Document:

Exhibit
10.89

 

THIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT
AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO BIO-KEY
INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

 

Right to
Purchase up to 250,000 Shares of Common Stock of

BIO-key International, Inc.

(subject to adjustment as
provided herein)

 

COMMON
STOCK PURCHASE WARRANT

 

	
  No.  W-09-2

  	
  Issue
  Date: December 28, 2009  

  

 

BIO-KEY INTERNATIONAL, INC., a corporation organized
under the laws of the State of Delaware (“BIO-key”),
hereby certifies that, for value received, THOMAS J. COLATOSTI, or assigns (the
“Holder”), is entitled, subject to the
terms set forth below, to purchase from the Company (as defined herein) from
and after the Issue Date of this Warrant and at any time or from time to time
before 5:00 p.m., New York time, through the close of business the fifth
anniversary of the date hereof (the “Expiration Date”),
up to Two Hundred Fifty Thousand (250,000) fully paid and nonassessable shares
(the “Initial Number” of Warrant Shares) of
Common Stock (as defined below) at the Exercise Price per share (as defined
below).  The number and character of such
shares of Common Stock and the Exercise Price per share are subject to
adjustment as provided herein.

 

As used herein the following terms, unless the
context otherwise requires, have the following respective meanings:

 

(a)           The term “Company”
shall include BIO-key and any corporation which shall succeed, or assume the
obligations of, BIO-key hereunder.

 

(b)           The term “Common Stock”
includes (i) the Company’s Common Stock, par value $0.0001 per share; and (ii) any
other securities into which or for which any of the securities described in (a) may
be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.

 

(c)           The term “Other
Securities” refers to any capital stock (other than Common Stock)
and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.

 

1

 

(d)           The term “Exercise
Price” means $0.30 per share, as adjusted from time to time as
provided herein.

 

1.             Exercise of Warrant.

 

1.1           Number of Shares Issuable
upon Exercise.  From and after the date hereof through and
including the Expiration Date, the Holder shall be entitled to receive, upon
exercise of this Warrant in whole or in part, by delivery of an original or fax
copy of an exercise notice in the form attached hereto as Exhibit A
(the “Exercise Notice”), shares of Common
Stock of the Company, subject to adjustment pursuant to Section 4.

 

1.2           Company Acknowledgment. 
The Company will, at the time of the exercise of the Warrant, upon the
request of the holder hereof, acknowledge in writing its continuing obligation
to afford to such holder any rights to which such holder shall continue to be
entitled after such exercise in accordance with the provisions of this
Warrant.  If the holder shall fail to
make any such request, such failure shall not affect the continuing obligation
of the Company to afford to such holder any such rights.

 

1.3           Trustee for Warrant
Holders.  In the event that a bank or trust company
shall have been appointed as trustee for the holders of the Warrant pursuant to
Subsection 3.2, such bank or trust company shall have all the powers and duties
of a warrant agent (as hereinafter described) and shall accept, in its own name
for the account of the Company or such successor person as may be entitled
thereto, all amounts otherwise payable to the Company or such successor, as the
case may be, on exercise of this Warrant pursuant to this Section 1.

 

2.             Procedure for Exercise.

 

2.1           Delivery of Stock
Certificates, Etc., on Exercise.  The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder as the record owner of such shares
as of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares in accordance herewith.  As soon as practicable after the exercise of
this Warrant in full or in part, and in any event within three (3) business
days thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to
the Holder, or as such Holder (upon payment by such Holder of any applicable
transfer taxes) may direct in compliance with applicable securities laws, a
certificate or certificates for the number of duly and validly issued, fully
paid and nonassessable shares of Common Stock (or Other Securities) to which
such Holder shall be entitled on such exercise, plus, in lieu of any fractional
share to which such holder would otherwise be entitled, cash equal to such
fraction multiplied by the then Fair Market Value (as defined below) of one
full share, together with any other stock or other securities and property
(including cash, where applicable) to which such Holder is entitled upon such
exercise pursuant to Section 1 or otherwise.  For purposes hereof, the “Fair Market Value” of a share of Common Stock as of a
particular date (the “Determination Date”)
shall mean:

 

(a)           If the Company’s Common Stock is traded
on the NYSE Amex Equities exchange or another national exchange or is
quoted on the Global or Capital Market of The 

 

2

 

NASDAQ Stock Market, Inc.(“Nasdaq”), then the closing or last sale price, respectively,
reported for the last business day immediately preceding the Determination
Date.

 

(b)           If the Company’s Common Stock is not
traded on the NYSE Amex Equities exchange or another national exchange or
on the Nasdaq, but is traded on the FINRA OTC Bulletin Board, then the mean of
the average of the closing bid and asked prices reported for the last business
day immediately preceding the Determination Date.

 

(c)           Except as provided in clause (d) below,
if the Company’s Common Stock is not publicly traded, then as the Holder and
the Company agree or in the absence of agreement by arbitration in accordance
with the rules then in effect of the American Arbitration Association,
before a single arbitrator to be chosen from a panel of persons qualified by
education and training to pass on the matter to be decided.

 

(d)           If the Determination Date is the date of
a liquidation, dissolution or winding up, or any event deemed to be a
liquidation, dissolution or winding up pursuant to the Company’s certificate of
incorporation, then all amounts to be payable per share to holders of the
Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Common Stock in liquidation under the charter, assuming for the
purposes of this clause (d) that all of the shares of Common Stock then
issuable upon exercise of the Warrant are outstanding at the Determination
Date.

