5)
business days) prior to their filing with the SEC, and not file any document in
a form to which such counsel reasonably objects. If such counsel objects, the
Required Filing Date shall be extended by the number of days from the date the
Registration Statement was delivered to such counsel to the date such counsel no
longer objects.

            (d) Notify each Investor, such Investor's legal counsel identified
to the Company (which, until further notice, shall be deemed to be Meltzer,
Lippe & Goldstein, LLP, Attn: Ira R. Halperin, Esq. (the "Investor's Counsel")),
and any managing underwriter immediately (and, in the case of (i)(A) below, not
less than five (5) days prior to such filing) and (if requested by any such
Person) confirm such notice in writing no later than one (1) business day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) whenever the SEC notifies the Company whether there will be a "review" of
such Registration Statement; (C) whenever the Company receives (or a
representative of the Company receives on its behalf) any oral or written
comments from the SEC relating to a Registration Statement (copies or, in the
case of oral comments, summaries of such comments shall be promptly furnished by
the Company to the Investors); and (D) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or any other Federal or state governmental
authority for amendments or supplements to the Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the SEC of
any stop order suspending the effectiveness of the Registration Statement
covering any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) if at any time any of the representations or
warranties of the Company contained in any agreement (including any underwriting
agreement) contemplated hereby ceases to be true and correct in all material
respects; (v) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (vi) of the occurrence of
any event that to the best knowledge of the Company makes any statement made in
the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration

<PAGE>

Statement or the Prospectus, as the case may be, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. In addition, the
Company shall furnish the Investors with copies of all intended written
responses to the comments contemplated in clause (C) of this Section 3(d) not
later than three (3) business days in advance of the filing of such responses
with the SEC so that the Investors shall have the opportunity to comment
thereon.

            (e) Furnish to each Investor and such Investor's Counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;

            (f) As promptly as practicable after becoming aware thereof, notify
each Investor of the happening of any event of which the Company has knowledge,
as a result of which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to each Investor as such Investor may reasonably
request;

            (g) As promptly as practicable after becoming aware thereof, notify
each Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance by the SEC
of a Notice of Effectiveness or any notice of effectiveness or any stop order or
other suspension of the effectiveness of the Registration Statement at the
earliest possible time;

            (h) Use its reasonable efforts to secure and maintain the
designation of all the Registrable Securities covered by the Registration
Statement on the "OTC Bulletin Board Market" of the National Association of
Securities Dealers Automated Quotations System ("NASDAQ") within the meaning of
Rule 11Aa2-1 of the SEC under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the quotation of the Registrable Securities on the OTC
Bulletin Board Market.

            (i) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than three (3) days after the
effective date of the Registration Statement;

            (j) Cooperate with the Investors to facilitate the timely
preparation and delivery of certificates for the Registrable Securities to be
offered pursuant to the Registration Statement and enable such certificates for
the Registrable Securities to be in such denominations or amounts as the case
may be, as the Investors may reasonably request, and, within three (3) business
days after a Registration Statement which includes Registrable Securities is
ordered effective by the SEC, the

<PAGE>

Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an appropriate instruction and opinion of such counsel; and

         4. OBLIGATIONS OF THE INVESTORS. In connection with the registration of
the Registrable Securities, the Investors shall have the following obligations:

            (a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. At
least ten (10) days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;

            (b) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and

            (c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.

            (d) Notwithstanding the foregoing, if at any time or from time to
time after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing of the existence of a Potential Material
Event, the Investors shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a Potential
Material Event until such Investor receives written notice from the Company that
such Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; provided, however, that the
Company may not so suspend the right to such holders of Registrable Securities
for more than two twenty (20) business day periods in the aggregate during any
12-month period (the last date of such period being

<PAGE>

the "Restricted Sale Date") with at least a ten (10) business day interval
between such periods, during the periods the Registration Statement is required
to be in effect.

         5. EXPENSES OF REGISTRATION.

            (a) All reasonable expenses (other than underwriting discounts and
commissions of the Investor) incurred in connection with registrations, filings
or qualifications pursuant to this Agreement (the "Registration Expenses"),
including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company and a fee for a single counsel for the Investors (as a group and not
individually), which fee shall not exceed $3,500 for a registration statement
and $2,000 for each amendment thereto.

