Document:

Exhibit
10.7.5

 

EMPLOYMENT AGREEMENT

 

EMPLOYMENT AGREEMENT
(the “Agreement”), dated as of March 6, 2006, between TRC Companies, Inc., a
Delaware Corporation (the “Company”), and Timothy D. Belton (the “Executive”)
(individually a “Party” and collectively the “Parties”).

 

1.             Effective Date and Employment
Term.

 

(a)           Effective
Date. This Agreement shall become effective upon the execution hereof by
the Parties (the “Effective Date”).

 

(b)           Employment
Term. Executive agrees to commence employment immediately and to commence
providing full-time services to the Company no later than April 3, 2006 (the “Commencement
Date”). The Effective Date shall be considered the date of employment for all
purposes. Executive’s employment with the Company shall continue for a period
of three (3) years from the Effective Date (the “Initial Term”), unless sooner
terminated pursuant to Section 4 this Agreement. Upon the expiration of such
Initial Term, it is anticipated that Executive will continue as an
employee-at-will upon terms and conditions generally available to individuals
at his level in the Company. The Initial Term and any successive term or period
of employment shall hereinafter be referred to as the “Employment Term.”

 

2.             Position, Reporting, and Other
Activities.

 

(a)           Position. Executive hereby
accepts employment with the Company as its Senior Vice President and Chief
Operating Officer as well as its Central Region General Manager in accordance
with the terms and conditions herein. Executive shall devote all of his full professional
time and attention (except for vacation, sick leave, and other excused periods
of absence) to the performance of the services customarily incident to such
offices and of such other duties as may be reasonably assigned to Executive
from time to time by the Company’s Chief Executive Officer (“CEO”). The Company
will provide office facilities, secretarial, and clerical support consistent
with customary practices of the Company. No later than twelve (12) months from
the Commencement Date, and contingent on Executive’s meeting mutually agreed
operational goals determined by Executive and the CEO and subject to the
approval of the Company’s Board of Directors, Executive shall be eligible to be
promoted to President of the Company.

 

(b)           Reporting. During the
Employment Term, Executive shall report to the Company’s CEO.

 

(c)           Other Activities. Except upon
the prior written consent of the Board of Directors of the Company (the “Board”),
during the Employment Term, Executive will not: (i) accept any other employment
or (ii) engage, directly or indirectly, in any other business activity (whether
or not for pecuniary advantage) that is competitive with, or that places him in
a competing position to, the Company. Personal passive investments and personal
business affairs not inconsistent with this Agreement, or teaching, writing or
publicly speaking, are permitted, so long as these activities do not interfere
or conflict with Executive’s duties hereunder.

 

 

3.             Compensation and Other Benefits.

 

(a)           Base Salary. In consideration
of the services to be rendered hereunder, beginning on the Commencement Date,
Executive shall be paid an initial annual base salary of $300,000.00, payable
in accordance with the Company’s payroll practices in effect during the course
of this Agreement. Upon Executive’s promotion to President of the Company,
Executive’s base annual salary shall increase to $350,000.00. The compensation
payable under this Subsection 3(a) shall be Executive’s “Base Salary”
hereunder.

 

(b)           Initial Bonus. Executive shall
be paid an initial bonus of $25,000 on the Commencement Date and two additional
payments of $25,000 each on the 91st and 181st day
respectively following the Commencement Date provided that he is employed by
the Company at those times. On mutual agreement between the Parties, these
additional payments can be made by restricted stock in lieu of cash.

 

(c)           Options. As of the Effective
Date, the Company grants to Executive ten-year options to purchase 75,000
shares of the Company’s common stock, par value $0.01 per share (the “Options”),
pursuant to the Company’s 2002 Restated Stock Option Plan (the “Plan”), which
grant shall be further evidenced by a separately executed Options Agreement as
provided in the Plan, the terms of which are specifically incorporated by
reference herein. The exercise price of such Options shall be the closing price
of the Company’s common stock on the Effective Date. In the event Executive’s
employment with the Company is terminated, Executive will only be permitted to
exercise such vested Options within the ninety (90) day period following such
termination. The Options will vest in equal one-third increments upon the
first, second, and third anniversaries of such grant and, to the extent
unvested, shall vest in their entirety upon a Change of Control, as defined
below, or upon termination of employment pursuant to Subsubsections 4(d) or
4(e) hereof.