 

2.2           Exercise. 
Payment may be made either (i) in cash or by certified or official
bank check payable to the order of the Company equal to the applicable
aggregate Exercise Price, (ii) by delivery of the Warrant, or shares of
Common Stock and/or Common Stock receivable upon exercise of the Warrant in
accordance with the formula set forth below, (iii) by application of
amounts due to the Holder under and in accordance with the terms of the Seven
Percent (7%) Convertible Note dated the date hereof issued by the Company to
the Holder (the “Note”), or (iv) by a combination of any of the foregoing
methods, for the number of Common Shares specified in such Exercise Notice (as
such exercise number shall be adjusted to reflect any adjustment in the total
number of shares of Common Stock issuable to the Holder per the terms of this
Warrant) and the Holder shall thereupon be entitled to receive the number of
duly authorized, validly issued, fully-paid and non-assessable shares of Common
Stock (or Other Securities) determined as provided herein.  Notwithstanding any provisions herein to the
contrary, if the Fair Market Value of one share of Common Stock is greater than
the Exercise Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant for cash, the Holder may elect to receive shares equal
to the value (as determined below) of this Warrant (or the portion thereof
being exercised) by surrender of this Warrant at the principal office of the
Company together with the properly endorsed Exercise Notice in which event the
Company shall issue to the Holder a number of shares of Common Stock computed
using the following formula:

 

X = Y (A-B)

A

 

	
  Where
  X =

  	
  the
  number of shares of Common Stock to be issued to the Holder

  

 

3

 

	
  Y
  =

  	
  the
  number of shares of Common Stock purchasable under the Warrant or, if only a
  portion of the Warrant is being exercised, the portion of the Warrant being
  exercised (at the date of such calculation)

  
	
   

  	
   

  
	
  A
  =

  	
  the
  Fair Market Value of one share of the Company’s Common Stock (at the date of
  such calculation)

  
	
   

  	
   

  
	
  B =

  	
  Exercise Price (as adjusted to the date of such
  calculation)

  

 

3.             Effect of Reorganization,
Etc.

 

3.1           Reorganization,
Consolidation, Merger, Etc.  In case at
any time or from time to time, the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person, or (c) transfer
all or substantially all of its properties or assets to any other person under
any plan or arrangement contemplating the dissolution of the Company, then, in
each such case, as a condition to the consummation of such a transaction, the
Company shall have delivered to the Holder written notice thereof not less than
10 days’ prior thereto and proper and adequate provision shall be made by the
Company whereby the Holder of this Warrant, on the exercise hereof as provided
in Section 1 at any time after the consummation of such reorganization,
consolidation or merger or the effective date of such dissolution, as the case may
be, shall receive, in lieu of the Common Stock (or Other Securities) issuable
on such exercise prior to such consummation or such effective date, the stock
and other securities and property (including cash) to which such Holder would
have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such Holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment thereafter as
provided in Section 4.

 

3.2           Dissolution. 
In the event of any dissolution of the Company following the transfer of
all or substantially all of its properties or assets, the Company, concurrently
with any distributions made to holders of its Common Stock, shall at its
expense deliver or cause to be delivered to the Holder the stock and other
securities and property (including cash, where applicable) receivable by the
Holder of the Warrant pursuant to Section 3.1, or, if the Holder shall so
instruct the Company, to a bank or trust company specified by the Holder and
having its principal office in New York, NY as trustee for the Holder of the
Warrant (the “Trustee”).

 

3.3           Continuation of Terms. 
Upon any reorganization, consolidation, merger or transfer (and any
dissolution following any transfer) referred to in this Section 3, this
Warrant shall continue in full force and effect and the terms hereof shall be
applicable to the shares of stock and other securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets of the
Company, whether or not such person shall have expressly assumed the terms of
this Warrant as provided in Section 4. 
In the event this Warrant does not continue in full force and effect
after the consummation of the transactions described in this Section 3,
then the Company’s securities and property (including 

 

4

 

cash, where applicable) receivable by the
Holders of the Warrant will be delivered to Holder or the Trustee as
contemplated by Section 3.2.

 

4.             Extraordinary Events
Regarding Common Stock.  In the event
that the Company shall (a) issue additional shares of the Common Stock as
a dividend or other distribution on outstanding Common Stock, (b) subdivide
its outstanding shares of Common Stock, or (c) combine its outstanding
shares of the Common Stock into a smaller number of shares of the Common Stock,
then, in each such event, the Exercise Price shall, simultaneously with the
happening of such event, be adjusted by multiplying the then Exercise Price by
a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such event and the denominator of which
shall be the number of shares of Common Stock outstanding immediately after
such event, and the product so obtained shall thereafter be the Exercise Price
then in effect.  The Exercise Price, as
so adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 4.  The number of shares of Common Stock that the
holder of this Warrant shall thereafter, on the exercise hereof as provided in Section 1,
be entitled to receive shall be increased to a number determined by multiplying
the number of shares of Common Stock that would otherwise (but for the
provisions of this Section 4) be issuable on such exercise by a fraction
of which (a) the numerator is the Exercise Price that would otherwise (but
for the provisions of this Section 4) be in effect, and (b) the
denominator is the Exercise Price in effect on the date of such exercise.

