REVOLVING CREDIT LOAN RIDER #1

(to Loan and Security Agreement dated as of April 4, 2014)

 

MACKINAC COMMERCIAL CREDIT, LLC (“Lender”)

 

This Revolving Credit Loan Rider and the attached Term Sheet (collectively, the
“Rider”) sets forth the terms upon which Lender will make certain Advances to
NANOFILM, LTD., an Ohio limited liability company (“Borrower”) under the
Revolving Credit Loan and is a supplement to and is hereby incorporated into
that Loan and Security Agreement between Borrower and Lender, as amended (the
“Agreement”).

 

1. Definitions. Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Loan Agreement. As used herein:

 

A. “Eligible Finished Goods” means finished goods Inventory that is Eligible
Inventory.

 

B. “Eligible Inventory” means Inventory (net of freight and container costs)
which Lender, in its sole discretion, shall deem Eligible Inventory, based on
such considerations as Lender may, from time to time, deem appropriate. Without
limiting Lender’s discretion, Borrower understands the following Inventory is
not Eligible Inventory:

 

  (i) Inventory which is work-in-process;         (ii) Inventory which is
obsolete or damaged, or not useful;         (iii) Inventory in which Lender does
not have a first perfected security interest or in which any other Person claims
a security interest or lien;         (iv) Inventory which is in transit or in
locations other than the Collateral Locations described in the Agreement;      
  (v) Inventory which is at a Collateral Location with respect to which Lender
does not have a Landlord’s Agreement acceptable to Lender;         (vi)
Inventory which is uninsured or under-insured;         (vii) Inventory which is
held on consignment for or is subject to a bailment arrangement with any other
Person;         (viii) Inventory which is trade-in Inventory or returned goods;
        (ix) Inventory which is used in packaging or shipping of Inventory; and
        (x) Inventory which is nonconforming to standards imposed by any
governmental agency regulating such Inventory or the sale or use thereof.

 

C. “Eligible Raw Material” means raw material Inventory that is Eligible
Inventory.

 

 

 

 

D. “Eligible Receivable” is a Receivable arising in the ordinary course of
Borrower’s business from the sale or lease of goods which have been delivered to
and accepted by the Receivable Debtor. The following are not Eligible
Receivables:

 

  (i) sales by Borrower to any affiliate, to any person controlled by an
affiliate or any subsidiary of Borrower;         (ii) an account which is due or
unpaid more than one hundred twenty (120) days after the original invoice date;
        (iii) if twenty-five (25%) percent or more of the invoices of a single
Receivable Debtor are greater than one hundred twenty (120) days old, then all
invoices from that Receivable Debtor are ineligible;         (iv) an account in
which Lender does not have a first perfected security interest or in which any
other Person claims a security interest or lien;         (v) an account to the
extent it exceeds the credit limit set by Lender for that account;         (vi)
the Receivable Debtor is also a creditor or supplier of Borrower or has disputed
liability with respect to such account or such account is subject to any right
of set off by the Receivable Debtor;         (vii) the Receivable Debtor is a
debtor under Federal Bankruptcy Laws or has filed or filed against it an
application for relief under such laws;         (viii) the Receivable Debtor has
suspended business;         (ix) a receiver, trustee, liquidator or custodian
has been appointed for the Receivable Debtor or a significant part of its
assets;         (x) the account arises from a sale to a Receivable Debtor
located outside of the United States, except for sales to Receivable Debtors
located in Canada not to exceed $100,000.00 in the aggregate;         (xi) the
account arises from a sale to a Receivable Debtor located in any state requiring
the filing of a Notice Of Business Activities Report or similar document in
order to bring suit or otherwise enforce its remedies against such Receivable
Debtor in the courts or through any judicial process of such state, unless
Borrower is qualified to do business in such states, has properly filed a Notice
of Business Activities Report as appropriate for the then applicable year, or is
exempt from such filing requirement;         (xii) the account arises from a
bill and hold, guaranteed sale, sell or return, sale on approval, consignment or
any other repurchase or return basis;         (xiii) the Receivable Debtor is
the United States of America or any department thereof;

 

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  (xiv) the goods giving rise to such account have not been delivered to or
accepted by the Receivable Debtor;         (xv) the total unpaid accounts of a
Receivable Debtor exceeds a credit limit determined by Lender in its sole
discretion;         (xvi) there is an agreement with the Receivable Debtor for
any deduction beyond those shown on the face of the invoice related to such
account; or         (xvii) Lender, in its sole and absolute discretion, believes
that the collection of the account is doubtful or will be delayed.

