Document:

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EXHIBIT 10.26

                       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-                                        Up to US $ 2,350,000
        ----                                            --------------

                           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 Three
Hundred Fifty Thousand and 00/100  ($2,350,000) Dollars, or such lesser amount
as may have been advanced from time to time under that certain Note Purchase
Agreement dated as of even date herewith 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
June 30, 2004.
This Note is subject to the following additional provisions:

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     1.  (a)    The Company acknowledges that there has been received on the
date hereof, the sum of $600,000.

         (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.

     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 "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
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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 B 9% Convertible Preferred Stock, $.01 par value per share (the
"Series B 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 B Preferred Stock
and/or Common Stock, recapitalization, or like capital adjustment affecting the
Series B Preferred Stock and/or Common Stock (each, an "Adjustment"), the Common
Conversion Price and/or the Series B 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 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
                                        3
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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 B Preferred Stock, as applicable, upon
conversion at the Common Conversion Price or Preferred Conversion Price, as
applicable.  No fractional shares of Series B 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 B 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 B 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 B 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 B 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:

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

                    1                         $100
                    2                         $200
                    3                         $300
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                    4                         $400
                    5                         $500
                    6                         $600
                    7                         $700
                    8                         $800
                    9                         $900
                    10                        $1,000
                    >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 B 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.

     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.

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     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

     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

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     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 B
          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 B 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 B 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 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,
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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.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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

Dated: January 27, 2003

                              BIO-KEY  INTERNATIONAL,  INC.

                              By:  /s/  Gary  Wendt
                              ------------------------------

                              Gary  Wendt
                              ------------------------------
                              (Print  Name)

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

                                        9
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                           [FORM OF CONVERSION NOTICE]

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

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

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

     The  undersigned hereby instructs the Company to convert the portion of the
Note  specified  above  into  __ shares of Series B 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  B  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 B 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

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EXHIBIT 10.27

         THE SECURITIES  EVIDENCED BY THIS  CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE  SECURITIES  ACT OF 1933,  AS  AMENDED,  AND MAY NOT BE SOLD,
         TRANSFERRED,  ASSIGNED OR  HYPOTHECATED  UNLESS  THERE IS AN  EFFECTIVE
         REGISTRATION  STATEMENT  UNDER SUCH ACT COVERING SUCH  SECURITIES,  THE
         SALE IS MADE IN  ACCORDANCE  WITH RULE 144, OR THE COMPANY  RECEIVES AN
         OPINION  OF  COUNSEL  FOR THE  HOLDER OF THESE  SECURITIES,  REASONABLY
         SATISFACTORY  TO  THE  COMPANY,   STATING  THAT  SUCH  SALE,  TRANSFER,
         ASSIGNMENT  OR  HYPOTHECATION  IS  EXEMPT  FROM  THE  REGISTRATION  AND
         PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.

                         OPTION TO PURCHASE COMMON STOCK
                                       OF
                           BIO-KEY INTERNATIONAL, INC.
                           Void after January 28, 2010

         This certifies that, for value received,  CHARLES P. ROMEO  ("Holder"),
is  entitled,  subject to the terms set forth  below,  to purchase  from BIO-KEY
INTERNATIONAL,  INC., a Minnesota  corporation  (the  "Company"),  shares of the
common stock,  $.01 par value per share,  of the Company  ("Common  Stock"),  as
constituted  on the date hereof (the "Option  Issue  Date"),  with the Notice of
Exercise  attached hereto duly executed,  and  simultaneous  payment therefor in
lawful money of the United States or as otherwise  provided in Section 3 hereof,
at the Exercise Price then in effect.  The number,  character and Exercise Price
of the shares of Common  Stock  issuable  upon  exercise  hereof are  subject to
adjustment as provided herein.

         1. TERM OF OPTION.  Subject to compliance  with the vesting  provisions
identified at Section 2.3 hereof, this Option shall be exercisable,  in whole or
in part,  during the term commencing on the Option Issue Date and ending at 5:00
p.m.  CST on January 28, 2010 (the "Option  Expiration  Date") and shall be void
thereafter.