 

5.             Certificate as to
Adjustments.  In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on
the exercise of the Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such
adjustment or readjustment in accordance with the terms of the Warrant and
prepare a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based,
including a statement of (a) the consideration received or receivable by
the Company for any additional shares of Common Stock (or Other Securities)
issued or sold or deemed to have been issued or sold, (b) the number of
shares of Common Stock (or Other Securities) outstanding or deemed to be
outstanding, and (c) the Exercise Price and the number of shares of Common
Stock to be received upon exercise of this Warrant, in effect immediately prior
to such adjustment or readjustment and as adjusted or readjusted as provided in
this Warrant.  The Company will forthwith
mail a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 11 hereof).

 

6.             Reservation of Stock
Issuable on Exercise of Warrant.  The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrant, shares of Common Stock (or Other Securities)
from time to time issuable on the exercise of the Warrant.

 

7.             Investment Representations. 
In connection with the Holder’s acquisition of this Warrant, the Holder
hereby represents and warrants to the Company as follows:

 

(a)           The Holder is acquiring this Warrant for
its own account for investment only, and not with a view to, or for sale in
connection with, any distribution of this Warrant in 

 

5

 

violation of the Securities Act of 1933, as
amended (the “Securities Act”), any rule or
regulation under the Securities Act, or any state, foreign or other securities
laws.

 

(b)           The Holder acknowledges that an
investment in this
Warrant involves a high degree of risk.

 

(c)           The Holder is able to protect its own
interest in the transactions contemplated hereby, can bear the economic risk of
this investment (including possible complete loss of such investment) for an
indefinite period of time and has such knowledge and experience in financial or
business matters such that he is capable of evaluating the merits and risks of
the investment in this
Warrant.

 

(d)           The Holder understands that this Warrant has not been registered
under the Securities
Act or under the securities laws of any jurisdiction, by reason of
reliance upon certain exemptions, and that the reliance of the Company on such
exemptions is predicated upon the accuracy of the representations and
warranties contained herein.

 

(e)           The Holder has had the opportunity to
ask questions of and receive answers from representatives of the Company and to
obtain additional information, documents and records relating to the Company,
its business and the investment contemplated hereby.

 

(f)            The Holder understands that this Warrant is characterized as a “restricted
security” under the federal securities laws inasmuch as it has been acquired in
a transaction not involving a public offering and that under such laws and
applicable regulations (and under other applicable securities laws) such Securities may not be transferred or
resold without registration under the Securities Act or other applicable laws or
pursuant to a valid exemption from registration under the Securities Act and
such laws.  The Holder understands that
the Company requires an opinion of counsel satisfactory to the Company that
registration is not required as a condition to any transfer where this Warrant is not being registered.

 

(g)           The Holder understands that the
Company will be under no obligation to register this Warrant under the Securities Act (or
any other applicable securities laws).

 

(h)           The Holder is familiar with Securities
and Exchange Commission Rule 144 and understands the resale limitations
imposed thereby and by the
Securities Act; and

 

(i)            The Holder is an “Accredited Investor”
pursuant to Rule 501 of Regulation D under the Securities Act.

 

8.             Assignment; Exchange of
Warrant.  Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a “Transferor”)
in whole or in part.  On the surrender
for exchange of this Warrant, with the Transferor’s endorsement in the form of Exhibit B
attached hereto (the “Transferor  Endorsement Form”) and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable securities
laws, which shall include, without limitation, the provision of a legal opinion
from the Transferor’s counsel (at the Company’s expense) that such transfer is
exempt from the registration requirements of applicable securities laws, and
with payment by the Transferor of any applicable transfer taxes) will issue and
deliver 

 

6

 

to or on the order of the Transferor thereof a new
Warrant of like tenor, in the name of the Transferor and/or the transferee(s) specified
in such Transferor Endorsement Form (each a “Transferee”),
calling in the aggregate on the face or faces thereof for the number of shares
of Common Stock called for on the face or faces of the Warrant so surrendered
by the Transferor.

 

9.             Replacement of Warrant. 
On receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant and, in the case of any
such loss, theft or destruction of this Warrant, on delivery of an indemnity
agreement or security reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, on surrender and cancellation of this
Warrant, the Company at its expense will execute and deliver, in lieu thereof,
a new Warrant of like tenor.

 

10.           Maximum Exercise. 
In no event shall the Holder be entitled to exercise this Warrant with
respect to any shares of Common Stock or shall the Company have the obligation
to issue any such shares to the extent that, after such exercise and issuance,
the Holder would be deemed to be the beneficial owner of more than 4.99% of the
outstanding shares of Common Stock.  For
purposes of this Section, beneficial ownership shall be determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as
amended.  Notwithstanding the foregoing,
the restriction described in this Section 10 may be revoked upon 75 days
prior notice from the Holder to the Company or immediately upon notice upon an
Event of Default under the Convertible Note.

 

11.           Warrant Agent. 
The Company may, by written notice to the each Holder of the Warrant,
appoint an agent for the purpose of issuing Common Stock (or Other Securities)
on the exercise of this Warrant pursuant to Section 1, exchanging this
Warrant pursuant to Section 8, and replacing this Warrant pursuant to Section 9,
or any of the foregoing, and thereafter any such issuance, exchange or
replacement, as the case may be, shall be made at such office by such agent.

 

12.           Transfer on the Company’s
Books.  Until this Warrant is transferred on the
books of the Company, the Company may treat the registered holder hereof as the
absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.