 

E. “Inventory” means inventory as defined in Article 9 of the Uniform Commercial
Code.

 

F. “Inventory Report” means a report of all Inventory of Borrower as of the
close of business on the Business Day that is no earlier than the Business Day
immediately preceding the date of delivery thereof to Lender and which is in
form and content acceptable to Lender in its sole discretion.

 

G. “Receivable” means an account as defined in Article 9 of the Uniform
Commercial Code.

 

H. “Receivable Debtor” means an account debtor of Borrower.

 

I. “Receivables Aging” means an aged listing of all Receivables of Borrower as
of the close of business on the Business Day that is no earlier than the
Business Day immediately preceding the date of delivery thereof to Lender,
including an aging column for 90-120 days and which is otherwise in form and
content acceptable to Lender in its sole discretion.

 

J. All terms defined in the Agreement which are used herein shall have the
meanings as defined in the Agreement, unless specifically defined otherwise
herein.

 

2. Revolving Credit Loan Advances.

 

A. Advances. Subject to the terms of the Agreement, Lender may, in its sole
discretion and upon Borrower’s request, make Advances to Borrower in an amount
(hereinafter referred to as the “Gross Availability”) which is the lesser of (i)
the Maximum Loan Amount as set forth on the Term Sheet or (ii) an amount equal
to the sum of (x) the applicable Percentage Advance Rate as set forth on the
Term Sheet times the face amount (less maximum discounts, credits and allowances
which may be taken by or granted to Receivable Debtors in connection therewith)
of Eligible Receivables; plus (y) the lesser of (1) the Inventory Cap as set
forth on the Term Sheet, or (2) the sum of (A) the applicable Percentage Advance
Rate as set forth on the Term Sheet times the value of Borrower’s Eligible Raw
Materials (less freight and container costs) calculated at the lower of cost or
market value, plus (B) the applicable Percentage Advance Rate as set forth on
the Term Sheet times the value of Borrower’s Eligible Finished Goods (less
freight and container costs) calculated at the lower of cost or market value;
which Advances Borrower may borrow, repay and reborrow during the term of the
Agreement. All Advances and amounts payable pursuant to this Rider shall
constitute part of the Obligations.

 

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B. Reserves. Lender shall have a continuing right to deduct reserves in
determining the Gross Availability (“Reserves”), and to increase and decrease
such Reserves from time to time, if and to the extent that, in Lender’s sole
discretion, such Reserves are necessary to protect Lender against any state of
facts which does, or would, with notice or passage of time or both, constitute
an Event of Default or have an adverse effect on any Collateral. Lender may, at
its option, implement Reserves by designating as ineligible a sufficient amount
of accounts or inventory which would otherwise be Eligible Receivables or
Eligible Inventory so as to reduce Gross Availability by the amount of the
intended Reserve.

 

C. Borrowing Procedure. With each request for an Advance, Borrower will submit
to Lender copies of invoices (but only on Lender’s request), a Receivables
Aging, an Inventory Report, together with such certifications and other
documents and information as Lender shall request, all of which shall be
satisfactory to Lender, in its sole discretion.

