NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT ("Agreement") is dated January 27, 2003, by and between BIO-
KEY INTERNATIONAL, INC., a Minnesota corporation with headquarters located at 1285 Corporate Center
Drive, Suite 175, Eagan, Minnesota 55121(the "Company"), and THE SHAAR FUND LTD. (the "Investor").
W I T N E S S E T H
WHEREAS, the Company wishes to induce the Investor to loan to the Company, and the Investor is willing to
loan to the Company, subject to the terms and conditions set forth herein, up to Two Million Three Hundred and
Fifty Thousand and 00/100 ($2,350,000.00) Dollars.
NOW, THEREFORE, for and in consideration of the premises and the mutual agreement contained herein and
for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
(a) Subject to the terms and conditions set forth herein, the Investor shall loan up to Two Million Three Hundred
Fifty Thousand and 00/100 ($2,350,000.00) Dollars to the Company by advancing (the "Initial Advance") to the
Company $600,000 on the date hereof, and subject to the conditions set forth in Sections 1(b) and 1(c) below,
advancing (each an "Advance" and collectively, the "Advances") an additional $190,000 on the first day of each
month commencing February 1, 2003 and terminating October 1, 2003, and advancing an additional $40,000 on
November 1, 2003.
(b) Upon each funding of an Advance hereunder, the Company shall deliver a Certificate of an executive officer
of the Company, substantially in the form annexed hereto as Exhibit A.
(c) The Investor shall not be obligated to make any Advances under Paragraph 1(a) hereof, unless: (i) all
representations and warranties made by the Company shall be true and correct in all material respects, as if same
were made on the date of such Advance; (ii) the Company shall be in material compliance with all other
obligations under this Agreement, (iii) the proceeds of such Advance are u