 

13.           Notices, Etc. 
All notices and other communications from the Company to the Holder of
this Warrant shall be mailed by first class registered or certified mail,
postage prepaid, at such address as may have been furnished to the Company in
writing by such Holder or, until any such Holder furnishes to the Company an
address, then to, and at the address of, the last Holder of this Warrant who
has so furnished an address to the Company.

 

14.           Governing Law. 
THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
ALWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS.  ANY ACTION BROUGHT BY ANY PARTY
AGAINST ANOTHER CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS WARRANT SHALL
BE BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS
LOCATED IN THE STATE OF NEW YORK IN EACH CASE SITTING IN THE CITY OF NEW YORK,
BOROUGH OF MANHATTAN.  ALL PARTIES AND
THE INDIVIDUALS EXECUTING THIS WARRANT 

 

7

 

ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE
JURISDICTION OF SUCH COURTS AND WAIVE TRIAL BY JURY.  IN THE EVENT THAT ANY PROVISION OF THIS
WARRANT DELIVERED IN CONNECTION HEREWITH IS INVALID OR UNENFORCEABLE UNDER ANY
APPLICABLE STATUTE OR RULE OF LAW, THEN SUCH PROVISION SHALL BE DEEMED
INOPERATIVE TO THE EXTENT THAT IT MAY CONFLICT THEREWITH AND SHALL BE
DEEMED MODIFIED TO CONFORM WITH SUCH STATUTE OR RULE OF LAW.  ANY SUCH PROVISION WHICH MAY PROVE
INVALID OR UNENFORCEABLE UNDER ANY LAW SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY
OF ANY OTHER PROVISION OF THIS WARRANT.

 

15.           Miscellaneous. 
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.  The prevailing party shall be entitled to
recover from the other party its reasonable attorney’s fees and costs.  The headings in this Warrant are for purposes
of reference only, and shall not limit or otherwise affect any of the terms
hereof.  The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision hereof. 
The Company acknowledges that legal counsel participated in the
preparation of this Warrant and, therefore, stipulates that the rule of
construction that ambiguities are to be resolved against the drafting party
shall not be applied in the interpretation of this Warrant to favor any party
against the other party.

 

8

 

IN WITNESS WHEREOF, each of the undersigned has
executed this Warrant as of the date first written above.

 

	
   

  	
   

  	
  BIO-KEY
  INTERNATIONAL, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Acknowledged and agreed:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  THE SHAAR FUND, LTD.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: SS&C Fund Services N.V.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  

 

9

 

EXHIBIT A

 

FORM OF
SUBSCRIPTION

 

(To Be Signed
Only On Exercise Of Warrant)

 

TO:         BIO-key International, Inc.

 

Attention:              Chief Financial Officer

 

The undersigned, pursuant to the provisions set
forth in the attached Warrant (No.    ), hereby irrevocably
elects to purchase (check applicable box):

 

	
  o

  	
                      
  shares of the Common Stock covered by such Warrant; or

  
	
   

  	
   

  
	
  o

  	
  the maximum number of
  shares of Common Stock covered by such Warrant pursuant to the cashless
  exercise procedure set forth in Section 2.

  

 

The undersigned herewith makes payment of the full
Exercise Price for such shares at the price per share provided for in such
Warrant, which is $                .  Such payment takes the form of (check
applicable box or boxes):

 

	
  o

  	
  $                    in lawful money of the United States; and/or

  
	
   

  	
   

  
	
  o

  	
  the cancellation of such
  portion of the attached Warrant as is exercisable for a total of                     
  shares of Common Stock (using a Fair Market Value of $                    per share for purposes of this calculation); and/or

  
	
   

  	
   

  
	
  o

  	
  the cancellation of such
  number of shares of Common Stock as is necessary, in accordance with the
  formula set forth in Section 2.2, to exercise this Warrant with respect
  to the maximum number of shares of Common Stock purchasable pursuant to the
  cashless exercise procedure set forth in Section 2; and/or

  
	
   

  	
   

  
	
  o

  	
  the application of $                  in respect of the annual installment of principal or accrued interest owing
  under the Convertible Note.

  

 

The undersigned requests that the certificates for
such shares be issued in the name of, and delivered to                                           
whose address is                                                              .

 

The undersigned represents and warrants that all
offers and sales by the undersigned of the securities issuable upon exercise of
the within Warrant shall be made pursuant to registration of the Common Stock
under the Securities Act of 1933, as amended (the “Securities
Act”) or pursuant to an exemption from registration under the
Securities Act.

 

A-1

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature
  must conform to name of holder as specified on the face of the Warrant)

  
	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  

 

 

EXHIBIT B

 

FORM OF
TRANSFEROR ENDORSEMENT

 

(To Be Signed
Only On Transfer Of Warrant)

 

For value received, the undersigned hereby sells,
assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to
purchase the percentage and number of shares of Common Stock of BIO-key
International, Inc.  into which the
within Warrant relates specified under the headings “Percentage Transferred”
and “Number Transferred,” respectively,
opposite the name(s) of such person(s) and appoints each such person
Attorney to transfer its respective right on the books of BIO-key International, Inc.  with full power of substitution in the
premises.