 

D. Interest Rate. Borrower shall pay Lender interest on the daily outstanding
balance of the Revolving Credit Loan account at a per annum rate equal to the
interest rate as set forth in the Agreement (the “Effective Rate”). In the event
any payments of principal are not paid when due or declared due, whether at
maturity, by acceleration, by lapse of time or otherwise, including any fees,
costs or expenses advanced or paid by Lender, the principal balance shall bear
interest thereafter, at Lender’s option, and without affecting any of Lender’s
rights and remedies provided for in the Agreement, this Rider or any promissory
note evidencing the Obligations, at a per annum rate equal to the Default Rate
as set forth on the Term Sheet. Any change in any of the above interest rates
resulting from a change in the LIBOR Rate shall become effective immediately
with each change in the LIBOR Rate. Interest charges shall be computed on the
basis of a year of 360 days for the actual days elapsed in a month and, except
as set forth in Section 12 of the Agreement, will be payable to Lender as set
forth in the Note.

 

E. Principal Payments. In the event that the principal amount outstanding under
the Revolving Credit Loan is in excess (for whatever reason) of the amount of
the Gross Availability, Borrower agrees to remit to Lender within one (1)
business day such amount as may be necessary to reduce the total outstanding
amount to the amount of the Gross Availability. All principal and interest due
under the Revolving Credit Loan shall be due upon termination of the Agreement.

 

F. Use of Proceeds. Borrower shall use the proceeds of the Revolving Credit Loan
solely for the purposes as set forth in the Agreement and on the attached Term
Sheet.

 

3. Receivables Collection.

 

A. Cash Collateral Account. All cash, checks, drafts and other instruments for
the payment of money (properly endorsed, where required, so that such items may
be collected by Lender), which may be received by Borrower at any time in full
or partial payment of any of the Receivables (“Remittances”) shall be deposited
to a non-interest bearing deposit account in Lender’s name (the “Cash Collateral
Account”) as security for payment of the Obligations. Borrower shall have no
right to withdraw any funds deposited in the Cash Collateral Account. In the
event that Borrower repays the Obligations in full at any time hereafter, the
balance in the Cash Collateral Account or such other accounts holding the
proceeds thereof will be delivered to Borrower five (5) business days after the
date of pay off, unless Lender shall (acting in its sole discretion) notify
Borrower to the contrary.

 

B. Lockbox. The Revolving Credit Loan shall be on a Lockbox Collection Basis.
Therefore, Borrower shall direct, and/or Lender may advise, all Receivable
Debtors to mail all Remittances to the post office box (“Lockbox”) specified by
Lender, or as set forth in a lockbox service agreement or other similar
agreement with Lender’s bank which provides for the collection and/or processing
of Remittances (“Lockbox Agreement”). Borrower shall be responsible for all fees
and charges assessed by Lender in connection with its operation of the Lockbox
and/or by its bank pursuant to the Lockbox Agreement. Remittances received in a
Lockbox shall be deposited into the Cash Collateral Account and disbursed to
Lender pursuant to the Lockbox Agreement, and Lender shall apply such
Remittances toward payment of the Obligations, whether or not then due, in such
order of application as Lender may determine, or Lender may release all or any
of such balance to Borrower; provided, however, for purposes of computing
interest on the outstanding principal of the Revolving Credit Loan, principal
paydowns shall be deemed to have been made after the elapse of the number of
Float Days set forth on the Term Sheet. If, notwithstanding Borrower’s
directions to Receivable Debtors, Borrower receive Remittances directly from
Receivable Debtors, Borrower shall not commingle such Remittances with any of
its other funds or property, but will hold same separate and apart from its own
funds or property, and in trust for Lender until delivery is made to Lender’s
bank.

 

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4. Inventory.

 

A. Return of Inventory. If at any time prior to Borrower’s Default under the
Agreement or this Rider, any Receivable Debtor returns any Inventory to Borrower
in the ordinary course of Borrower’s business, Borrower shall promptly determine
the reason for such return and issue a credit memorandum to the Receivable
Debtor in the appropriate amount. Borrower agrees to give Lender prompt notice
of the return of such Inventory. In the event any attempted return occurs after
Borrower’s Default hereunder, Borrower shall (i) hold the returned Inventory in
trust for Lender, (ii) segregate all returned Inventory from all of Borrower’s
other property and (iii) conspicuously label the returned Inventory as Lender’s
property.

