Exhibit 10.3

 

COLLATERAL SHARING AGREEMENT

 

This AGREEMENT, dated as of July 10, 2019 by and among Versant Funding LLC (the
“Earlier Creditor”), Lind Global Macro Fund, LP (the “Later Creditor”) and
BIO-key International, Inc. (“Debtor”).

 

RECITALS

 

A.     In connection with the factoring relationship, the Debtor is indebted to
the Earlier Creditor and may in the future incur new obligations to the Earlier
Creditor, direct and indirect, absolute and contingent (the existing obligations
and any new obligations hereinafter collectively, the “Earlier Creditor
Obligations”), secured by all assets of the Debtor together with the products
and proceeds thereof (the “Collateral”).     

 

B.     The Later Creditor has agreed to extend financial accommodations to the
Debtor secured by the Collateral on the condition that its security interest in
the Later Creditor Collateral of the Debtor is senior to that of the Earlier
Creditor and that the security interest in the Debtor’s Accounts is junior to
the security interest of the Earlier Creditor solely with respect to obligations
owing to the Earlier Creditor pursuant to that certain Factoring Agreement dated
as of December 20, 2011 (as amended and in effect from time to time, the
“Factoring Agreement”) by and between the Debtor and the Earlier Creditor (the
obligations owing under the Factoring Agreement that relate to the arrangements
of the type contemplated by the Factoring Agreement as in effect on the date
hereof being hereinafter referred to as the “Earlier Creditor Factoring
Obligations”).

 

C.     The Creditors are executing this Agreement to adjust their lien
priorities with respect to the Later Creditor Collateral of the Debtor.

 

NOW, THEREFORE, in consideration of the premises, and intending to be legally
bound hereby, the Creditors hereby agree as follows:

 

AGREEMENT

 

1.   Definitions and Index to Definitions.

 

1.1.     The following terms shall have the meanings set forth below:

 

1.1.1.     “Chosen State” – New York.

 

1.1.2.     “Collateral” - see Recital A.

 

1.1.3.     “Creditors” - the Earlier Creditor and the Later Creditor.

 

1.1.4.     “Debtor” – see Preamble.

 

1.1.5.      “Earlier Creditor” - see Preamble.

 

1.1.6.     “Earlier Creditor Factoring Obligations” - see Recital B.

 

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1.1.7.      “Earlier Creditor Obligations” - see Recital A.

 

1.1.8.     “Later Creditor” - see Preamble.

 

1.1.9.     “Later Creditor Collateral” – All Assets of the Debtor other than the
Accounts.

 

1.1.10.     “Later Creditor Obligations” - obligations of the Debtor to the
Later Creditor absolute and contingent secured directly or indirectly by the
Collateral.

 

1.1.11.     “Later Creditor Security Interest” - any security interest of Later
Creditor in the Collateral.

 

1.2.     All capitalized terms used but not defined herein shall have the
meaning as set forth in the Uniform Commercial Code then in effect.

 

2.     Priority. So long as this Agreement shall be in effect and
notwithstanding the terms or provisions of any agreement or arrangement which
either Creditor may now or hereafter have with the Debtor or any rule of law and
irrespective of the time, order or method of attachment or perfection of any
security interest or the recordation or other filing in any public record of any
financing statement, any Later Creditor Security Interest shall be senior to the
security interest of the Earlier Creditor in the Later Creditor Collateral and
any security interest of the Earlier Creditor in the Accounts which secure any
Earlier Creditor Obligations other than the Earlier Creditor Factoring
Obligations and the Earlier Creditor Security Interest shall be senior to the
security interest of the Later Creditor in the Accounts which secure the Earlier
Creditor Factoring Obligations. Furthermore, the Later Creditor releases any and
all security interest that it has in the Accounts of the Debtor that are
purchased by Earlier Creditor pursuant to the Factoring Agreement.

 

3.     Enforcement of Security Interest.

 

3.1.     The Earlier Creditor shall have no right to take any action with
respect to the Later Creditor Collateral or with respect to any Accounts which
secure any Earlier Creditor Obligations other than the Earlier Creditor
Factoring Obligations whether by judicial or non-judicial foreclosure, or
otherwise, unless and until all Later Creditor Obligations have been fully and
indefeasibly paid, all commitments have been terminated and the Later Creditor
has terminated all of its security interests therein.

 

3.2.     Any proceeds of the Later Creditor Collateral or any Accounts which
secure any Earlier Creditor Obligations other than the Earlier Creditor
Factoring Obligations, or proceeds thereof (whether or not identifiable),
received by the Earlier Creditor shall be held in trust and paid to the Later
Creditor promptly upon receipt in like form with appropriate endorsement if
applicable, for the account of the Debtor.