 

	
  Transferees

  	
   

  	
  Address

  	
   

  	
  Percentage

  Transferred

  	
   

  	
  Number

  Transferred

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature
  must conform to name of holder as specified on the face of the Warrant)

  
	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SIGNED
  IN THE PRESENCE OF:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Name)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ACCEPTED
  AND AGREED:

  	
   

  	
   

  
	
  [TRANSFEREE]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Name)

  	
   

  	
   

  

 

B-1Exhibit 10.90

 

THE SECURITIES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS (COLLECTIVELY, THE “LAWS”). THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER (I) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE LAWS, OR (II) AN
OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE AND SCOPE
REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS NOT
REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE LAWS.

 

	
  DATE:   December 28, 2009

  	
   

  	
  U.S.
  $673,079.00

  

 

BIO-KEY INTERNATIONAL, INC.

 

SEVEN PERCENT (7%) CONVERTIBLE NOTE

 

FOR VALUE RECEIVED, BIO-KEY
INTERNATIONAL, INC., a corporation duly organized and validly existing under
the laws of the State of Delaware, U.S.A. (the “Company”), promises to
pay to the order of THE SHAAR FUND, LTD., the registered holder hereof and its
successors and assigns (the “Holder”), Six Hundred Seventy-Three
Thousand and Seventy-Nine Dollars ($673,079.00), and to pay interest on the
principal sum outstanding, at the rate of seven percent (7%) per annum,
compounded annually.  Except as provided
in Section 5 below, principal and interest outstanding on this Note from
time to time shall not be payable in cash but shall be payable in shares of the
Company’s common stock, par value $.0001 per share (the “Common Stock”),
as set forth herein at the Holder’s option. 
The interest so payable will be paid to the person in whose name this
Note (or one or more predecessor Notes) is registered on the records of the
Company regarding registration of the Note (the “Note Register”).

 

This Note is subject to the
following additional provisions:

 

1.             Note Exchangeable.  The Note is exchangeable at any time for an
equal aggregate principal amount of Notes of different authorized
denominations, as requested by the Holder surrendering the same without the Company’s
written consent. No service charge will be made for such registration or
transfer or exchange.

 

2.             Withholding. 
The Company shall be entitled to withhold from all payments of principal
or interest pursuant to this Note any amounts required to be withheld under the
applicable provisions of the United States income tax or other applicable laws
at the time of such payments.

 

3.             Transfer/Exchange of Note; Legend.

 

(a)           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 

 

1

 

1933, as amended (the “1933 Act”) and
applicable state 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 his Note be overdue, and neither the Company nor
any such agent shall be affected or bound by notice to the contrary.  If presentment for transfer is made, the
parties agree hereunder to execute any and all documents necessary to
effectuate said transfer within thirty (30) days of presentment.

 

(b)           The Holder understands and acknowledges by its acceptance
hereof that (i) except as provided herein, this Note and the shares of
Common Stock issuable upon conversion thereof as herein provided (“Conversion
Shares”) have not been and are not being registered under the 1933 Act or
any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (a) subsequently registered thereunder, or (b) pursuant
to an exemption from such registration; (ii) any sale of such securities
made in reliance on Rule 144 promulgated under the 1933 Act may be made
only in accordance with the terms of said Rule and further, if said Rule is
not applicable, any resale of such securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other regulation and/or exemption under the 1933 Act or the rules and
regulations of the United States Securities and Exchange Commission (the “SEC”)
thereunder; and (iii) neither the Company nor any other person is under
any obligation, other than as provided herein to register such securities under
the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.

 

(c)           Any Conversion Shares issued upon conversion of this Note
shall, if and only to the extent required by law, bear legends in similar form
to the legends set forth on the first page of this Note.

 

4.             Conversion of Note into Common Stock; No Prepayment.

 

(a)           The Holder of this Note is entitled, at its option at any
time or from time to time to convert all or a portion of the original principal
face amount of this Note, and all or a portion of the interest accrued hereon,
into shares of Common Stock, at the Conversion Price.  The Conversion Price shall be equal to the
lower of (i) the average closing price of the Company’s Common Stock as
quoted by Bloomberg for the ten (10) trading days prior to the date that
the notice of conversion is transmitted to the Company, and (ii) $0.30
(subject to adjustment as provided in Section 8(b) below).  Each conversion shall be achieved by
submitting to the Company a notice of conversion, in the form attached hereto
as Exhibit A (the “Notice of Conversion”) executed by the
Holder of this Note evidencing such Holder’s intention to convert this Note or
the specified portion.  If such notice of
conversion is submitted via facsimile to the Company, the Holder need not send
an original notice to the Company.  The
Company and the Holder shall each keep records with respect to the portion of
this Note then being converted and all portions previously converted; upon
receipt by the Holder of the requisite Conversion Shares, the outstanding
principal amount of the Note or the accrued interest hereon, or both, shall be
reduced by the amount specified in the Notice of Conversion resulting in such
Conversion Shares. If no amount shall be specified, the applicable reduction
shall be applied first to the accrued interest and then to the outstanding
principal amount.  The Company may from
time to time, but is not required to, instruct the Holder and the Holder 

 

2

 

shall surrender this Note along with the
notice of conversion for the purposes of making a notation thereon as to the
amount of principal or interest, or both, being converted, or of canceling this
Note and issuing a new Note in the same form with the principal amount of such
Note reduced by the amount converted. Such new or notated Note shall be
delivered to the Holder within three (3) business days after such Holder’s
surrender to the Company. No fractional shares 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 a notice of conversion
is given (the “Conversion Date”) shall be deemed to be the date on which
notice of conversion is submitted via facsimile to the Company, or if the
notice of conversion is not submitted by facsimile to the Company, the date the
notice of conversion is otherwise delivered to the Company.