         2. NUMBER OF SHARES, EXERCISE PRICE AND VESTING PROVISIONS.

                  2.1  NUMBER OF SHARES.  The  number of shares of Common  Stock
which may be  purchased  pursuant  to this Option  shall be 200,000  shares (the
"Shares"), subject, however, to adjustment pursuant to Section 11 hereof.

                  2.2 EXERCISE  PRICE.  The Exercise Price at which this Option,
or  portion  thereof,  may be  exercised  shall be $0.60(1) per Share,  subject,
however, to adjustment pursuant to Section 11 hereof.

--------
1 The last sale  price of the  Company's  common  stock as  reported  on the OTC
Bulletin Board on the date of grant.

<PAGE>

     2.3  VESTING.  This  Option  shall vest in  accordance  with the  following
schedule:

                  Options to purchase  50,000  shares  vest on the Option  Issue
                  Date. The remainder of the options vest in equal  installments
                  every  three (3)  months  during  the  three  (3) year  period
                  commencing on the Option Issue Date

3. EXERCISE OF OPTION.

     3.1 PAYMENT OF EXERCISE  PRICE.  Subject to the terms hereof,  the purchase
rights  represented by this Option are  exercisable by the Holder in whole or in
part, at any time, or from time to time, by the surrender of this Option and the
Notice of Exercise  annexed  hereto duly completed and executed on behalf of the
Holder,  at the office of the  Company  (or such  other  office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company)  accompanied by payment of the
Exercise Price in full either (i) in cash or by bank or certified  check for the
Shares with respect to which this Option is  exercised;  (ii) by delivery to the
Company of shares of the  Company's  Common Stock having a Fair Market Value (as
defined  below)  equal  to the  aggregate  Exercise  Price of the  Shares  being
purchased which Holder is the record and beneficial owner of and which have been
held by the Holder for at least six (6) months;  or (iii) by  delivering  to the
Company  a Notice  of  Exercise  together  with an  irrevocable  direction  to a
broker-dealer  registered under the Securities  Exchange Act of 1934, as amended
(the "Exchange Act"), to sell a sufficient portion of the Shares and deliver the
sales proceeds directly to the Company to pay the Exercise Price; or (iv) by any
combination of the  procedures  set forth in subsections  (i), (ii) and (iii) of
this Section 3.1.

     3.2 FAIR MARKET  VALUE.  If  previously  owned  shares of Common  Stock are
tendered as payment of the Exercise Price, the value of such shares shall be the
"Fair Market Value" of such shares on the trading date immediately preceding the
date of exercise.  For the purpose of this  Agreement,  the "Fair Market  Value"
shall be:

                           (a) If the Common  Stock is admitted to  quotation on
the National Association of Securities Dealers
Automated  Quotation System ("NASDAQ"),  the Fair Market Value on any given date
shall be the average of the highest  bid and lowest  asked  prices of the Common
Stock as reported for such date or, if no bid and asked prices were reported for
such  date,  for the last day  preceding  such date for which such  prices  were
reported;

                           (b) If the Common  Stock is  admitted to trading on a
United States securities exchange or the NASDAQ
National  Market System,  the Fair Market Value on any date shall be the closing
price reported for the Common Stock on such exchange or system for such date or,
if no sales were reported for such date,  for the last day  preceding  such date
for which a sale was reported.  Notwithstanding  the foregoing,  the Fair Market
Value of the Common Stock on the effective date of the Initial  Public  Offering
(as  defined in Section  7.2) shall be the  offering  price to the public of the
Common Stock on such date;
                                       2
<PAGE>

                           (c)  If  the   Common   Stock   is   traded   in  the
over-the-counter market and not on any national securities
exchange nor in the NASDAQ Reporting System,  the Fair Market Value shall be the
average of the mean  between the last bid and ask prices per share,  as reported
by the National  Quotation  Bureau,  Inc., or an equivalent  generally  accepted
reporting  service,  or if not so  reported,  the average of the closing bid and
asked  prices  for a share as  furnished  to the  Company  by any  member of the
National  Association of Securities  Dealers,  Inc., selected by the Company for
that purpose; or

                           (d) If the  Fair  Market  Value of the  Common  Stock
cannot be determined on the basis previously set forth
in this  definition on the date that the Fair Market Value is to be  determined,
the Board of Directors  of the Company  shall in good faith  determine  the Fair
Market Value of the Common Stock on such date.

