Document:

Exhibit 10.40

 

OMNIBUS AMENDMENT OF THE TRANSACTION DOCUMENTS RELATED TO THE SALE OF BIO-KEY’S LAW ENFORCEMENT DIVISION TO INTERACT AND ASSOCIATED WAIVERS

 

THIS OMNIBUS AMENDMENT AND WAIVER (this “Amendment and Waiver”) is made and entered into as of December 30, 2010 by and between BIO-key International, Inc., a Delaware corporation (“Seller”), and InterAct911 Mobile Systems, Inc., a Delaware corporation (“Buyer”).  Seller and Buyer are collectively referred to herein as the “Parties” and each individually as a “Party”.

 

WHEREAS, Buyer and Seller are parties to that certain Asset Purchase Agreement dated as of August 13, 2009 (as amended, modified and/or supplemented to date, the “Asset Purchase Agreement”).

 

WHEREAS, Buyer and Seller  have agreed to an omnibus amendment and waiver with respect to the Transaction Documents (as defined in Section 1.1 of the Asset Purchase Agreement) executed to effectuate the sale of Seller’s Law Enforcement Division to Buyer as set forth herein;

 

WHEREAS, Section 10.1 of the Asset Purchase Agreement stipulates that the Agreement may not be amended or modified except by an instrument in writing signed by or on behalf of Buyer and Seller or by a waiver in accordance with Section 10.2;

 

WHEREAS, Section 10.2 of the Asset Purchase Agreement addresses waiver and allows any Party to the Agreement to extend the time for the performance of any of the obligations or other acts of the other Parties as long as the waiver/extension is in writing and signed by the Party to be bound thereby;

 

NOW, THEREFORE, for good and valuable consideration, including the forfeiture of warrants previously issued to SilkRoad Equity LLC as set forth herein, the receipt and sufficiency of which are hereby

 

 

acknowledged, the Parties agree to the following Omnibus Amendment and Waiver as follows:

 

ARTICLE I

DEFININTIONS

 

1.1                                 Definitions

 

All definitions in the Asset Purchase Agreement remain unchanged.  Capitalized terms used herein without definition have the meanings given to them in the Asset Purchase Agreement.

 

“Deferred Payment” is the $834,000.00 [Eight Hundred and Thirty Four Thousand Dollars] which is the difference between the full payment due in December 2010 under the Buyer Note prior to this Amendment and Waiver and the amount paid by Buyer in December 2010.

 

ARTICLE II

 

Amendment—Payment Schedule

 

The payment schedule listed in the Buyer Note is amended such that the first payment of $1,334,000 due on the first anniversary date of the Buyer Note (the “2010 Payment Requirement”) is adjusted.  Instead of requiring Buyer to pay the entire payment in one lump sum, Seller has agreed to accept installment payments of the $1,334,000 over time as follows:

 

Seller accepted payment of $500,000 on December 14, 2010;

 

This $500,000 payment will be treated as principal curtailment;

 

Buyer will pay Seller the balance of the Deferred Payment due to Seller over the first three quarters of 2011 as follows:

 

 

Buyer will pay Seller $278,000.00 on March 31, 2011;

Buyer will pay Seller $278,000.00 on June 30, 2011;

Buyer will pay Seller $278,000.00 on September 30, 2011;

 

These scheduled payments during the first, second and third quarters of 2011 (collectively, the “2011 Installment Payments”) will also be treated as principal curtailment.  There shall be no penalties for pre-payment of the scheduled payments outlined above.  Buyer shall have three (3) Business Days to cure any failure to make any 2011 Installment Payment on the applicable due date set forth above.

 

This Amendment and Waiver does not in any way change the schedule of payments described in the Buyer Note due in December 2011 or December 2012.

 

Seller agrees to waive any Events of Default that have occurred or will occur with respect to the 2010 Payment Requirement (and not with respect to any other term or condition of the Buyer Note) until the final 2011 Installment Payment described above has been made on September 30, 2011; provided, however, that if any of the 2011 Installment Payments described above are not timely made, this Article II of this Amendment and Waiver shall terminate and be of no further force or effect and Seller shall be entitled to all of its rights and remedies under the Transaction Documents with respect to the Buyer Note.