 

(d)           Annual Bonuses. Executive
shall be paid a bonus of $150,000.00 in a single lump sum on the first
anniversary date of the Commencement Date. Executive shall also participate in
the Company’s Bonus Plan for senior management and be given consideration
thereunder in accordance with Executive’s role in the Company.

 

(e)           Periodic Options. Executive
will be eligible to receive stock options under the Plan and will be given
consideration thereunder in accordance with Executive’s role in the Company.

 

(f)            Benefits. Executive shall
have the right to participate in and to receive benefits from all present and
future life, vacation, accident, disability, medical, pension, and savings
plans and all similar benefits made available generally to executives of the
Company. The amount and extent of benefits to which Executive is entitled shall
be governed by any applicable benefit plan, as it may be amended from time to
time. Executive shall receive four (4) weeks’ each year of the Agreement, which
vacation shall accrue if not used in any year and be paid to Executive or
carried forward to subsequent years, consistent with Company policy. The Company
shall also carry D&O Liability Insurance coverage for the benefit of its
officers and directors, including Executive, and shall provide Executive with
such other insurance coverages provided its executives, officers, and
directors, from on and after the Effective Date.

 

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(g)           Automobile Allowance. During
the Employment Term, the Company shall provide Executive with an automobile
allowance of $700 per month to be increased consistent with policies applicable
to other executives of the Company. Executive will also receive a Company
gasoline credit card pursuant to its standard practice for officers.

 

(h)           Expenses. The Company shall
reimburse Executive for reasonable travel and other business expenses incurred
by Executive in the performance of his duties hereunder in accordance with the
Company’s general policies, as they may be amended from time to time during the
course of this Agreement, including, but not limited to, the cost of Executive’s
private club expenses up to $10,000 per fiscal year of the Employment Term.

 

4.             Termination of Employment.

 

(a)           By Death. If Executive dies
prior to the expiration of the Employment Term, his beneficiaries or estate
shall be paid within thirty (30) days of his death any unpaid Base Salary for
services rendered prior to the date of his death, any unreimbursed business
expenses, any accrued but unused vacation for the year of his death, any unpaid
automobile allowance through the month of Executive’s death, any balance on the
annual private club allowance, any awarded but unpaid bonus under Subsection
3(d), any earned but unpaid bonus under Subsection 3(b), any other
earned/awarded but unpaid bonuses, payment for any carried-over vacation from
prior years; provided that the manner and time frame in which the bonuses under
Subsection 3(d) for the remainder of the year of his death will be paid shall
be pursuant to Subsection 4(f). In addition, Executive agrees to enroll in the
Company’s life insurance plan, and the Company will provide a benefit to
Executive’s estate equal to the amount, if any, such life insurance benefit is
less than Executive’s annual Base Salary hereunder. Thereafter, the Company’s
obligations hereunder shall terminate.

 

(b)           By Disability. If Executive
becomes “Permanently Disabled” (as defined below) prior to the expiration of
the Employment Term, then the Company shall be entitled to terminate his
employment, subject to the requirements of applicable law, and Executive shall
be entitled to receive disability benefits in accordance with any applicable
disability policy maintained by the Company as of the date of such disability,
Executive agrees to enroll in such policy. In the event of such termination,
the Company will pay Executive the amount, if any, by which amounts paid under
such disability policy are less than Executive’s Base Salary hereunder for the
year in which he becomes disabled. Additionally, the Company shall pay to
Executive on the date of termination a lump sum payment for: bonuses pursuant
to Subsection 3(d) (if any, other than any awarded/earned but unpaid bonuses
under that Subsection) for the year of termination), pro rated pursuant to
Subsection 4(f); accrued but unused vacation for the year of termination;
payment for any unpaid Base Salary for services rendered prior to the date of
termination; unreimbursed business expenses; any unpaid automobile allowance
through the month of Executive’s termination; any balance on the annual private
club allowance; any earned but unpaid bonus under Subsection 3(b); any other
earned/awarded but unpaid bonuses; and payment for any carried-over vacation
from prior years; provided that the manner and time frame in which the bonuses
under Subsection 3(d) for the remainder of the year of his termination will be
paid shall be pursuant to Subsection 4(f), and thereafter the Company shall
have no further obligations to Executive hereunder other than to provide
Executive with the benefits as set forth in this subparagraph. For the purposes
of this subparagraph, Executive shall be deemed

 

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“Permanently Disabled”
when, and only when, the Company determines, after consultation with Executive’s
physician, that Executive suffers a physical or mental disability that prevents
Executive from performing the essential duties of his position with reasonable
accommodations as may be required by law: (i) for a period of one hundred
twenty (120) consecutive days or (ii) for an aggregate of one hundred fifty
(150) business days in any twelve (12) month period.