If the tender of previously  owned shares would result in an issuance of a whole
number of Shares  and a  fractional  Share of  Common  Stock,  the value of such
fractional share shall be paid to the Company in cash or by check by the Holder.

     3.3. TERMINATION OF STATUS AS A DIRECTOR; DEATH.

               (a) If  Holder  shall  cease to serve as a member of the Board of
          Directors of the Company, all Options to which Holder is then entitled
          to exercise may be exercised  only within  ninety (90) days after such
          event and prior to the Option Termination Date.

               (b) If Holder shall die while serving as a member of the Board of
          Directors of the Company and prior to the Option Termination Date, any
          Options then  exercisable  may be  exercised  only within one (1) year
          after Holder's death, prior to the Option Termination Date and only by
          the Holder's personal representative or persons entitled thereto under
          the Holder's will or the laws of descent and distribution.

               (c) This Option may not be exercised for more Shares  (subject to
          adjustment  as provided in Section 11 hereof)  after Holder  ceases to
          serve as a member of the Board of  Directors  of the Company or death,
          as the  case  may  be,  than  the  Holder  was  entitled  to  purchase
          thereunder  at the time of the  termination  of  Holder's  status as a
          member of the Board of Directors  or death.

     3.4 EXERCISE DATE; DELIVERY OF CERTIFICATES. This Option shall be deemed to
have been  exercised  immediately  prior to the close of business on the date of
its  surrender for exercise as provided  above,  and Holder shall be treated for
all  purposes as the holder of record of such Shares as of the close of business
on such date. As promptly as  practicable on or after such date and in any event
within ten (10) days  thereafter,  the  Company at its  expense  shall issue and

                                       3
<PAGE>

deliver to the Holder a  certificate  or  certificates  for the number of Shares
issuable upon such exercise. In the event that this Option is exercised in part,
the Company at its expense  will  execute and deliver a new Option of like tenor
exercisable  for the  number  of  shares  for  which  this  Option  may  then be
exercised.

         4.       NO  FRACTIONAL  SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this Option.
In lieu of any fractional share to which the Holder would otherwise be entitled,
the Company shall make a cash payment equal to the Exercise Price  multiplied by
such fraction.

         5.       REPLACEMENT  OF  OPTION.  On receipt  of  evidence  reasonably
satisfactory  to the Company of the loss,  theft,  destruction  or mutilation of
this Option and, in the case of loss,  theft or  destruction,  on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Option, the
Company at its expense shall execute and deliver,  in lieu of this Option, a new
Option of like tenor and amount.

         6.       RIGHTS  OF  STOCKHOLDER.   Except  as  otherwise  contemplated
herein,  the Holder  shall not be  entitled to vote or receive  dividends  or be
deemed the holder of Common  Stock or any other  securities  of the Company that
may at any time be issuable on the exercise  hereof for any  purpose,  nor shall
anything  contained herein be construed to confer upon the Holder,  as such, any
of the  rights  of a  stockholder  of the  Company  or any right to vote for the
election  of  directors  or upon any matter  submitted  to  stockholders  at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization,  issuance of stock, reclassification of stock, change
of par  value,  or  change  of stock  to no par  value,  consolidation,  merger,
conveyance  or  otherwise)  or to  receive  notice of  meetings,  or to  receive
dividends or  subscription  rights or otherwise until the Option shall have been
exercised as provided herein.

         7. TRANSFER OF OPTION.

                  7.1.  NON-TRANSFERABILITY.  This Option shall not be assigned,
transferred,  pledged or  hypothecated  in any way,  nor  subject to  execution,
attachment or similar process,  otherwise than by will or by the laws of descent
and distribution.  Any attempted assignment,  transfer, pledge, hypothecation or
other disposition of this Option contrary to the provisions hereof, and the levy
of an execution,  attachment,  or similar process upon the Option, shall be null
and void and without effect.

                 7.2.  COMPLIANCE  WITH  SECURITIES  LAWS;   RESTRICTIONS  ON
TRANSFERS. In addition to restrictions on transfer of this Option and Shares set
forth in Section 7.1 above.