            (b) Neither the Company nor any of its subsidiaries has, as of the
date hereof, nor shall the Company nor any of its subsidiaries, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Investors in this Agreement
or otherwise conflicts with the provisions hereof. Except as set forth on
Schedule 5(b) hereto, neither the Company nor any of its subsidiaries has
previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person. Without limiting the generality
of the foregoing, without the written consent of the Investors holding a
majority of the Registrable Securities, the Company shall not grant to any
person the right to request the Company to register any securities of the
Company under the Securities Act unless the rights so granted are subject in all
respects to the prior rights in full of the Investors set forth herein, and are
not otherwise in conflict or inconsistent with the provisions of this Agreement.

         6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:

            (a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified Person" or
"Indemnified Party"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
the final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation under the Securities Act, the Exchange Act or any state
securities law (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations").

<PAGE>

Subject to clause (b) of this Section 6, the Company shall reimburse the
Investors, promptly as such expenses are incurred and are due and payable, for
any legal fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a) shall not (I) apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (II) be available to the extent such Claim is based on a failure of the
Investor to deliver or cause to be delivered the prospectus made available by
the Company or the failure to comply with the plan of distribution contained in
the prospectus; (III) apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld, or (IV) any violation or alleged
violation by an Indemnified Person of the Securities Act, the Exchange Act, any
state securities laws or any rule or regulation under the Securities Act, the
Exchange Act, or any state securities laws. Each Investor will indemnify the
Company and its officers, directors and agents (each, an "Indemnified Person" or
"Indemnified Party") against any claims arising out of or based upon a Violation
which occurs in reliance upon and in conformity with information furnished in
writing to the Company, by or on behalf of such Investor, expressly for use in
connection with the preparation of the Registration Statement, subject to such
limitations and conditions as are applicable to the Indemnification provided by
the Company in this Section 6. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.

            (b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be. In case any such action is brought against any Indemnified Person
or Indemnified Party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, assume the defense thereof, subject to the provisions herein stated
and after notice from the indemnifying party to such Indemnified Person or
Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified Person or Indemnified
Party under this Section 6 for any legal or other reasonable out-of-pocket
expenses subsequently incurred by such Indemnified Person or Indemnified Party
in connection with the defense thereof other than reasonable costs of
investigation, unless the indemnifying party shall not pursue the action to its
final conclusion. The Indemnified Person or Indemnified Party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and reasonable out-of-pocket expenses of such
counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the Indemnified Person or Indemnified Party. The failure to
deliver written notice to

<PAGE>

the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.

         7. CONTRIBUTION. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.

         8. REPORTS UNDER SECURITIES ACT AND EXCHANGE ACT. With a view to making
available to the Investors the benefits of Rule 144 promulgated under the
Securities Act or any other similar rule or regulation of the SEC that may at
any time permit the Investors to sell securities of the Company to the public
without registration ("Rule 144"), the Company agrees to:

            (a) make and keep public information available, as those terms are
understood and defined in Rule 144;

            (b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;

            (c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration; and

            (d) at the request of any Holder of Registrable Securities, upon
receipt from such Holder of a certificate certifying (i) that such Holder has
held such Registrable Securities for a period of not less than one (1) year and
(ii) as to all other matters and actions required under Rule 144, remove from
the stock certificate representing such Registrable Securities that portion of
any restrictive legend which relates to the registration provisions of the
Securities Act in order to permit the public sale of such Registrable
Securities, provided, however, counsel to Investor may provide such instructions
and opinion to the transfer agent regarding the removal of the restrictive
legend.

         9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the Registrable
Securities (or all or any portion of any

<PAGE>

unconverted Preferred Stock) only if: (a) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment, (b)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, and (d) at or before the time the Company received the written notice
contemplated by clause (b) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein.
In the event of any delay in filing or effectiveness of the Registration
Statement as a result of such assignment, the Company shall not be liable for
any damages arising from such delay.

         10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold a eighty (80%) percent
interest of the Registrable Securities. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the
Company.