 

Seller agrees that given the foregoing waiver, it does not have the right to enforce any acceleration provisions or other penalties that may be contained in the Transaction Documents solely with respect to the 2010 Payment Requirement and subject in all respects to the proviso contained in the preceding sentence.

 

Seller agrees to release InterAct911 and SilkRoad Equity LLC from any obligations under their Guaranties as contained in the Transaction

 

 

Documents pertaining to ensuring that Buyer made the full 2010 Payment Requirement in December 2010; provided, however, that such Guaranties remain in full force as to ensuring that Buyer makes the 2011 Installment Payments and fulfills each other obligation under the Buyer Note on a timely basis.

 

ARTICLE III

 

Payment of Interest

 

This Amendment and Waiver does not change the interest rates identified in the Buyer Note.  Specifically, the following provision shall remain in effect:

 

“All amounts not paid when due under this Note shall bear interest until paid at a rate of twelve percent (12%) per year or the maximum rate allowed by law, whichever is less.”

 

The Buyer Note is amended such that the interest on the Deferred Payment under this Amendment and Waiver shall not be “immediately due and payable”.

 

The Buyer Note is amended such that interest on the Deferred Payment of $834,000.00 [Eight Hundred and Thirty Four Thousand Dollars] (which, for purposes of clarity, shall be equal to twelve percent (12%) per year) shall be paid pursuant to the payment schedule listed in the Buyer Note for regular interest payments.  Under that schedule, the interest payments on the Deferred Payments shall be payable quarterly in arrears in cash on January 1, April 1, July 1 and October 1 of 2011.

 

ARTICLE IV

 

Amendment—Acceleration Clause pertaining to Buyer Raising Private Capital

 

 

The Buyer Note is amended to delete item (g) under the listing of Events of Default which states that “Maker shall receive proceeds from equity capital financings after the date of the Note that collectively exceed Twenty Million Dollars ($20,000,000).

 

The Buyer Note is amended to state that Buyer does not have any limitation related to receiving proceeds from private (non-IPO) equity capital financings for the remainder of the term of the Note and the receipt of such funds no longer constitutes an event that would allow Seller to accelerate the payment of the principal and/or interest on the Note.

 

Notwithstanding the above, should Buyer (collectively with the Parent and its other Affiliates) raise more than Twenty Million Dollars ($20,000,000) of new capital in the aggregate from private (non-IPO) equity capital financings, excluding debt and any equity issued upon the conversion of debt, from and after the date of the Buyer Note and prior to paying off the Buyer Note in full, then Buyer shall be required to make a Seven Hundred and Fifty Thousand Dollar ($750,000.00) payment, payable within five (5) days of closing on such funding.  This payment shall be treated as principal curtailment and applied towards the unpaid principal balance of the Buyer Note in the inverse order of maturity.

 

ARTICLE V

 

Forfeiture of SilkRoad Equity LLC Warrants to Seller

 

The Transaction Documents include the Warrant issued at the Closing giving SilkRoad Equity LLC (“SilkRoad”) the right to purchase up to 8,000,000 Shares of Common Stock of Seller.

 

Section 12 of the Warrant states that any term 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.”

 

It is agreed between the Buyer and Seller that in consideration of amendments and waivers described herein, SilkRoad shall forfeit its Warrant to purchase 8,000,000 shares of Common Stock of Seller.  Upon the execution of this Amendment and Waiver by both Parties, the Warrant will automatically terminate and become null and void.

 

ARTICLE VI

 

Conflicts Between Transaction Documents and this Amendment and Waiver

 

To the extent that this Amendment and Waiver conflicts with any provisions in any of the Transaction Documents, this Amendment and Waiver will control/govern.

 

Except as expressly set forth in this Amendment and Waiver, no other term or provision of the Buyer Note or any of the other Transaction Documents is hereby amended or affected in any way, and each such document shall remain in full force and effect after the date hereof.