 

In all cases, the Company
shall deliver the Conversion Shares to the Holder within five (5) business
days after the Conversion Date with respect to such Conversion Shares being
delivered, and at the address specified in the Notice of Conversion.

 

Notwithstanding
anything herein to the contrary, the Holder shall not have the right, and the
Company shall not have the obligation, to convert all or any portion of the
Note if and to the extent that the issuance to the Holder of shares of Common
Stock upon such conversion would result in the Holder being deemed the “beneficial
owner” of more than 4.9% of the then outstanding shares of Common Stock within
the meaning of Section 13(d) of the Securities Exchange Act of 1934,
as amended, and the rules promulgated hereunder.  If any court of competent jurisdiction shall
determine that the foregoing limitation is ineffective to prevent the Holder
from being deemed the beneficial owner of more than 4.9% of the then
outstanding shares of Common Stock, then the Company shall redeem so much of
such Holder’s Note as necessary to cause such Holder to be deemed the
beneficial owner of not more than 4.9% of the then outstanding shares of Common
Stock.  Such redemption shall be for cash
at a redemption price equal to the sum of (i) 100% of the principal value
of the Note and (ii) any accrued and unpaid interest to the date of such
redemption.

 

(b)          The Company shall not have the right to prepay all or any
portion of this Note.

 

5.             Default. 
If one or more of the following described “Events of Default”
shall occur:

 

(a)           The Company shall fail to perform or observe, in any
material respect, any covenant, term, provision, condition, agreement or
obligation of the Company under this Note and such failure shall continue
uncured for a period of seven (7) days after written notice from the
Holder of such failure; or

 

(b)           The Company shall either: 
(i) become insolvent; (ii) admit in writing its inability to
pay its debts generally or as they become due; (iii) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; or (iv) 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

 

(c)           A Change of Control shall occur; or

 

3

 

(d)           A trustee, liquidator or receiver shall be appointed for
the Company or for a substantial part of its property or business without the
Company’s consent and such appointment is not discharged within sixty (60) days
after such appointment; or

 

(e)           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 sixty (60) days thereafter; or

 

(f)            After the date of this Note, any money judgment, writ or
note of attachment, or similar process in excess of One Hundred Thousand
Dollars ($100,000.00) in the aggregate shall be entered or filed against the
Company or any of its properties or assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of fifteen (15) days or in any event later
than five (5) days prior to the date of any proposed sale thereunder; or

 

(g)           The Company shall default in the
payment of any other outstanding indebtedness incurred or guaranteed by the
Company beyond any period of notice and opportunity to cure, or the payment of
such indebtedness shall be accelerated by the holder thereof; or

 

(h)           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 sixty 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;

 

then,
or at any time thereafter, and in any and every such case, unless such Event of
Default shall have been waived in writing by the Holder (which waiver in one
instance shall not be deemed to be a waiver in another instance or for any
other prior or subsequent Event of Default) at the option of the Holder and in
the Holder’s sole discretion, the Holder may immediately declare this Note due
and payable, whereupon all principal and interest hereunder shall be
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived by the Company, anything
herein or other instrument contained to the contrary notwithstanding, payable
in cash or Common Stock of the Company at the Conversion Price as set forth
herein at the Holder’s option, and the Holder may immediately, and upon the
expiration of any period of grace, enforce any and all of the Holder’s rights
and remedies provided herein or any other rights or remedies afforded by law or
equity.  In addition, if this Note is not
paid when due, the Company shall pay interest on overdue principal and (to the
fullest extent permitted by law) on overdue interest at the rate of twelve
(12%) percent per annum, payable in cash or Common Stock of the Company at the
Conversion Price as set forth herein at the Holder’s option.

 

As used herein, “Change of Control” means (i) any
merger, consolidation, share exchange, business combination, issuance of
securities, acquisition of securities, tender offer, exchange offer or other
similar transaction (A) in which the Company is a constituent corporation,
(B) in which a person, firm or other entity (“Person”)  or “group” (as defined in the Securities
Exchange Act of 1934, as amended, and the rules promulgated thereunder) of
Persons directly or indirectly 

 

4

 

acquires beneficial or record ownership of
securities representing more than 50% of the outstanding voting securities of
the Company, or (C) in which the Company issues securities representing
more than 50% of the outstanding securities of any class of voting securities
of the Company or (ii) any sale, lease, exchange, transfer, license,
acquisition or disposition of any assets that constitute more than 50% of the
assets of the Company on a consolidated basis.

 

6.             Maximum Payments. 
Nothing contained herein shall be deemed to establish or require the
payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law.  In the
event that the rate of interest required to be paid or other charges hereunder
exceed the maximum permitted by such law, any payments in excess of such
maximum shall be credited against amounts owed by the Company to the Holder and
thus refunded to the Company.

 

7.             Obligations of the Company herein are Unconditional.  No provision of this Note shall alter or
impair the obligation of the Company, which obligation is absolute and
unconditional, to repay the principal amount of this Note at the time, place,
rate, and in the coin, currency or Common Stock, hereinabove stated. This Note
and all other Notes now or hereafter issued in replacement of this Note on the
same or similar terms are direct obligations of the Company. This Note ranks at
least equally with all other Notes now or hereafter issued under the terms set
forth herein. The Conversion Price and number of shares of Common Stock
issuable upon conversion shall be subject to adjustment from time to time as
provided in Section 8(b) below.