         11. MISCELLANEOUS.

             (a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.

             (b) Notices required or permitted to be given hereunder shall be
given in the manner contemplated by the Exchange Agreement, (i) if to the
Company or to the Investor, to their respective address contemplated by the
Exchange agreement, and (iii) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company, or at such other address
as each such party furnishes by notice given in accordance with this Section
11(b).

             (c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

             (d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws, except to the extent that the Minnesota Business
Corporation Act would apply to the Internal Corporate Governance of the
Company.. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the City of New York or the state courts
of the State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on FORUM NON
COVENIENS, to the bringing of any such proceeding in such jurisdictions. To the
extent determined

<PAGE>

by such court, the Company shall reimburse the Buyer for any reasonable legal
fees and disbursements incurred by the Buyer in enforcement of or protection of
any of its rights under this Agreement.

             (e) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction. If any
such invalidity, unenforceability or illegality of a provision of this Agreement
becomes known or apparent to any of the parties hereto, the parties shall
negotiate promptly and in good faith in an attempt to make appropriate changes
and adjustments to such provision specifically and this Agreement generally to
achieve as closely as possible, consistent with applicable law, the intent and
spirit of such provision specifically and this Agreement generally.

             (f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.

             (g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.

             (h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.

             (i) This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.

             (j) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof. This Agreement may be amended only by an instrument in writing signed by
the party to be charged with enforcement thereof.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.

                                        COMPANY:

                                        BIO-KEY INTERNATIONAL, INC.

                                        By:    /s/ Gary Wendt
                                           ----------------------------------
                                        Name:  Gary Wendt
                                             ------------------------------
                                        Title: CFO
                                             ------------------------------

                                        INVESTOR:

                                        THE SHAAR FUND, LTD.

                                        By:    /s/
                                           ----------------------------------
                                        Name:  InterCaribbean Services Ltd.
                                             ------------------------------
                                        Title: Director
                                             ------------------------------

<PAGE>

                   SCHEDULE A TO REGISTRATION RIGHTS AGREEMENT
                   -------------------------------------------

1.       Warrants issued to CEO Cast, Inc. to purchase 400,000 shares of common
         stock.

2.       Warrants issued to Punk Zeigel, Inc. to purchase 25,000 shares of
         common stock.EXHIBIT 10.19

                       SECURED CONVERTIBLE PROMISSORY NOTE

         THIS NOTE HAS NOT BEEN REGISTERED WITH THE UNITED STATES
         SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
         COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933,
         AS AMENDED. THE NOTE MAY NOT BE OFFERED, RESOLD, PLEDGED OR
         TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO
         REGISTRATION THEREUNDER OR THE AVAILABILITY OF AN EXEMPTION
         THEREFROM.

No.      N-3                                                Up to US $ 2,125,000
         ---                                                --------------------

                           BIO-KEY INTERNATIONAL, INC.

                                      NOTE

         FOR VALUE RECEIVED, BIO-KEY INTERNATIONAL, INC., a Minnesota
corporation (the "Company"), promises to pay to THE SHAAR FUND LTD., the
registered holder hereof (the "Holder"), the principal sum of Two Million One
Hundred Twenty Five Thousand and 00/100 ($2,125,000) Dollars, or such lesser
amount as may have been advanced from time to time after the date hereof under
that certain Note Purchase Agreement dated January 27, 2003, as amended October
31, 2003, by and between the Company and Investor (the "Agreement"), and to pay
interest in arrears at the rate of 7% per annum on the outstanding principal
balance due hereunder. Accrual of interest shall commence on the first such
business day to occur after the date hereof and shall continue until payment in
full of the principal sum has been made or duly provided for on a 360 day basis.
The principal of, and interest on, this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, at the address last appearing on
the Note Register of the Company as designated in writing by the Holder from
time to time. The Company will pay the principal of and interest upon this Note,
less any amounts required by law to be deducted, to the registered holder of
this Note to such date and addressed to such holder at the last address
appearing on the Note Register. The forwarding of such check shall constitute a
payment of principal and interest hereunder and shall satisfy and discharge the
liability for principal and interest on this Note to the extent of the sum
represented by such check plus any amounts so deducted.