 

This Amendment and Waiver shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws.

 

[Signature page follows]

 

 

Acknowledged and Accepted:

 

 

BIO-KEY INTERNATIONAL, INC.

 

 

	
By:
    	
 
    	
 
    
	
Name:
    	
 
    
	
Title:
    	
 
    

 

STATE OF NEW JERSEY

COUNTY OF

 

BEFORE ME, the undersigned authority, on this day personally appeared                       (title) of                             , known by me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he/she executed the same for the purpose and consideration therein expressed.

 

GIVEN UNDER MY HAND AND SEAL OF OFFICE ON                                                       , 2010

 

	
 
    	
 
    	
 
    
	
Notary Public for   the State of New Jersey
    
	
 
    
	
[NOTORIAL SEAL]
    

 

 

Acknowledged and Accepted:

 

INTERACT911 MOBILE SYSTEMS, INC.

 

 

	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

STATE OF

COUNTY OF

 

BEFORE ME, the undersigned authority, on this day personally appeared                       (title) of                             , known by me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he/she executed the same for the purpose and consideration therein expressed.

 

GIVEN UNDER MY HAND AND SEAL OF OFFICE ON                                                       , 2010

 

	
 
    	
 
    	
 
    
	
Notary Public for the Commonwealth of
    
	
 
    
	
[NOTORIAL SEAL]
    

 

 

Acknowledged and Accepted (solely

with respect to Article V hereof):

 

SILKROAD EQUITY, LLC

 

 

	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

STATE OF

COUNTY OF

 

BEFORE ME, the undersigned authority, on this day personally appeared                       (title) of                             , known by me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he/she executed the same for the purpose and consideration therein expressed.

 

GIVEN UNDER MY HAND AND SEAL OF OFFICE ON                                                       , 2010

 

	
 
    	
 
    	
 
    
	
Notary Public for the Commonwealth of
    
	
 
    
	
[NOTORIAL SEAL]Exhibit 10.41

 

SECURITIES EXCHANGE AGREEMENT

 

This Securities Exchange Agreement (this “Agreement”) is entered into as of December 31, 2010 by and among BIO-key International, Inc., a Delaware corporation (the “Company”), The Shaar Fund, Ltd. (“Shaar”) and Thomas J. Colatosti (“TJC” and, together with Shaar, collectively the “Holders” and each individually a “Holder”).

 

Introduction

 

Shaar is the holder of 27,932 shares (the “Shaar  Exchanged Shares”) of the Company’s Series D 7% Convertible Preferred Stock, $0.0001 par value per share (the “Series D Preferred Stock”).  TJC is the holder of 2,625 shares (the “TJC  Exchanged Shares” and, together with the Shaar Exchanged Shares, collectively the “Exchanged Shares”) of Series D Preferred Stock.

 

Shaar is also the holder of a Seven Percent (7%) Convertible Promissory Note dated December 28, 2009 issued by the Company to Shaar in the original principal amount of $673,079 (the “Shaar Exchanged Note”) and TJC is the holder of a Seven Percent (7%) Convertible Promissory Note dated December 28, 2009 issued by the Company to TJC in the original principal amount of $64,878 (the “TJC Exchanged Note” and, together with the Shaar Exchanged Note, collectively the “Exchanged Notes”).

 

Shaar is also the holder of (i) a Warrant dated January 23, 2006 to purchase up to 225,000 shares of the Company’s common stock, $0.0001 par value per share (“Common Stock”), (ii) a Warrant dated August 10, 2006 to purchase up to 133,333 shares of Common Stock and (iii) a Warrant dated December 28, 2009 to purchase up to 4,750,000 shares of Common Stock (collectively, the “Shaar Exchanged Warrants”).

 

The Holders and the Company desire to exchange the Exchanged Shares, including all accrued and unpaid dividends thereon to and including the Closing Date (as defined below), and the Exchanged Notes for the Secured Notes (as defined below) and, in the case of Shaar, the Shaar Exchanged Warrants for the New Shaar Warrant (as defined below), in each case on the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

1.                                      Exchange of the Exchanged Shares, Exchanged Notes and Shaar Exchanged Warrants for the Secured Notes and the New Shaar Warrant.