 

8.             Merger; Consolidation; Stock Splits.

 

(a)           In the event the Company, at any time while all or any
portion of this Note is outstanding, shall be consolidated with or merged into
any other corporation or corporations or shall sell or lease all or
substantially all of its property and business as an entirety, then lawful provisions
shall be made as part of the terms of such consolidation, merger, sale or lease
so that the holder of this Note may thereafter receive in lieu of such Common
Stock otherwise issuable to such holder upon conversion of this Note, but at
the conversion rate which would otherwise be in effect at the time of
conversion, as hereinbefore provided, the same kind and amount of securities or
assets as may be issuable, distributable or payable upon such consolidation,
merger, sale or lease with respect to Common Stock of the Company.

 

(b)           In the event, at any time while all or any portion of this
Note is outstanding, the outstanding shares of Common Stock shall be
subdivided, consolidated or combined, by stock split, stock dividend,
combination or like event, into a greater or lesser number of shares of Common
Stock, the fixed portion of the Conversion Price specified in Section 4(a)(ii) above
in effect immediately prior to such subdivision, combination, consolidation or
stock dividend shall, concurrently with the effectiveness of such subdivision,
combination, consolidation or stock dividend, be proportionately adjusted.

 

9.             Note Holder Not Deemed a Stockholder.  No Holder, as such, of this Note shall be
entitled (prior to conversion of this Note into Common Stock, and only then to
the extent of such conversion) to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose, nor shall anything contained
in this Note be construed to confer upon the Holder hereof, as 

 

5

 

such, any of the rights of a stockholder of
the Company or any right to vote, give or withhold consent to any corporate
action (whether any reorganization, issue of stock, reclassification of stock,
consolidation, merger, conveyance or otherwise), receive notice of meetings,
receive dividends or subscription rights, or otherwise, prior to the issuance
to the holder of this Note of the Conversion Shares which he or she is then
entitled to receive upon the due conversion of all or a portion of this Note.
Notwithstanding the foregoing, the Company will provide the Holder with copies
of the same notices and other information given to the stockholders of the
Company generally, contemporaneously with the giving thereof to the stockholders.

 

10.           Restrictive Covenant.   Until the principal amount of this Note and
all accrued and unpaid interest is paid in full or converted into Common Stock
as provided herein, the Company shall not issue any loan or debt secured by any
of the assets of the Company.

 

11.           No Limitation on Corporate Action.  No provisions of this Note and no right or
option granted or conferred hereunder shall in any way limit, affect or abridge
the exercise by the Company of any of its corporate rights or powers to recapitalize,
amend its Certificate of Incorporation, reorganize, consolidate or merge with
or into another corporation, or to transfer all or any part of its property or
assets, or the exercise of any other of its corporate rights and powers.

 

12.           Representations of Holder.  Upon conversion of all or a portion of this
Note, the Holder shall confirm in writing, in a form reasonably satisfactory to
the Company, that the Conversion Shares so purchased are being acquired solely
for the Holder’s own account and not as a nominee for any other party, and that
such Holder is an Accredited Investor (as defined in Rule 501(a) of
Regulation D promulgated under the 1933 Act). The Company acknowledges that
Holder’s duly executed certification on the Notice of Conversion is satisfactory
confirmation of the facts set forth in the immediately preceding sentence. If
such Holder cannot make such representations because they would be factually
incorrect, it shall be a condition to such Holder’s conversion of all or a
portion of the Note that the Company receive such other representations as the
Company considers reasonably necessary to assure the Company that the issuance
of its securities upon conversion of the Note shall not violate any United
States or state securities laws.

 

13.           Waiver of Demand, Presentment, Etc.  The Company hereby expressly waives demand
and presentment for payment, notice of nonpayment, protest, notice of protest,
notice of dishonor, notice of acceleration or intent to accelerate, bringing of
suit and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing
and to be owing hereunder, regardless of and without any notice, diligence, act
or omission as or with respect to the collection of any amount called for
hereunder.

 

14.           Failure or Delay Not Waiver.  No failure or delay on the part of the Holder
in the exercise of any power, right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.  All rights
and remedies existing hereunder are cumulative to, and not exclusive of, any
rights or remedies otherwise available.

 

6

 

15.           Attorney’s Fees. 
The Company agrees to pay all costs and expenses, including without
limitation reasonable attorney’s fees, which may be incurred by the Holder in
collecting any amount due under this Note or in enforcing any of Holder’s
conversion rights as described herein.

 

16.           Access to Books and Records.  The Holder will have the right to inspect and
audit the Company’s original books, records, and documents at any time and from
time to time, during normal business hours, upon reasonable notice to the
Company.

 

17.           Enforceability.      In
case any provision of this Note is held by a court of competent jurisdiction to
be excessive in scope or otherwise invalid or unenforceable, such provision
shall be adjusted rather than voided, if possible, so that it is enforceable to
the maximum extent possible, and the validity and enforceability of the
remaining provisions of this Note will not in any way be affected or impaired
thereby.

 

18.           Governing Law.  This Note shall be governed by and construed
in accordance with the laws of the state of New York without giving effect to
applicable principles of conflict of law. Each of the parties submits to the
exclusive jurisdiction of the state and federal courts of New York County, New
York in connection with any dispute arising under this Note and hereby waives,
to the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. To the extent determined by such court, the Company shall
reimburse the Holder for any reasonable legal fees and disbursements incurred
by the Holder in enforcement of or protection of any of its rights under this
Note.