         Principal and interest hereunder shall be payable in a single payment
on October 1, 2005.
<PAGE>

         This Note is subject to the following additional provisions:

         1. (a) Intentionally omitted.

            (b) This Note is being issued pursuant to the Terms of the
Agreement. Terms not otherwise defined herein shall have the meanings ascribed
to them in the Agreement.

            (c) The obligation of the Company for payment of principal, interest
and all other sums hereunder is secured by Security Interest Provisions between
the Company and the Holder as set forth in the Annex to that certain Secured
Note of the Company dated November 26, 2001 issued to Holder in the principal
amount of $4,092,920 with the same force and effect as if annexed hereto and the
Company shall execute such documents and certificates as may be necessary in
respect thereof. The Company covenants that since November 26, 2001 it has not
granted any security interest in any assets or collateral to any person or
entity..

         2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Note any amounts required to be withheld
under the applicable provisions of the United States income tax laws or other
applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.

         3. This Note has been issued subject to investment representations of
the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and other
applicable state and foreign securities laws. In the event of any proposed
transfer of this Note, the Company may require, prior to issuance of a new Note
in the name of such other person, that it receive reasonable transfer
documentation including legal opinions that the issuance of the Note in such
other name does not and will not cause a violation of the Act or any applicable
state or foreign securities laws. Prior to due presentment for transfer of this
Note, the Company and any agent of the Company may treat the person in whose
name this Note is duly registered on the Company's Note Register as the owner
hereof for the purpose of receiving payment as herein provided and for all other
purposes, whether or not this Note be overdue, and neither the Company nor any
such agent shall be affected by notice to the contrary.

         4. No provision of this Note shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of, and
interest on, this Note at the time, place, and rate, and in the coin or
currency, herein prescribed. This Note is a direct obligation of the Company.

         5. A. In the event that, on or before June 30, 2004 (the "Financing
Date"), the Company completes a private placement of equity securities of the
Company (the

                                       2
<PAGE>

"Current Financing Securities") for an aggregate sale price of at least
$5,000,000 (the "Transaction"), upon the closing of the Transaction, some or all
of the principal of, or the interest due on, the Note, or both, shall, at the
option of the Holder, either (i) be converted into shares of Current Financing
Securities at a conversion price equal to the price per share at which the
Current Financing Securities are issued (such price subject to adjustment for
stock splits, stock dividends and the like), and on the additional terms and
conditions applicable generally to the Transaction, or (ii) immediately be paid
in cash.

            B. In lieu thereof, the Investor may, at its option and discretion,
at any time and from time to time, elect to convert some or all of the then
outstanding principal and interest of the Note into either (a) Common Stock of
the Company at a conversion price of $.75 per share (subject to adjustment set
forth below) (the "Common Conversion Price") or (b) shares of the Company's
Series C 7% Convertible Preferred Stock, $.01 par value per share (the "Series C
Preferred Stock"), at a conversion price (the "Preferred Conversion Price" and
together with the Common Conversion Price, the "Conversion Prices ") of $100.00
per share (subject to adjustment set forth below) by telecopying to the Company
an executed and completed Notice of Conversion in the form attached hereto as
Exhibit A. Conversion shall be deemed to have been effected at on the date the
Notice of Conversion is telecopied and received by the Company and at such time
the rights of the Holder under this Note shall cease to the extent of such
conversion.

            C. (i) Notwithstanding any other provision hereof to the contrary,
the Company shall have the right to prepay, in whole or in part, the then
outstanding principal amount of the Note then held by the Holder for an amount
(the "Redemption Amount") equal to the sum of (a) the principal due under the
Note and (b) all accrued but unpaid interest thereon through the date the
Redemption Amount is paid to the Holder (the "Redemption Payment Date"), The
Company shall give at least fifteen (15) business days, but not more than twenty
(20) business days, written notice of such redemption to the Holder (the "Notice
of Redemption").