 

1.1.                            Authorization of the Secured Notes.  The Company has authorized the issuance of Seven Percent (7%) Secured Promissory Notes, each to be in the form attached as Exhibit A hereto, in the respective original principal amounts set forth on Schedule I attached hereto (collectively, the “Secured  Notes”) to Shaar and TJC on the terms and conditions set forth in

 

 

this Agreement.  Each Holder hereby consents to the issuance of his or its Secured Note, and the indebtedness represented thereby, on the terms and conditions set forth in this Agreement.

 

1.2                               Authorization of the New Shaar Warrant.  The Company has authorized the issuance of a Warrant to purchase up to 8,000,000 shares of Common Stock, in the form attached hereto as Exhibit B (the “New  Shaar  Warrant”), to Shaar on the terms and conditions set forth in this Agreement.

 

1.3                               The Exchange.

 

(a)                                  In exchange for the delivery by Shaar of the Shaar Exchanged Shares, the Shaar Exchanged Note and the Shaar Exchanged Warrants, the Company agrees, in full settlement of the Company’s obligations to Shaar as of the Closing Date under the Series D Certificate of Designation (as defined below), the Shaar Exchanged Shares, the Shaar Exchanged Note and the Shaar Exchanged Warrants, to issue and deliver to Shaar its Secured Note, the Security Agreement, as defined below, and the New Shaar Warrant (the “Shaar  Exchange”).

 

(b)                                 In exchange for the delivery by TJC of the TJC Exchanged Shares and the TJC Exchanged Note, the Company agrees, in full settlement of the Company’s obligations to TJC as of the Closing Date under the Series D Certificate of Designation, the TJC Exchanged Shares and the TJC Exchanged Note, to issue and deliver to TJC his Secured Note and the Security Agreement (the “TJC  Exchange” and, together with the Shaar Exchange, the “Exchange”).

 

(c)                                  Other than as set forth in this Agreement, the Exchange shall be made without any additional consideration payable to or by the Holders or the Company.  As used herein, “Series D Certificate of Designation” means the Certificate of Designation of the Company filed with the Secretary of State of the State of Delaware on December 28, 2009, which provides for the designation of the rights and preferences of the Series D Preferred Stock.

 

1.4                               Closing.  The closing of the Exchange on the terms and conditions set forth in this Agreement (the “Closing”) shall take place remotely via the exchange of documents and signatures at 10:00 a.m. EST on (a) the later of December 31, 2010 or the date that is five (5) days after the satisfaction or waiver of all of the conditions set forth in Section 4 hereof or (b) on such other date as the parties hereto may agree (the “Closing Date”).

 

1.5                               Closing Documents and Payments.

 

(a)                                  At the Closing, (i) the Company shall deliver to each Holder (A) its or his Secured Note and the Security Agreement, and (B) in the case of Shaar, its New Shaar Warrant and (ii) each Holder shall deliver to the Company (A) stock certificate(s) representing its or his Exchanged Shares, together with a duly executed transfer power transferring its or his Exchanged Shares to the Company for cancellation, (B) its or his original Exchanged Note, together with a duly executed transfer power transferring its or his Exchanged Note to the Company for cancellation, and (C) in the case of Shaar, its Shaar Exchanged Warrants.

 

2

 

(b)                                 At the Closing, the Company will make a cash payment to Shaar in the amount of $500,000 by wire transfer of immediately available funds to an account designated by Shaar prior to the Closing.

 

(c)                                  On January 31, 2011, the Company will make a cash payment to Shaar in the amount of $125,209 by wire transfer of immediately available funds to the account designated by Shaar pursuant to Section 1.5(b) above.  The parties hereto acknowledge and agree that such amount represents the full satisfaction of the Company’s obligations to Shaar pursuant to all accrued and unpaid dividends with respect to the Company’s Series B Convertible Preferred Stock and Series C Convertible Preferred Stock and that, upon its receipt of such payment, Shaar shall not have any further rights to any such dividends.