 

(c)           By the Company for Cause. If
the Company terminates Executive for “Cause” (as defined below), then the
Company shall pay Executive, within ten (10) days of the termination, his Base
Salary for services rendered prior to the date of termination; accrued but
unused vacation for the year of termination, and any vacation balance for prior
years; any unreimbursed business expenses; and any unpaid automobile allowance
through the month of termination; and thereafter the Company shall have no
obligations to Executive hereunder. For purposes of this Agreement, “Cause”
shall mean: (i) any act or omission that constitutes a material breach by
Executive of any of his obligations under this Agreement, or under any other
material agreement with, or material written policy of the Company, which act
or omission is not cured within thirty (30) days of the Company providing
Executive with reasonably detailed written notice of the act, omission, or
failure deemed to constitute Cause; (ii) the failure or refusal by Executive to
follow any lawful reasonable written direction of the Board of Directors or
CEO, which failure or refusal is not cured within thirty (30) days of the
Company providing Executive with reasonably detailed written notice of the
failure or refusal deemed to constitute Cause; (iii) the conviction of
Executive of a felony or a crime involving moral turpitude or the perpetration
by Executive of fraud; or (iv) any other willful act or omission by Executive,
which is or will be materially injurious to the financial condition or business
reputation of, or is otherwise materially injurious to, the Company, which act
or omission is not cured within thirty (30) days of the Company providing
Executive with reasonably detailed written notice of the act or omission deemed
to constitute Cause.

 

(d)           By Executive for Good Reason. Executive
may terminate, without liability, the Employment Term for “Good Reason” (as
defined below) upon advance written notice of thirty (30) business days to the
Company if such circumstance claimed to constitute Good Reason is not cured
within such 30-day period. Within ten (10) days after termination by Executive
for Good Reason, the Company shall pay to Executive a lump sum payment equal to
the sum of:  one year’s compensation at
the level of his Base Salary at the time of termination; a payment of $8400.00,
or a payment equal to 12 months’ payment of the then-current monthly automobile
allowance, under Subsection 3(g) herein; a payment of $10,000.00, or the
then-current annual allowance, under Subsection 3(h) herein for private club
expenses; any unpaid Base Salary for services rendered prior to termination of
employment; any accrued but unused vacation, pro rated to the date of
termination for the year of termination, and any unpaid balance for prior
years; any unreimbursed business expenses; any balance on the annual private
club allowance for the year in which the termination occurs; any unpaid
automobile allowance through the month of the termination; pro-rated bonuses
pursuant to Subsection 3(d) through the date of such termination; and a single
payment for the cost of continued coverage under the Company’s benefit plans
and the benefits described in Subsection 3(f) herein for a period of one (1)
year following the date of termination. Thereafter, the Company’s obligations
hereunder shall terminate. Thereafter, the Company’s obligations hereunder
shall terminate. For purposes of this Agreement, “Good Reason” shall exist if:
(i) there is a permanent assignment to Executive of a role materially
inconsistent with, or which constitutes a material adverse diminution in,

 

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Executive’s position,
duties, responsibilities, or status with the Company, or a material adverse
diminution in Executive’s reporting responsibilities, title, or offices; or
(ii) there is a material breach by the Company of this Agreement or any other
material agreement between the Company and Executive; or (iv) Executive is
required to relocate his principal place of employment to a location outside a
radius of 50 miles from the Company’s current offices in Houston, Texas.