               (ii) With respect to any principal amount and interest for which
a Notice of Conversion is submitted to the Company prior to the Redemption
Payment Date, the Notice of Conversion shall take precedence and such principal
amount and interest shall be converted in accordance with the terms hereof.
Furthermore, in the event such Redemption Payment is not timely made, the Notice
of Redemption shall be null and void, and any rights of the Company to
thereafter redeem this Note shall be subject to the deposit of the Redemption
Amount, in escrow, with an attorney designated by the Holder , within 2 business
days of delivery of any Notice or Redemption .

            D. In case of any reclassification of the Series C Preferred Stock
and/or Common Stock, recapitalization, or like capital adjustment affecting the
Series C Preferred Stock and/or Common Stock (each, an "Adjustment"), the Common
Conversion Price and/or the Series C Conversion Price, as applicable, in effect
at the time of the effective date for such Adjustment shall be proportionally
adjusted so that the Holder of

                                       3
<PAGE>

this Note converted after such date shall be entitled to receive the aggregate
number and kind of shares which, if this Note had been converted by such Holder
immediately prior to such date, the Holder would have owned upon such conversion
and been entitled to received upon such Adjustment (and for such purposes the
Holder shall, to the extent relevant, be deemed to have converted this Note
immediately prior to the record date or the effective date, as the case may, for
the Adjustment).

            E. Conversion of this Note pursuant to Section 5B hereof may be
exercised, in whole or in part, by the Holder by telecopying an executed and
completed notice of conversion. Interest accrued or accruing from the Issue Date
to the date of conversion shall, at the option of the Company, be paid in cash
or shares of Common Stock or Series C Preferred Stock, as applicable, upon
conversion at the Common Conversion Price or Preferred Conversion Price, as
applicable. No fractional shares of Series C Preferred Stock or Common Stock or
scrip representing fractions of shares will be issued on conversion, but the
number of shares issuable shall be rounded to the nearest whole share. The date
on which notice of conversion is given (the "Conversion Date") shall be deemed
to be the date on which the Holder faxes the conversion notice ("Notice of
Conversion"), substantially in the form annexed hereto as Exhibit A, duly
executed, to the Company. Facsimile delivery of the Notice of Conversion shall
be accepted by the Company at facsimile number (651) 687-0515; ATTN: Chief
Financial Officer. Certificates representing Series C Preferred Stock or Common
Stock, as applicable, upon conversion will be delivered within five (5) business
days (the "Delivery Date") from the date the Notice of Conversion is delivered
to the Company's transfer agent or the Company.

            F. From and after the date hereof, the Company shall have at all
times authorized and reserved for issuance, free from preemptive rights, shares
of Series C Preferred Stock and Common Stock sufficient to yield the number of
such shares issuable at conversion as may be required to satisfy the conversion
rights based on the Conversion Prices as in effect from time to time, pursuant
to the terms and conditions of the maximum principal mount of the Notes and
accrued interest to maturity.

            G. The Company understands that a delay in the issuance of the
shares of Common Stock or Series C Preferred Stock beyond the Delivery Date
could result in economic loss to the Buyer. As compensation to the Buyer for
such loss, the Company agrees to pay late payments to the Buyer for late
issuance of shares of Common Stock or Series C Preferred Stock upon Conversion
in accordance with the following schedule (where "No. Business Days Late" is
defined as the number of business days beyond seven (7) business days from
Delivery Date:

                                       4
<PAGE>

                                           Late Payment For Each
               No. of Business             $10,000 Principal Amount
               Days Late                   Being Converted

                 1                          $100
                 2                          $200
                 3                          $300
                 4                          $400
                 5                          $500
                 6                          $600
                 7                          $700
                 8                          $800
                 9                          $900
                 10                         $1,000
                 Greater than 10            $1,000+$200 for each Business
                                            Day Late beyond 10 days

The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Furthermore, in addition to any other remedies
which may be available to the Holder, in the event that the Company fails for
any reason to effect delivery of such shares of Series C Preferred or Common
Stock within five (5) business days after the Delivery Date, the Holder will be
entitled to revoke the relevant Notice of Conversion by delivering a notice to
such effect to the Company whereupon the Company and the Holder shall each be
restored to their respective positions immediately prior to delivery of such
Notice of Conversion.