                           (a) The Holder of this Option, by acceptance  hereof,
acknowledges that this Option and the Shares to
be issued upon exercise  hereof are being  acquired  solely for the Holder's own
account and not as a nominee for any other  party,  and for  investment  (unless
such shares are subject to resale pursuant to an effective prospectus), and that
the Holder will not offer,  sell or otherwise dispose of any Shares to be issued
upon  exercise  hereof  except  under  circumstances  that will not  result in a
violation of applicable federal and state securities laws. Upon exercise of this
Option, the Holder shall, if requested by the Company,  confirm in writing, in a

                                       4
<PAGE>

form  satisfactory 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,  for  investment  (unless  such  shares are  subject to resale
pursuant to an effective prospectus), and not with a view toward distribution or
resale.

     (b) Neither this Option nor any share of Common Stock issued upon  exercise
of this Option may be offered for sale or sold, or otherwise transferred or sold
in any transaction  which would  constitute a sale thereof within the meaning of
the 1933 Act,  unless (i) such security has been  registered  for sale under the
1933 Act and registered or qualified  under  applicable  state  securities  laws
relating  to  the  offer  an  sale  of  securities;  (ii)  exemptions  from  the
registration  requirements of the 1933 Act and the registration or qualification
requirements  of all such state  securities  laws are  available and the Company
shall have received an opinion of counsel  satisfactory  to the Company that the
proposed sale or other  disposition of such  securities may be effected  without
registration  under the 1933 Act and would not  result in any  violation  of any
applicable  state  securities laws relating to the registration or qualification
of securities for sale,  such counsel and such opinion to be satisfactory to the
Company.

     (c) All Shares  issued upon  exercise  hereof shall be stamped or imprinted
with a legends in  substantially  the following  form (in addition to any legend
required by state securities laws).

         THE SECURITIES  EVIDENCED BY THIS  CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE  SECURITIES  ACT OF 1933,  AS  AMENDED,  AND MAY NOT BE SOLD,
         TRANSFERRED,  ASSIGNED OR  HYPOTHECATED  UNLESS  THERE IS AN  EFFECTIVE
         REGISTRATION  STATEMENT  UNDER SUCH ACT COVERING SUCH  SECURITIES,  THE
         SALE IS MADE IN  ACCORDANCE  WITH RULE 144, OR THE COMPANY  RECEIVES AN
         OPINION  OF  COUNSEL  FOR THE  HOLDER OF THESE  SECURITIES,  REASONABLY
         SATISFACTORY  TO  THE  COMPANY,   STATING  THAT  SUCH  SALE,  TRANSFER,
         ASSIGNMENT  OR  HYPOTHECATION  IS  EXEMPT  FROM  THE  REGISTRATION  AND
         PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.

     (d) Holder  recognizes that investing in the Option and the Shares involves
a high degree of risk, and Holder is in a financial  position to hold the Option
and the Shares  indefinitely and is able to bear the economic risk and withstand
a complete loss of its investment in the Option and the Shares.  The Holder is a
sophisticated  investor  and is  capable of  evaluating  the merits and risks of
investing  in the  Company.  The Holder has had an  opportunity  to discuss  the
Company's  business,   management  and  financial  affairs  with  the  Company's
management,  has been given full and complete  access to information  concerning
the Company, and has utilized such access to its satisfaction for the purpose of
obtaining  information or verifying  information  and has had the opportunity to
inspect the Company's operation. Holder has had the opportunity to ask questions
of, and receive  answers  from the  management  of the  Company  (and any person
acting on its behalf)  concerning  the Option and the Shares and the  agreements
and transactions  contemplated hereby, and to obtain any additional  information
as Holder may have requested in making its investment decision.