 

2.                                      Representations and Warranties of the Holder.  Each Holder, severally and not jointly, represents and warrants to the Company as follows:

 

2.1.                            Title.  Such Holder has good title to his or its Exchanged Shares and Exchanged Note, and, in the case of Shaar, the Shaar Exchanged Warrants, free and clear of any and all restrictions, encumbrances, liens, rights, title or interests of others, other than restrictions under applicable securities laws.

 

2.2.                            Authority.  Such Holder has the requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereby and to deliver his or its Exchanged Shares and Exchanged Note and, in the case of Shaar, the Shaar Exchanged Warrants, to the Company in accordance herewith.

 

3.                                      Representations and Warranties of the Company.  The Company represents and warrants to each Holder as follows:

 

3.1.                            Entity Matters.  The Company is duly organized and validly existing in good standing under the laws of the State of Delaware, has all requisite power and authority to conduct its business and to own its property as the same is and shall be conducted or owned, and is qualified to do business as a foreign corporation in all locations required under the laws of each jurisdiction in which it does business and under which the failure so to qualify and remain in good standing would have a material adverse effect on the Company.  The execution of this Agreement, the Secured Notes, the Security and Subordination Agreement dated as of even date herewith made by the Company in favor of Shaar, TJC and The Shaar Fund, Ltd., as collateral agent thereunder (the “Security Agreement”), and the New Shaar Warrant (collectively, the “Exchange Documents”) will not violate the Company’s Certificate of Incorporation or By-Laws.

 

3.2.                            No Violation.  The performance by the Company of its obligations hereunder or under any other Exchange Document does not constitute a violation of any law, order, regulation, contract, or agreement to which the Company is a party or by which the Company or the Company’s property may be bound and does not require any filing or registration with, or any permit, license, consent, or approval of, any governmental agency or regulatory authority, or the waiver, consent or approval of any other party which has not been or will not be duly obtained as of the Closing Date.

 

3

 

3.3.                            No Litigation.  There is no litigation or arbitration pending or, to the Company’s knowledge, threatened against the Company which, if adversely decided, could materially impair the ability of the Company to pay and perform the Company’s obligations under any Exchange Document.

 

3.4.                            Exchange Documents Enforceable.  The Exchange Documents have been duly authorized, executed, and delivered by the Company and are legal, valid, and binding instruments, enforceable against the Company in accordance with their respective terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights and general principles of equity that restrict the availability of equitable or legal remedies.

 

4.                                      Conditions Precedent to the Holders’ Obligations.  It shall be a condition precedent to the Holders’ obligations under this Agreement that all of the following requirements are satisfied:

 

4.1.                            Representations and Warranties.  All representations and warranties made by or on behalf of the Company herein shall be true, correct and complete in all material respects on and as of the Closing Date.

 

4.2.                            Additional Conditions Precedent.  Each Holder shall have received each of the following, as applicable:

 

(a)                                  its or his Secured Note executed and delivered by the Company in favor of such Holder;

 

(b)                                 a copy of the Security Agreement executed and delivered by the Company in favor of the agent thereunder;

 

(c)                                  in the case of Shaar, the New Shaar Warrant executed and delivered by the Company; and

 

(d)                                 such other and further documents, agreements and instruments as the Holders or their counsel may reasonably require to evidence, confirm or give effect to the undertakings of the Company set forth herein.

 

5.                                      Miscellaneous.

 

5.1.                            Governing Law.  THIS AGREEMENT AND EACH OTHER EXCHANGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS 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 AGREEMENT AND EACH OTHER EXCHANGE AGREEMENT 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 AGREEMENT AND THE OTHER EXCHANGE AGREEMENTS ON

 

4

 

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 AGREEMENT OR ANY OTHER EXCHANGE AGREEMENT 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 AGREEMENT OR ANY OTHER EXCHANGE AGREEMENT.