            H. The Holder shall not have the right to convert any portion of
this Note to the extent that the issuance to the Holder of Common Shares upon
such conversion would result in the Holder being deemed the "beneficial owner"
of 4.99% or more of the then outstanding Common Shares within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934, as amended.(but without
giving effect to the unconverted portion of this Note.

         6. The Holder of the Note, by acceptance hereof, agrees that this Note
is being acquired for investment and that such Holder will not offer, sell or
otherwise dispose of this Note except under circumstances which will not result
in a violation of the Act or any applicable state Blue Sky or foreign laws or
similar laws relating to the sale of securities. The exercise by Holder of or
failure to so exercise any authority granted herein shall in no manner affect
Company's liability to Holder, and provided, further, that Holder shall be under
no obligation or duty to exercise any of the powers hereby conferred upon them
and they shall be without liability for any act or failure to act in connection
with the collection of, or the preservation of, any rights hereunder.

                                       5
<PAGE>

         7. This Note shall be governed by and construed in accordance with the
laws of the State of New York. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on FORUM NON COVENIENS, to the bringing of any such proceeding in such
jurisdictions.

         8. The following shall constitute an "Event of Default":

                  a.       The Company shall default in the payment of principal
                           or interest on this Note and same shall continue for
                           a period of five (5) business days; or

                  b.       Any of the representations or warranties made by the
                           Company herein, or in any certificate or financial or
                           other written statements heretofore or hereafter
                           furnished by the Company in connection with the
                           execution and delivery of the Agreement or this Note
                           shall be false or misleading in any material respect
                           at the time made; or

                  c.       The Company shall fail to perform or observe, in any
                           material respect, any other covenant, term,
                           provision, condition, agreement or obligation of the
                           Agreement or this Note, and such failure shall
                           continue uncured for a period of ten (10) business
                           days after written notice from the Holder of such
                           failure; or

                  d.       The Company shall fail to perform or observe, in any
                           material respect, any covenant, term, provision,
                           condition, agreement or obligation of the Company
                           hereunder, and such failure shall continue uncured
                           for a period of thirty (30) days after written notice
                           from the Holder of such failure; or

                  e.       The Company shall (1) admit in writing its inability
                           to pay its debts generally as they mature; (2) make
                           an assignment for the benefit of creditors or
                           commence proceedings for its dissolution; or (3)
                           apply for or consent to the appointment of a trustee,
                           liquidator or receiver for its or for a substantial
                           part of its property or business; or

                  f.       A trustee, liquidator or receiver shall be appointed
                           for the Company or for a substantial part of its
                           property or business without its consent and shall
                           not be discharged within ninety (90) days after such
                           appointment; or

                                       6
<PAGE>

                  g.       Any governmental agency or any court of competent
                           jurisdiction at the instance of any governmental
                           agency shall assume custody or control of the whole
                           or any substantial portion of the properties or
                           assets of the Company and shall not be dismissed
                           within ninety (90) days thereafter; or

                  h.       Any money judgment, writ or warrant of attachment, or
                           similar process in excess of Two Hundred Thousand
                           ($200,000) Dollars in the aggregate shall be entered
                           or filed against the Company or any of its properties
                           or other assets and shall remain unpaid, unvacated,
                           unbonded or unstayed for a period of ninety (90) days
                           or in any event later than five (5) business days
                           prior to the date of any proposed sale thereunder; or

                  i.       Bankruptcy, reorganization, insolvency or liquidation
                           proceedings or other proceedings for relief under any
                           bankruptcy law or any law for the relief of debtors
                           shall be instituted by or against the Company and, if
                           instituted against the Company, shall not be
                           dismissed within ninety (90) days after such
                           institution or the Company shall by any action or
                           answer approve of, consent to, or acquiesce in any
                           such proceedings or admit the material allegations
                           of, or default in answering a petition filed in any
                           such proceeding; or

                  j.       The Company shall have its Common Stock suspended or
                           delisted from an exchange or other trading market
                           from trading for in excess of ten (10) trading days.

