Document:

EXHIBIT 10.20

                       SECURED CONVERTIBLE PROMISSORY NOTE

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

No.      N- 3                                              US $ 375,000
         ----                                              ------------

                           BIO-KEY INTERNATIONAL, INC.

         FOR VALUE RECEIVED, BIO-KEY INTERNATIONAL, INC., a Minnesota
corporation (the "Company"), promises to pay to THOMAS J. COLATOSTI, the
registered holder hereof (the "Holder"), the principal sum of Three Hundred
Seventy Five Thousand and 00/100 ($375,000) Dollars, previously advanced under
that certain Note Purchase Agreement dated January 27, 2003, as amended October
31, 2003, by and between the Company and The Shaar Fund Ltd. (the "Agreement"),
and to pay interest in arrears at the rate of 7% per annum on the outstanding
principal balance due hereunder. Accrual of interest shall commence on the first
such business day to occur after the date hereof and shall continue until
payment in full of the principal sum has been made or duly provided for on a 360
day basis. The principal of, and interest on, this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, at the address last appearing on
the Note Register of the Company as designated in writing by the Holder from
time to time. The Company will pay the principal of and interest upon this Note,
less any amounts required by law to be deducted, to the registered holder of
this Note to such date and addressed to such holder at the last address
appearing on the Note Register. The forwarding of such check shall constitute a
payment of principal and interest hereunder and shall satisfy and discharge the
liability for principal and interest on this Note to the extent of the sum
represented by such check plus any amounts so deducted.

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

<PAGE>

         This Note is subject to the following additional provisions:

         1. (a) Intentionally omitted.

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

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

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

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

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

         5. A. In the event that, on or before June 30, 2004 (the "Financing
Date"), the Company completes a private placement of equity securities of the
Company (the "Current Financing Securities") for an aggregate sale price of at
least $5,000,000 (the

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<PAGE>

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

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

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

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

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

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<PAGE>

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

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

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

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

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<PAGE>

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

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

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

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

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

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<PAGE>

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

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

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

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

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

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

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

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

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<PAGE>

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

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

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

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

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

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

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<PAGE>

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

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

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

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

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

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

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

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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<PAGE>

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

Dated: March 3, 2004

                                          BIO-KEY INTERNATIONAL, INC.

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

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

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

                                       9
<PAGE>

                           [FORM OF CONVERSION NOTICE]

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

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

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

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

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

Date ___________________________________________________________________

Signature ______________________________________________________________________
                                    [Name]

Address: _______________________________________________________________________

                                       10EXHIBIT 10.21

         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 December 10, 2010

         This certifies that, for value received, Michael W. DePasquale
("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 December 10, 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 500,000 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 $1.32(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 Option Issue Date.

<PAGE>

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

                 (i)  250,000 Shares shall vest on January 3, 2004;

                 (ii) 250,000 Shares shall vest on January 3, 2005

         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 (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; (iii) if the Shares
are eligible for public resale, 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;

                                        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 EMPLOYMENT; DEATH.

                 (a) If Holder shall cease to be employed by the Company, all
Options to which Holder is then entitled to exercise may be exercised only
within ninety (90) days after the termination of employment and prior to the
Option Termination Date or, if such termination was due to disability or
retirement (as hereinafter defined), within one (1) year after termination of
employment and prior to the Option Termination Date. Notwithstanding the
foregoing, in the event that any termination of employment shall be for Cause as
that term is defined in the Company's 1999 Stock Option Plan, then this Option
shall forthwith terminate.

                 (b) If Holder shall die while employed by 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 the termination of the
Holder's employment or death, as the case may be, than the Holder was entitled
to purchase thereunder at the time of the termination of the Holder's employment
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 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.

                                       3
<PAGE>

         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 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.

                                       4
<PAGE>

                 (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. The Holder of this Option, by acceptance hereof,
acknowledges that the Company has no obligation to file a registration statement
with the Securities and Exchange Commission or any state securities commission
to register the issuance of the Shares upon exercise hereof or the sale or
transfer of the Shares after issuance.

                 (c) All Shares issued upon exercise hereof shall be stamped or
imprinted with a legend 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.

                 (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

                                       5
<PAGE>

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) that the Company has made no representations, warranties, or
assurances as to (A) the future trading value of the Common Stock, (B) whether
there will be a public market for the resale of the Common Stock or (C) the
filing of a registration statement with the Securities and Exchange Commission
or any state securities commission to register the issuance of the Shares upon
exercise hereof or the sale or transfer of the Shares after issuance.

         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 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

                                       6
<PAGE>

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:
                Spector  Gadon & Rosen, PC
                1635 Market Street, 7th Floor
                Philadelphia, PA 19103
                Attn.:  Vincent A. Vietti, Esquire

                and to the Holder:
                Michael W. DePasquale
                704 Michael Drive
                Toms River, NJ 08753

         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.

                                       7
<PAGE>

         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
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.

                                       8
<PAGE>

             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.

         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

                                       9
<PAGE>

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.

         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.

                                       10
<PAGE>

         IN WITNESS WHEREOF, the Company and Holder have caused this Option to
be executed as of December 11, 2003.

                                          BIO-KEY INTERNATIONAL, INC.

                                          By:       /s/ Gary E. Wendt
                                              ---------------------------------
                                              Name:  Gary E. Wendt
                                                     --------------------------
                                              Title: Chief Financial Officer
                                                     --------------------------

AGREED AND ACCEPTED:

MICHAEL W. DEPASQUALE

/s/ Michael W. DePasquale
-------------------------
      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.

                                                [____________________________]

__________________________                      _____________________________
(Date)                                          (Signature)

                                       12

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