 

3.3.     The Later Creditor shall have no right to take any action with respect
to the Accounts which secure the Earlier Creditor Factoring Obligations, whether
by judicial or non-judicial foreclosure, notification to the Debtor's account
debtors, or otherwise, unless and until all Earlier Creditor Factoring
Obligations have been fully and indefeasibly paid, all commitments under the
Factoring Agreement have been terminated and the Earlier Creditor has terminated
all of its security interests therein.

 

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3.4.     Any proceeds of the Accounts which secure the Earlier Creditor
Factoring Obligations, or proceeds thereof (whether or not identifiable),
received by the Later Creditor shall be held in trust and paid to the Earlier
Creditor promptly upon receipt in like form with appropriate endorsement if
applicable, for the account of the Debtor.

 

4.     Inducement. This Agreement is entered into as a specific inducement to
the Later Creditor to provide credit accommodations to the Debtor.

 

5.     Waiver of Marshaling. The Creditors irrevocably waives any right to
compel the other Creditor to marshal assets of the Debtor.

 

6.     Applicable Law. This Agreement shall be governed by the law of the Chosen
State.

 

7.     Benefits Of This Agreement. This Agreement is solely for the benefit of
and shall bind the Creditors and their respective successors and assigns and no
other entity shall have any right, benefit, priority, or interest hereunder.

 

8.     Modification. This Agreement shall be subject to modification only in
writing, signed by the Creditors.    Later Creditor and Earlier Creditor may
each modify, amend or terminate any of the documents evidencing the obligations
created by their respective documents without the consent of the other party,
but such modifications shall in no way affect the priority of the Earlier
Creditor or Later Creditor in the Collateral.

 

9.     Term. This Agreement shall continue so long as both Creditors have a
security interest in the Collateral. At such time as either the Earlier Creditor
Factoring Obligations or the Later Creditor Obligations are paid in full, the
applicable creditor shall promptly execute or file any documentation necessary
to terminate that party’s lien on their applicable collateral.

 

10.     Enforcement. In the event that either party finds it necessary to retain
counsel in connection with the interpretation, defense, or enforcement of this
Agreement, the prevailing party shall recover its reasonable attorney’s fees and
expenses from the unsuccessful party. It shall be presumed (subject to rebuttal
only by the introduction of competent evidence to the contrary) that the amount
recoverable is the amount billed to the prevailing party by its counsel and that
such amount will be reasonable if based on the billing rates charged to the
prevailing party by its counsel in similar matters.

 

11.     Notice.

 

11.1.     All notices shall be deemed given upon the first to occur of (i) the
date of delivery if deposited thereof in a receptacle under the control of the
United States Postal Service and sent certified mail, return receipt requested,
(ii) transmittal by electronic means to a receiver under the control of such
party with electronic acknowledgement by the recipient that such transmission
was received; or (iii) delivery to a nationally recognized overnight delivery
service, properly addressed and prepaid.

 

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11.2.     For the purposes hereof, notices hereunder shall be sent to the
following addresses, or to such other address as may have been advised by the
recipient to the sender.

 

 

 

EARLIER CREDITOR

 

Address: 2500 N. Military Trail   Suite 465   Boca Raton, Florida 33431 Officer:
Mark D. Weinberg, C.E.O. Email: mweinberg@versantfunding.com

 

LATER CREDITOR

 

Address: c/o The Lind Partners LLC   370 Lexington Avenue, Suite 1900   New
York, New York 10018    Officer: Jeff Easton Email: jeaston@thelindpartners.com
and   notice@thelindpartners.com

 

12.     Counterparts and Electronic Transmission. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute the same
agreement. Delivery of an executed counterpart of this Agreement by facsimile or
other electronic method of transmission shall be equally as effective as
delivery of an original manually executed counterpart.

 

13.     Waiver. Later Creditor and Earlier Creditor each waive against the other
any rights either may have to claim that the enforceability of this Agreement
may be affected by any subsequent modification, release, extension, or other
change, material or otherwise, in the Earlier Creditor Factoring Obligations,
Later Creditor Obligations or the Collateral.

 

14.     Miscellaneous. Earlier Creditor agrees that beginning July 1, 2019, it
will purchase no more than Five-Hundred Thousand ($500,000.00) Dollars of
Accounts from the Debtor during each ninety (90) day period.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.

 

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EARLIER CREDITOR:

Versant Funding LLC

      By:                                                                 Name: 
Mark D. Weinberg   Title:     C.E.O.

 

     

 

 

 

LATER CREDITOR:

Lind Global Macro Fund, LP

      By:                                                                    
Name:                                            Title:                        
                           DEBTOR: BIO-key International, Inc.       By:       
                                                             Name:   Michael W.
DePasquale          Title:     CEO                                       

 

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