                  k.       The Company fails to issue shares of Common Stock or
                           Series C Preferred Stock, as applicable, to the
                           Holder upon exercise by the Holder of the conversion
                           rights of the Holder in accordance with the terms of
                           this Note, fails to transfer any certificate for
                           shares of Common Stock or Series C Preferred Stock,
                           as applicable, issued to the Holder upon conversion
                           of this Note and when required by this Note, and such
                           transfer is otherwise lawful, or fails to remove any
                           restrictive legend or to transfer on any certificate
                           or any shares of Common Stock Series C or Preferred
                           Stock issued to the Holder upon conversion of this
                           Note as and when required by this Note or the
                           Agreement and such legend removal is otherwise
                           lawful, and any such failure shall continue uncured
                           for five (5) business days.

Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the

                                       7
<PAGE>

Holder's sole discretion, the Holder may consider this Note immediately due and
payable within five (5) business days of written notice by Holder to the
Company, without presentment, demand, protest or notice of any kinds, all of
which are hereby expressly waived, anything herein or in any note or other
instruments contained to the contrary notwithstanding, and the Holder may
immediately enforce any and all of the Holder's rights and remedies provided
herein or any other rights or remedies afforded by law.

         9. Upon failure to make any payment of any installment of principal or
interest when due hereunder, Company further promises to pay, automatically on
all installments of principal and interest which are not timely paid when due,
and until such payment default is cured and on the then outstanding principal
balance, additional interest in addition to the rate set forth hereinabove, so
that interest will then accrue at a rate equal to fifteen (15%) percent per
annum.

         10. Any interest rate provided for hereunder which exceeds the maximum
rate provided by applicable law shall instead be deemed to be such maximum rate
and any interest in excess of such maximum rate paid to Holder shall be applied
to reduce the principal balance of this Note so that in no event shall Holder
receive or be entitled to receive interest in excess of the maximum amount
permitted by applicable law.

         11. Nothing contained in this Note shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or any
rights whatsoever as a shareholder of the Company, unless and to the extent
converted in accordance with the terms hereof.

         12. The Company and the Holder hereby waive a trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other in respect of any matter arising out of or in connection with
the Note.

         13. The Holder's books and records as to the amounts advanced hereunder
and the date of such advances shall be conclusive evidence thereof.

         14. This Note partially restates indebtedness evidenced by that certain
$2,500,000 Note (the "Prior Note") from the Company to the Holder dated October
31, 2003, and evidences that portion of the indebtedness evidenced by the Prior
Note which has been retained by the Holder after the sale of $375,000 of the
Prior Note.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       8
<PAGE>

         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.

Dated: March 3, 2004

                                          BIO-KEY INTERNATIONAL, INC.

                                          By:        /s/ Gary E. Wendt
                                              ---------------------------------

                                                     Gary E. Wendt
                                              ---------------------------------
                                            (Print Name)

                                                     Chief Financial Officer
                                              ---------------------------------
                                             (Title)

                                       9
<PAGE>

                           [FORM OF CONVERSION NOTICE]

TO:
    ---------------------------------

    ---------------------------------

    ---------------------------------

         The undersigned hereby instructs the Company to convert the portion of
the Note specified above into __ shares of Series C Preferred Stock/__ shares of
Common Stock [complete, as applicable] issued at a Conversion Price in
accordance with the provisions of the Note. The undersigned directs that the
Series C Preferred Stock or Common Stock, as applicable, issuable and
certificates therefor deliverable upon conversion, the Note recertificated in
the principal amount, if any, not being surrendered for conversion hereby,
together with any check in payment for fractional shares of Series C Preferred
Stock or Common Stock, as applicable, be issued in the name of and delivered to
the undersigned unless a different name has been indicated below. All
capitalized terms used and not defined herein have the respective meanings
assigned to them in the Note.

         By delivering this conversion notice, the undersigned owner represents
and warrants that it does not now, nor after giving effect to this conversion
notice will it, beneficially own in excess of 4.99% of the outstanding shares of
Common Stock of the Corporation within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended.

Date ___________________________________________________________________

Signature _____________________________________________________________________
                                      [Name]

Address: ______________________________________________________________________

                                       10

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00063-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00063-of-00352.parquet"}]]