                                       5
<PAGE>

                  (e) Holder  acknowledges and represents:  (i) that he has been
afforded the  opportunity to review and is familiar with the business  prospects
and finances of the Company and has based his  decision to invest  solely on the
information  contained  therein  and has  not  been  furnished  with  any  other
literature,  prospectus or other information except as included in such reports;
(ii) he is at least 21 years of age;  (iii) he has  adequate  means of providing
for his  current  needs  and  personal  contingencies;  (iv) he has no need  for
liquidity  for his  investment  in the Option or Shares;  (v) he  maintains  his
domicile  and is not a  transient  or  temporary  resident at the address on the
books and records of the Company; (vi) all of his investments and commitments to
non-liquid  assets and similar  investments  are,  after his  acquisition of the
Option and Shares,  will be  reasonable in relation to his net worth and current
needs;  (vii) he  understands  that no federal or state  agency has  approved or
disapproved the Option or Shares or made any finding or  determination as to the
fairness of the Option and Common Stock for investment; and (viii) he recognizes
that the Common Stock is not presently  eligible for public trading and that the
Company has made no representations,  warranties, or assurances as to the future
trading value of the Common Stock,  whether a public market will develop for the
resale of the Common Stock, or if developed whether it will continue.

         8.       RESERVATION AND ISSUANCE OF STOCK; PAYMENT OF TAXES.

                  (a) The  Company  covenants  that  during  the term  that this
Option is exercisable, the Company will reserve from its authorized and unissued
Common  Stock a  sufficient  number of shares to provide for the issuance of the
Shares  upon the  exercise of this  Option,  and from time to time will take all
steps necessary to amend its Certificate of Incorporation to provide  sufficient
reserves of shares of Common Stock issuable upon the exercise of the Option.

                  (b) The Company  further  covenants  that all shares of Common
Stock  issuable upon the due exercise of this Option will be free and clear from
all taxes or liens,  charges and security  interests created by the Company with
respect to the issuance thereof,  however, the Company shall not be obligated or
liable for the  payment of any taxes,  liens or charges of Holder,  or any other
party  contemplated  by Section 7, incurred in  connection  with the issuance of
this  Option or the  Common  Stock upon the due  exercise  of this  Option.  The
Company agrees that its issuance of this Option shall  constitute full authority
to its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the shares of Common Stock upon
the exercise of this Option.  The Common Stock issuable upon the due exercise of
this Option,  will, upon issuance in accordance  with the terms hereof,  be duly
authorized, validly issued, fully paid and non-assessable.

                  (c) Upon  exercise of the Option,  the Company  shall have the
right to require  the Holder to remit to the  Company  an amount  sufficient  to
satisfy  federal,  state  and local tax  withholding  requirements  prior to the
delivery of any certificate for Shares of Common Stock purchased pursuant to the
Option, if in the opinion of counsel to the Company such withholding is required
under applicable tax laws.

                  (d) If  Holder  is  obligated  to pay the  Company  an  amount
required to be withheld under  applicable tax withholding  requirements  may pay
such amount (i) in cash; (ii) in the discretion of the Board of Directors of the
                                       6
<PAGE>

Company,  through  the  delivery to the  Company of  previously-owned  shares of
Common Stock having an aggregate  Fair Market Value equal to the tax  obligation
provided  that the  previously  owned shares  delivered in  satisfaction  of the
withholding  obligations  must have been held by the Holder for at least six (6)
months;  (iii) in the  discretion  of the  Board of  Directors  of the  Company,
through the  withholding  of Shares of Common  Stock  otherwise  issuable to the
Holder in connection with the Option exercise;  or (iv) in the discretion of the
Board of Directors of the Company,  through a combination  of the procedures set
forth in subsections (i), (ii) and (iii) of this Section 8(d).

         9.       NOTICES.

                  (a)  Whenever   the   Exercise   Price  or  number  of  shares
purchasable  hereunder  shall be  adjusted  pursuant  to Section 11 hereof,  the
Company shall issue a certificate  signed by its Chief Financial Officer setting
forth, in reasonable detail,  the event requiring the adjustment,  the amount of
the  adjustment,  the method by which such  adjustment was  calculated,  and the
Exercise Price and number of shares purchasable hereunder after giving effect to
such  adjustment,  and shall cause a copy of such  certificate  to be mailed (by
first-class mail, postage prepaid) to the Holder of this Option.