 

(e)           By the Company other than for
Reasons of Death, Disability, or Cause. If the Company terminates Executive’s
employment for any reason other than death, disability, or Cause, then, within
ten (10) days after termination, the Company shall pay to Executive a lump sum
payment equal to the sum of: one year’s compensation at the level of his Base
Salary at the time of termination; a payment of $8400.00, or a payment equal to
12 months’ payment of the then-current monthly automobile allowance, under
Subsection 3(g) herein; a payment of $10,000.00, or the then-current allowance,
under Subsection 3(h) herein, for private club expenses; any unpaid Base Salary
for services rendered prior to termination of employment; any accrued but
unused vacation, and any unpaid balance for prior years; any unreimbursed
business expenses; any balance on the annual private club allowance; any unpaid
automobile allowance through the month of the termination; pro-rated bonuses
pursuant to Subsection 3(d) through the date of such termination; and a single
payment for the cost of continued coverage under the Company’s benefit plans
and the benefits described in Subsection 3(f) herein for a period of one (1)
year following the date of termination. Thereafter, the Company’s obligations
hereunder shall terminate.

 

(f)            Bonus Calculation. The pro
rata bonuses payable to Executive pursuant to Subsections 4(a), (b), (d), or
(e) for the fiscal year in which the termination occurs will be calculated at
the end of the fiscal year in question according to the following method and
paid to Executive during the calendar year following the fiscal year but in no
event later than the date on which the other executives awarded fiscal year
bonuses are paid those bonuses. The Company and/or Board shall determine the
amount that would have been paid to Executive as if he had remained employed
through the end of the fiscal year (the “Determined Bonus”) and multiply that
amount by the number of days of such fiscal year during which Executive was
employed by the Company divided by 365 days.

 

5.             Proprietary Information.

 

(a)           Defined. “Proprietary
Information” is all proprietary, secret, or confidential information pertaining
to the business of the Company.

 

(b)           General Restrictions on Use. Executive
agrees to hold all Proprietary Information in strict confidence and trust for
the sole benefit of the Company, and not, directly or indirectly, to disclose,
use, copy, publish, summarize, or remove from the Company’s premises any
Propriety Information except: (i) during the Employment Term to the extent
necessary to carry out Executive’s responsibilities under this Agreement; (ii)
to the extent that such Proprietary Information is generally available to the
public other than as a result of disclosure by Executive; and (iii) after
termination of the Employment Term as specifically authorized in writing by the
Board.

 

5

 

6.             No Assignment.

 

(a)           Neither this Agreement nor any right
or interest hereunder shall be assignable by Executive, his beneficiaries, or
legal representatives without the Company’s prior written consent; provided
that nothing in this Subsection 6(a) shall preclude Executive from designating
a beneficiary to receive, upon his death, any benefit payable hereunder, or the
executors, administrators, or other legal representatives of Executive’s estate
from assigning any rights hereunder to the person or persons entitled thereto.

 

(b)           Except as otherwise required by law,
without the Company’s prior written consent, no right to receive payments under
this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to exclusion,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null,
void, and of no effect.

 

(c)           The Company agrees that in any Change
of Control, as defined in Section 7 herein, the terms of this Agreement will
survive and will be assumed by any successor to the Company in such Change of
Control.

 

7.             Change of Control. For
purposes of this Agreement, “Change of Control” shall mean: (i) the merger or
consolidation of the Company with another entity, as a result of which the
Company will not be the surviving entity; (ii) the sale of all or substantially
all of the Company’s assets or all or substantially all of the assets of the
Company’s wholly-owned subsidiaries; or (iii) the acquisition, by an entity,
person, or group of beneficial ownership (as defined in Rule 13d-3 under the
Securities and Exchange Act of 1934) of the capital stock of the Company (other
than Peter Kellogg and or related entities) if, immediately after such
acquisition, such entity, person, or group is entitled to exercise more than
25% of the outstanding voting power of all capital stock of the Company
entitled to vote at elections of Directors.

 

8.             Section 409A Issues. Notwithstanding
any provision of this Agreement to the contrary, if at the time of Executive’s
termination of employment with the Company he is a “specified employee” as
defined in Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”),
then no payment or benefit will be provided with respect to such
termination until the earlier of (A) the date which is six months after
the date of Executive’s termination of employment and (B) the date of Executive’s
death. The first sentence of this Section shall apply only to the extent
required to avoid Executive’s incurrence of any additional tax,
interest, or penalties under Section 409A of the Code or any regulations
or Treasury guidance promulgated thereunder. In addition, if any provision of
this Agreement (or of any award of compensation) would cause Executive to incur
any additional tax, interest, or penalties under Section 409A of the Code
or any regulations or Treasury guidance promulgated thereunder, then
the Company shall reform such provision so that such tax, interest, or
penalties shall be avoided; provided that the Company shall (i) maintain,
to the maximum extent practicable, the original intent of the applicable
provision without violating the provisions of Section 409A of the Code and (ii)
notify and consult with Executive regarding such amendments or modifications
prior to the effective date of any such change.  In the event that the
Company causes the Executive to incur any additional tax, interest, or
penalties under Section 409A of the

 

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Code
or any regulations or Treasury guidance promulgated thereunder, the Company
shall indemnify Executive in the amount of any such amounts.