 

19.           Assignment.  This Note shall not be assigned by the
Company without the prior written consent of the Holder.  This Note shall bind the Company and its
successors and permitted assigns and shall inure to the benefit of the Holder and
its successors and assigns.

 

20.           Amendment Provision. Neither this Note nor any term
hereof may be amended, waived, discharged or terminated other than by a written
instrument signed by the Company and the Holder.

 

21.           Entire Agreement. 
This Note and constitutes the full and entire understanding between the
Company and the Holder with respect to the subject matter hereof and thereof.

 

22.           Notices.  All
notices and other communications given or made pursuant to this Note shall be
in writing and shall be deemed effectively given upon the earlier of actual
receipt or:  (a) personal delivery
to the party to be notified, (b) when sent, if sent by electronic mail or
facsimile during normal business hours of the recipient, and if not sent during
normal business hours, then on the recipient’s next business day, (c) five
(5) days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one (1) business day after
deposit with a nationally recognized overnight courier, freight prepaid,
specifying next business day delivery, with written verification of
receipt.  All communications shall be
sent to the respective parties at the following addresses or to such other
e-mail address, facsimile number or address as subsequently modified by written
notice given in accordance with this Section 23:

 

7

 

	
  If to the Borrower, to:

  	
   

  	
  BIO-key
  International, Inc.

  3349 Highway 138

  Building D, Suite B

  Wall, NJ 07719

  Attn: Chief Executive Officer

  Facsimile: (508) 460 4098

  
	
   

  	
   

  	
   

  
	
  with
  a copy (which shall not constitute notice) to:

  	
   

  	
  Choate,
  Hall & Stewart LLP

  Two International Place

  Boston, MA 02110

  Attention: Charles J. Johnson, Esq.

  Facsimile: (617) 248-4000

  
	
   

  	
   

  	
   

  
	
  If
  to the Holder, to:

  	
   

  	
  The
  Shaar Fund Ltd.

  c/o SS&C Fund Services N.V.

  Pareraweg 45

  Curacao, Netherlands Antilles

  Facsimile: (599-9) 434-3560

  
	
   

  	
   

  	
   

  
	
  with
  a copy (which shall not constitute notice) to:

  	
   

  	
  Meltzer,
  Lippe, Goldstein & Breitstone, LLP

  190 Willis Avenue

  Mineola, NY 11501

  Attention: Ira R. Halperin, Esq.

  Facsimile: (516) 747-0653

  

 

23.           Waiver of Jury Trial.   THE COMPANY EXPRESSLY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OFACTION (A) ARISING
UNDER THIS NOTE OR ANY OTHER INSTRUMENT, 
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS NOTE OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND
THE BORROWER HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THIS WAIVER OF THE RIGHT TO TRIAL BY JURY.

 

8

 

IN WITNESS WHEREOF, the
Company has caused this instrument to be duly executed by an officer thereunto
duly authorized, all as of the date first hereinabove written.

 

 

	
   

  	
  BIO-KEY
  INTERNATIONAL, INC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Commonwealth of
  Massachusetts

  	
  )

  	
   

  	
   

  
	
  ) ss:

  	
   

  	
   

  	
   

  
	
  County of
                                    )

  	
   

  	
   

  	
   

  

 

On the
         day of
          ,
20     before me, the undersigned, personally appeared
                            ,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her capacity, and that
by his/her signature on the instrument, the individual, or the person upon
behalf of which the individual acted, executed the instrument.

 

 

	
   

  	
   

  
	
   

  	
  Notary
  Public

  	
   

  

 

9

 

EXHIBIT A

 

FORM OF NOTICE OF CONVERSION

 

                 ,
20       

 

BIO-key International, Inc.

3349 Highway 138

Building D, Suite B

Wall, NJ 
07719

Attn:  Chief
Executive Officer

 

The
undersigned, holder of BIO-key International, Inc.’s (the “Company”)
Seven Percent (7%) Convertible Note (the “Note”), hereby exercises its
option to convert
$                      
of the principal amount of the Note and [all]
[$                ]
of the accrued interest on this Note into shares of the Company’s common stock,
$.0001 par value per share (the “Common Stock”), in accordance with the
terms of the Note.  All capitalized terms
used and not defined herein have the respective meanings assigned to them in
the Note.

 

The
undersigned hereby instructs the Company to convert the portion of the Note
specified above into
                
shares of Common Stock at the Conversion Price in accordance with the provisions
of Section 4 of the Note. The undersigned directs that (i) the Common
Stock issuable and certificates therefor deliverable upon conversion, and (ii) if
so delivered by the Holder, the Note, recertificated in the principal amount,
if any, not being surrendered for conversion hereby be issued in the name of
and delivered to the undersigned unless a different name has been indicated
below.

 

By
delivering this conversion notice, the undersigned represents and warrants to
the Company that the shares of Common Stock so purchased are being
acquired solely for the Holder’s own account and not as a nominee for any other
party, and that such Holder is an Accredited Investor (as defined in Rule 501(a) of
Regulation D promulgated under the 1933 Act).

 

	
   

  	
  HOLDER:

  
	
   

  	
   

  
	
   

  	
   

  

 

10

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