                  (b) All notices,  advices and communications under this Option
shall be deemed to have been given, (i) in the case of personal delivery, on the
date of such delivery and (ii) in the case of mailing, on the third business day
following the date of such mailing, addressed as follows:

                           If to the Company:

                           BIO-key International, Inc.
                           1285 Corporate Center Drive
                           Suite 175
                           Eagan, MN 55121

                           With a copy to:

                           Buchanan Ingersoll Professional Corporation
                           11 Penn Center, 14th Floor
                           1835 Market Street
                           Philadelphia, Pa.  19103
                           Attn.:  Vincent A. Vietti, Esquire

                           and to the Holder:

                           Charles P. Romeo
                           29 Ginger Court
                           North Kingstown, RI 02852

                                       7
<PAGE>

         Either of the  Company or the  Holder may from time to time  change the
address  to  which  notices  to it are  to be  mailed  hereunder  by  notice  in
accordance with the provisions of this Paragraph 9.

         10.      AMENDMENTS.

                  (a) Any term of this  Option may be amended  with the  written
consent of the Company and the Holder. Any amendment effected in accordance with
this  Section 10 shall be binding  upon the Holder,  each future  holder and the
Company.

                  (b) No waivers of, or  exceptions  to, any term,  condition or
provision of this Option,  in any one or more instances,  shall be deemed to be,
or construed as, a further or continuing  waiver of any such term,  condition or
provision.

         11.      ADJUSTMENTS.  The number of Shares of Common Stock purchasable
hereunder and the Exercise Price is subject to adjustment from time to time upon
the occurrence of certain events, as follows:

                  11.1. REORGANIZATION, MERGER OR SALE OF ASSETS. If at any time
while this Option,  or any portion  thereof,  is outstanding and unexpired there
shall  be (i) a  reorganization  (other  than a  combination,  reclassification,
exchange or  subdivision  of shares  otherwise  provided for herein);  or (ii) a
merger or  consolidation  of the  Company in which the  shares of the  Company's
capital  stock  outstanding  immediately  prior to the merger are  converted  by
virtue of the merger  into other  property,  whether in the form of  securities,
cash  or  otherwise,  then,  as  a  part  of  such  reorganization,  merger,  or
consolidation,  lawful provision shall be made so that the holder of this Option
shall upon such  reorganization,  merger,  or  consolidation,  have the right by
exercising  such  Option,  to  purchase  the kind and number of shares of Common
Stock or other securities or property (including cash) otherwise receivable upon
such reorganization, merger or consolidation by a holder of the number of shares
of Common  Stock that might have been  purchased  upon  exercise  of such Option
immediately prior to such reorganization, merger or consolidation. The foregoing
provisions   of  this  Section  11.1  shall   similarly   apply  to   successive
reorganizations,  consolidations  or  mergers.  If the  per-share  consideration
payable to the Holder hereof for shares in connection with any such  transaction
is in a form other than cash or  marketable  securities,  then the value of such
consideration  shall  be  determined  in good  faith by the  Company's  Board of
Directors. In all events, appropriate adjustment (as determined in good faith by
the  Company's  Board  of  Directors)  shall be made in the  application  of the
provisions of this Option with respect to the rights and interests of the Holder
after the  transaction,  to the end that the  provisions of this Option shall be
applicable  after that event,  as near as reasonably  may be, in relation to any
shares or other  property  deliverable  after that event upon  exercise  of this
Option.

                  11.2. RECLASSIFICATION. If the Company, at any time while this
Option,  or  any  portion  thereof,   remains  outstanding  and  unexpired,   by
reclassification of securities or otherwise,  shall change any of the securities
as to which purchase rights under this Option exist into the same or a different
number of securities of any other class or classes, this Option shall thereafter
represent  the right to acquire such number and kind of securities as would have

                                       8

<PAGE>

been issuable as the result of such change with respect to the  securities  that
were subject to the purchase rights under this Option  immediately prior to such
reclassification  or other  change  and the  Exercise  Price  therefor  shall be
appropriately  adjusted,  all subject to further  adjustment as provided in this
Section 11.

                  11.3.  SPLIT,  SUBDIVISION OR  COMBINATION  OF SHARES.  If the
Company  at any  time  while  this  Option,  or  any  portion  thereof,  remains
outstanding and unexpired shall split, subdivide or combine the securities as to
which  purchase  rights  under this Option  exist,  into a  different  number of
securities  of the same  class,  the  Exercise  Price  and the  number of shares
issuable upon exercise of this Option shall be proportionately adjusted.