 

5.2.                            Survival.  The representations, warranties, covenants and agreements made herein shall survive any investigation made by the Holders and for one year after the date of the closing of the transactions contemplated hereby.  All statements as to factual matters contained in any certificate or other instrument delivered by or on behalf of the Company pursuant hereto in connection with the transactions contemplated hereby shall be deemed to be representations and warranties by the Company hereunder solely as of the date of such certificate or instrument, unless otherwise specified therein.

 

5.3.                            Successors.  Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, heirs, executors and administrators of the parties hereto.  No Holder may assign its rights hereunder to a competitor of the Company.  The Company may not assign its rights or delegate its obligations hereunder to a third party without obtaining the consent of the Holders, such consent not to be unreasonably withheld or delayed.

 

5.4.                            Entire Agreement.  This Agreement, the other Exchange Documents, the exhibits and schedules hereto and thereto and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein.

 

5.5.                            Amendments and Waivers.  This Agreement may be amended or modified only upon the written consent of the Company and each Holder.

 

5.6.                            Delays or Omissions.  It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement or the other Exchange Documents, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring.  All remedies, either under this Agreement or the other Exchange Documents, by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

5.7.                            Notices.  All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual

 

5

 

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:

 

	
If to the Company or to TJC, to: or c/o
    	
 
    	
BIO-key International, Inc.

3349 Highway 138
    
	
 
    	
 
    	
Building D, Suite B
    
	
 
    	
 
    	
Wall, NJ 07719
    
	
 
    	
 
    	
Attn: Chief Executive Officer
    
	
 
    	
 
    	
Facsimile: (732) 359-1101
    
	
 
    	
 
    	
 
    
	
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 Shaar, to:
    	
 
    	
The Shaar Fund Ltd.
    
	
 
    	
 
    	
c/o Maarten Robberts
    
	
 
    	
 
    	
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
    

 

5.8.                            Titles and Subtitles.  The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

 

5.9.                            Facsimile Signatures; Counterparts.  This Agreement may be executed by facsimile signatures and in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

 

5.10.                     Broker’s Fees.  Each party hereto represents and warrants that no agent, broker, investment banker, person or firm acting on behalf of or under the authority of such party hereto is or will be entitled to any broker’s or finder’s fee or any other commission directly or indirectly in connection with the transactions contemplated herein.  Each party hereto further agrees to

 

6

 

indemnify each other party for any claims, losses or expenses incurred by such other party as a result of the representation by such party in this Section 5.10 being untrue.

 

5.11.                     Construction.  Each party acknowledges that its legal counsel participated in the preparation of this Agreement and the other Exchange Documents 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 Agreement to favor any party against the other.

 

5.12.                     Fees and Expenses.   The Company agrees to pay the reasonable fees and expenses of Meltzer, Lippe, Goldstein & Breitstone, LLP, as counsel to Shaar, in connection with the negotiation, execution and delivery of this Agreement, the Secured Notes, the Security Agreement and the New Shaar Warrant, and the consummation of the transactions contemplated hereby and thereby.

 

[Signature pages follow]

 

7

 

IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as a sealed instrument as of the date first written above.

 

 

	
 
    	
THE   COMPANY:
    
	
 
    	
 
    
	
 
    	
BIO-KEY   INTERNATIONAL, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Signature Page to Securities Exchange Agreement]

 

 

	
 
    	
THE   HOLDERS:
    
	
 
    	
 
    
	
 
    	
THE   SHAAR FUND, LTD.
    
	
 
    	
 
    
	
 
    	
By:   SS&C Fund Services N.V.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Thomas   J. Colatosti
    

 

[Signature Page to Securities Exchange Agreement]

 

 

Exhibit A

 

Form of Secured Notes

 

 

Exhibit B

 

Form of New Shaar Warrant

 

11

 

Schedule I

 

	
Holder
    	
 
    	
Original Principal Amount
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
The Shaar Fund, Ltd.
    	
 
    	
$
    	
3,157,759
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Thomas J. Colatosti
    	
 
    	
$
    	
350,804

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00186-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00186-of-00352.parquet"}]]