 

9.             Non-Interference. Executive
agrees that, during any period for which or related to which Executive is
receiving payments pursuant to Section 4 hereof, but, in any event, (other than
a termination by Executive for Good Reason) for no less than 12 months
following a termination of employment, Executive will not, without the prior
written consent of the Company, directly or indirectly, solicit, induce, or
attempt to solicit or induce any employee, agent, or other representative or
associate of the Company to terminate its relationship with the Company or in
any way interfere with such a relationship.

 

10.           Notices. All notices,
requests, claims, demands, and other communications under this Agreement shall
be in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) or confirmed facsimile to the
Parties at the following addresses (or at such address for a party as shall be
specified by like notice):

 

If to
the Company:

 

TRC
Companies, Inc.

21 Griffin Road North

Windsor, Connecticut 06095

Facsimile: (860) 298-6399

Attn:  General Counsel

 

If to
Executive:

 

Timothy
D. Belton

5428 Braeburn Drive

Bellaire, TX  77401

Facsimile: (713) 662-3582

 

With
a copy to:

 

Nancy
Morrison O’Connor

Bracewell & Giuliani, LLP

2000 K Street, N.W.

Washington, DC     20006

Facsimile: (202) 223-1225

 

11.           Right to Rescind. It shall be
the right of either Party to this Agreement, in its or his sole discretion, to
rescind its or his assent to this Agreement within seventy-two (72) hours of
its or his execution thereof by giving the other Party written notice thereof
and, in the event of such a rescission by either Party, this Agreement shall
immediately be and remain null and void as if never executed, and neither Party
shall have any obligations or rights hereunder.

 

12.           Entire Agreement. The terms of
this Agreement are intended by the Parties to be the final expression of their
agreement with respect to the employment of Executive by the Company and may
not be contradicted by evidence of any prior or contemporaneous agreement.

 

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The Parties further
intend that this Agreement shall constitute the complete and exclusive
statement of its terms and that no extrinsic evidence whatsoever, except as
specifically referenced herein, may be introduced in any judicial,
administrative, or other legal proceeding involving this Agreement.

 

13.           Amendments; Waivers. This
Agreement may not be modified, amended, or terminated except by an instrument
in writing, signed by Executive and by a duly authorized representative of the
Company other than Executive. By an instrument in writing similarly executed,
either Party may waive compliance by the other Party with any provision of this
Agreement that such other Party was or is obligated to comply with or perform;
provided that such waiver shall not operate as a waiver of, or estoppel with
respect to, any other or subsequent failure. No failure to exercise and no
delay in exercising any right, remedy, or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, remedy,
or power hereunder preclude any other or further exercise thereof, or the
exercise of any other right, remedy, or power provided herein, or by law or in
equity.

 

14.           Confidentiality. Executive
agrees that the terms and conditions of this Agreement are confidential and
shall not be disclosed by Executive to any third parties, other than  Executive’s lawyers and other professional
advisors, unless such disclosure is required by law.

 

15.           Governing Law. The validity,
interpretation, enforceability, and performance of this Agreement shall be
governed by and construed in accordance with the law of the State of Texas
without giving effect to its conflict of laws principles.

 

16.           Executive Acknowledgment. Executive
acknowledges: (i) that he has consulted with or has had the opportunity to
consult with independent counsel of his own choice concerning this Agreement
and has been advised to do so by the Company and that he has been advised by
the Company that it will pay him a maximum of $15,000.00 for fees and expenses
in connection with securing said advice; and (ii) that he has read and
understands the Agreement, is fully aware of its legal effect, and has entered
into it freely based on his own judgment.

 

17.           Binding Effect. This Agreement
shall be binding upon and shall inure to the benefit of the Company and its
respective successors and assigns, but the rights and obligations of Executive
are personal and may not be assigned or delegated without the Company’s prior
written consent. By its execution of the Agreement, the Company represents that
the signatory is authorized to and intends to so bind the Company.