                  11.4.  ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER  SECURITIES
OR PROPERTY.  If while this Option, or any portion hereof,  remains  outstanding
and unexpired the holders of the  securities as to which  purchase  rights under
this Option  exist at the time shall have  received,  or, on or after the record
date fixed for the  determination  of eligible  Stockholders,  shall have become
entitled to receive,  without  payment  therefor,  other or additional  stock or
other  securities  or  property  (other  than  cash)  of the  Company  by way of
dividend,  then and in each  case,  this  Option  shall  represent  the right to
acquire,  in addition to the number of shares of the  security  receivable  upon
exercise of this Option,  and without  payment of any  additional  consideration
therefor,  the amount of such other or additional  stock or other  securities or
property  (other  than cash) of the Company  that such holder  would hold on the
date  of  such  exercise  had it been  the  holder  of  record  of the  security
receivable  upon exercise of this Option on the date hereof and had  thereafter,
during  the  period  from  the date  hereof  to and  including  the date of such
exercise,  retained  such  shares  and/or  all  other  additional  stock,  other
securities or property available by this Option as aforesaid during such period.

                  11.5  GOOD  FAITH.  The  Company  will not,  by any  voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed  hereunder by the Company,  but will at all times in
good faith assist in the carrying out of all the  provisions  of this Section 11
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holder of this Option against impairment.

         12.      FUNDAMENTAL  TRANSACTION.  For  purposes of this Section 12, a
"Fundamental  Transaction"  shall mean (i) the dissolution or liquidation of the
Company; (ii) a merger,  reorganization or consolidation in which the Company is
acquired by another person or entity (other than a holding company formed by the
Company);  (iii)  the  sale of all or  substantially  all of the  assets  of the
Company to any person or persons;  or (iv) the sale in a single transaction or a
series of related  transactions  of voting  stock  representing  more than fifty
percent  (50%) of the voting power of all  outstanding  shares of the Company to
any person or persons.  In the event of a Fundamental  Transaction,  this Option
shall automatically become immediately  exercisable in full, and shall be deemed
to have attained such status  immediately prior to the Fundamental  Transaction.
Holder  shall be given at least 15 days prior  written  notice of a  Fundamental
Transaction and shall be permitted to exercise any vested Options during this 15
day period  (including  those Options  vesting as a result of the  provisions of
this Section 12). In the event of a Fundamental  Transaction,  any Options which
are  neither  assumed or  substituted  for in  connection  with the  Fundamental
Transaction nor exercised as of the date of the Fundamental  Transaction,  shall
terminate  and  cease  to  be  outstanding  effective  as of  the  date  of  the
Fundamental Transaction,  unless otherwise provided by the Board of Directors of
the Company.

                                       9
<PAGE>

         13.      SEVERABILITY. Whenever possible, each provision of this Option
shall  be  interpreted  in  such  manner  as to be  effective  and  valid  under
applicable  law,  but if any  provision  of this  Option is held to be  invalid,
illegal or  unenforceable in any respect under any applicable law or rule in any
jurisdiction,  such invalidity,  illegality or unenforceability shall not affect
the validity,  legality or  enforceability of any other provision of this Option
in such  jurisdiction or affect the validity,  legality or enforceability of any
provision  in any  other  jurisdiction,  but  this  Option  shall  be  reformed,
construed  and  enforced in such  jurisdiction  as if such  invalid,  illegal or
unenforceable provision had never been contained herein.

         14.      GOVERNING  LAW.  The  corporate  law of the State of Minnesota
shall govern all issues and  questions  concerning  the  relative  rights of the
Company and its stockholders.  All other questions  concerning the construction,
validity,  interpretation and enforceability of this Option and the exhibits and
schedules  hereto shall be governed by, and  construed in accordance  with,  the
laws of the State of  Minnesota,  without  giving effect to any choice of law or
conflict of law rules or  provisions  (whether of the State of  Minnesota or any
other  jurisdiction)  that  would  cause  the  application  of the  laws  of any
jurisdiction other than the State of Minnesota.

         15.      JURISDICTION.  The Holder and the  Company  agree to submit to
personal  jurisdiction  and to waive any objection as to venue in the federal or
state  courts of  Minnesota.  Service of process on the Company or the Holder in
any action  arising  out of or relating to this  Option  shall be  effective  if
mailed to such party at the address listed in Section 9 hereof.

         16.      ARBITRATION.  If a dispute arises as to interpretation of this
Option,  it shall be decided  finally  by three  arbitrators  in an  arbitration
proceeding  conforming  to the  Rules of the  American  Arbitration  Association
applicable  to commercial  arbitration.  The  arbitrators  shall be appointed as
follows:  one by the  Company,  one by the  Holder and the third by the said two
arbitrators,  or,  if they  cannot  agree,  then the third  arbitrator  shall be
appointed by the American Arbitration Association. The third arbitrator shall be
chairman of the panel and shall be impartial.  The arbitration  shall take place
in Minneapolis,  Minnesota.  The decision of a majority of the arbitrators shall
be conclusively  binding upon the parties and final,  and such decision shall be
enforceable  as a judgment in any court of  competent  jurisdiction.  Each party
shall pay the fees and expenses of the  arbitrator  appointed by it, its counsel
and its witnesses.  The parties shall share equally the fees and expenses of the
impartial arbitrator.

         17.      CORPORATE POWER; AUTHORIZATION;  ENFORCEABLE OBLIGATIONS.  The
execution,  delivery  and  performance  by the Company of this  Option:  (i) are
within the  Company's  corporate  power;  (ii) have been duly  authorized by all
necessary or proper  corporate  action;  (iii) are not in  contravention  of the
Company's  certificate of incorporation or bylaws;  (iv) will not violate in any
material respect, any law or regulation, including any and all Federal and state
securities   laws,  or  any  order  or  decree  of  any  court  or  governmental
instrumentality;  and (v) will not, in any material  respect,  conflict  with or
result  in the  breach or  termination  of, or  constitute  a default  under any
agreement  or other  material  instrument  to which the Company is a party or by
which the Company is bound.

                                       10
<PAGE>

         18.      SUCCESSORS AND ASSIGNS. This Option shall inure to the benefit
of  and  be   binding  on  the   respective   successors,   assigns   and  legal
representatives of the Holder and the Company.

         19.      COUNTERPARTS.  This  Option  may be  executed  in two or  more
counterparts and delivered via facsimile, each of which shall be deemed to be an
original,  and all of  which  together  shall be  deemed  to be one and the same
instrument.

         IN WITNESS  WHEREOF,  the Company and Holder have caused this Option to
be executed on this 29th day of January, 2003.

                           BIO-KEY INTERNATIONAL, INC.

                           By:  /S/ THOMAS J. COLATOSTI
                               -------------------------
                               Thomas J. Colatosti
                               Chairman of the Board of Directors

AGREED AND ACCEPTED:

CHARLES P. ROMEO

/S/ CHARLES P. ROMEO
---------------------
     Signature

                                       11
<PAGE>

                               NOTICE OF EXERCISE

TO:  [_____________________________]

         (1) The undersigned  hereby elects to purchase _______ shares of Common
Stock of  BIO-KEY  INTERNATIONAL,  INC.  pursuant  to the terms of the  attached
Option,  and tenders  herewith  payment of the purchase price for such shares in
full in the following manner (please check one of the following choices):

    [ ]             In Cash

    [ ]             Cashless exercise through a broker; or

    [ ]             Delivery of previously owned Shares.

         (2) In exercising  this Option,  the  undersigned  hereby  confirms and
acknowledges  that the  shares of  Common  Stock to be  issued  upon  conversion
thereof are being acquired  solely for the account of the undersigned and not as
a nominee  for any other  party,  and for  investment  (unless  such  shares are
subject to resale pursuant to an effective prospectus), and that the undersigned
will not offer,  sell or  otherwise  dispose of any such shares of Common  Stock
except under circumstances that will not result in a violation of the Securities
Act of 1933, as amended, or any state securities laws.

         (3)      Please issue a certificate or certificates representing said
 shares of Common Stock in the name of the undersigned.

                                                CHARLES P. ROMEO

--------------------------                     -----------------------------
(Date)                                         (Signature)

<PAGE>

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