 

18.           Arbitration. Any dispute or
controversy between the Parties arising out of or under this Agreement,
Executive’s employment with the Company, or the termination thereof, including
without limitation, claims under any federal, state, or local statute
preventing discrimination, shall not be decided in court, but instead shall be
submitted to final, binding arbitration before the American Arbitration
Association (the “AAA”) in Houston, TX. The National Rules for Resolution of
Employment Disputes shall be used by the AAA to resolve any disputes between
the Parties. Each Party shall bear its own expenses arising under this
arbitration provision.

 

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19.           Counterparts. This Agreement
may be signed in counterparts, each of which shall be deemed an original and
all of which taken together shall constitute one and the same agreement, and
delivered by facsimile transmission confirmed promptly thereafter by actual
delivery of executed counterparts.

 

20.           Indemnification. To the fullest extent permitted by the
Delaware corporation law, and comparably with other executive officers, the
Company hereby agrees to indemnify, during and after the Employment Term, the
Executive from and against all loss, costs, damages, and expenses including,
without limitation, legal expenses of counsel reasonably selected by Executive
to represent his interests (which expenses the Company will, to the extent so
permitted, advance to Executive as the same are incurred) arising out of or in
connection with the fact that Executive is or was an officer, employee, or
agent of the Company or serving in such capacity for another affiliate or
subsidiary at the request of the Company.

 

21.           Severability.          To the extent any provision of this
Agreement or portion thereof shall be invalid or unenforceable, it shall be
considered deleted therefrom and the remainder of such provision and of this
Agreement shall be unaffected and shall continue in full force and effect.

 

The Parties have duly
executed this Agreement as of the date first written above.

 

	
   

  	
  TRC COMPANIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Christopher P. Vincze

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Christopher
  P. Vincze

  
	
   

  	
   

  	
  Title:

  	
  Chairman,
  President and

  
	
   

  	
   

  	
   

  	
  Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Timothy D. Belton

  	
   

  
	
   

  	
  Timothy
  D. Belton

  
						

 

9EXHIBIT 10.86

 

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

 

This certifies that, for value received,            
(“Holder”), is entitled, subject to the terms set forth below, to purchase from
BIO-key International, Inc., a Delaware corporation (the “Company”), shares
of the common stock, $.0001 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. EST on              (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               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) 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.

 

 

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

 

(i)                                                   Shares
shall vest on         ;
and

 

(ii)                                                Shares
shall vest on         .

 

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;

 

(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 

 

2

 

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 any employment agreement by and between the
Holder and the Company, 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

 

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

 

(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

 

furnished with any
other literature, prospectus or other information except as included in such
reports; (ii) he maintains his domicile and is not a transient or
temporary resident at the address on the books and records of the Company; (iii) 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 (iv) 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 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) 

 

6

 

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.

  
	
   

  	
  300 Nickerson Road

  
	
   

  	
  Marlborough, MA 01752

  
	
   

  	
   

  
	
   

  	
  With a copy to:

  
	
   

  	
   

  
	
   

  	
  Choate, Hall & Stewart

  
	
   

  	
  Two International Place

  
	
   

  	
  Boston, MA 02110

  
	
   

  	
  Attn.: Charles Johnson

  
	
   

  	
   

  
	
   

  	
  and to the Holder:

  
	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Address:

  
	
   

  	
  City/State/Zip:

  

 

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

 

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

 

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 or
subsidiary 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 

 

9

 

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 Commonwealth of
Massachusetts 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 Commonwealth of Massachusetts, without giving
effect to any choice of law or conflict of law rules or provisions
(whether of the Commonwealth of Massachusetts or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the Commonwealth
of Massachusetts.

 

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 Massachusetts. 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 Middlesex County, Massachusetts. 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.                                 Intentionally omitted.

 

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

 

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

 

	
   

  	
  BIO-key International, Inc.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Chief Financial
  Officer

  
					

 

AGREED AND ACCEPTED:

 

	
  Holder:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature

  	
   

  

 

11

 

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):

 

	
   

  	
  o

  	
  In Cash

  
	
   

  	
   

  	
   

  
	
   

  	
  o

  	
  Cashless exercise through a broker; or

  
	
   

  	
   

  	
   

  
	
   

  	
  o

  	
  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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