 

B. Sale of Inventory. Until its Default under the Agreement or this Rider,
Borrower may, in any lawful manner, sell Inventory, but only in the ordinary
course of its business, provided, however, its sale shall not cause a breach of
its warranties and representations as set forth in this Rider. Borrower
acknowledges that any sale of Inventory in the ordinary course of business does
not include a transfer of partial or total satisfaction of Indebtedness.

 

5. Covenants.

 

A. Receivables. Unless or until Lender notifies Borrower in writing that Lender
has dispensed with any one or more of the following requirements, Borrower
shall:

 

  (i) Immediately upon its learning thereof, inform Lender in writing of the
rejection of goods by any Receivable Debtor, delays in delivery of goods,
nonperformance of contracts and of any assertion of any claims, offsets or
counterclaims by any Receivable Debtor;         (ii) Not permit or agree to any
extension, compromise or settlement or make any change or modification of any
kind or nature with respect to any Receivables, including any of the terms
relating thereto;         (iii) Immediately upon its learning thereof, furnish
to and inform Lender of all information relating to the financial condition of
any Receivable Debtor;         (iv) Immediately upon its learning thereof,
notify Lender in writing of those Receivables which are not Eligible
Receivables;         (v) Keep all goods returned by any Receivable Debtor and
all goods repossessed or stopped in transit by Borrower from any Receivable
Debtor segregated from Borrower’s other property, holding the same as trustee
for Lender until otherwise directed in writing by Lender;

 

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  (vi) Not re-date any invoice or sale;         (vii) Not make sales on extended
dating terms beyond that customary in Borrower’s industry; and         (viii)
Immediately deliver to Lender any promissory note, trade acceptance or any other
instrument for the payment of money evidencing any Receivables and endorsed to
Lender’s order.

 

B. Inventory. Unless or until Lender notifies Borrower in writing that Lender
has dispensed with any one or more of the following requirements, Borrower
shall:

 

  (i) not remove the Inventory from the Collateral Locations described in the
Agreement;         (ii) promptly, and in any event within five (5) days of the
receipt thereof, deliver such certification schedules and information relating
to the Inventory and Eligible Inventory as Lender may reasonably request;      
  (iii) keep correct and accurate records itemizing and describing the kind,
type, quality and quantity of Inventory, Borrower’s costs, therefore, selling
price thereof, and the daily withdrawals therefrom and additions thereto, all of
which records shall be available to Lender, its officers, employees and agents
upon demand for inspection and copying;         (iv) concurrently, with the
delivery of any of the Inventory to a bailee, warehousemen or similar party,
deliver to Lender, in form acceptable to Lender, warehouse receipts in Lender’s
name evidencing the storage of Inventory;         (v) allow Lender to have the
right upon the demand and at any time or times hereafter during Borrower’s usual
business hours to inspect and examine Inventory and to check and test the same
as to quality, quantity, value and condition. Borrower agrees to reimburse
Lender for its reasonable costs and expenses in doing so;         (vi) conduct a
physical count of the Inventory at such intervals as Lender may request and
promptly supply Lender with a copy of such counts accompanied by a report of the
value (valued at the lower of cost or market value) of the Inventory;        
(vii) if sales of Inventory are made for cash, Borrower shall immediately
deliver to Lender the identical checks, cash or other forms of payment which
Borrower receives (only in the event Lender elects to place Borrower on a
dominion of funds arrangement or on Default);         (viii) not acquire
consigned Inventory.

 

6

 

 

6. Representations.

 

A. Receivables. With respect to all Receivables now in existence or hereafter
created, Borrower warrants and represents to Lender that, except as disclosed to
Lender in writing:

 

  (i) all Receivables are genuine in all respects, are what they purport to be
and are not evidenced by a judgment;         (ii) all Receivables represent
undisputed, bona fide transactions completed in accordance with the terms and
provisions contained in the invoices and purchase orders relating thereto;      
  (iii) the amounts shown on all certifications provided to Lender, Borrower’s
books and records and all invoices and statements delivered to Lender with
respect thereto are actually and absolutely owing to Borrower and are not
contingent for any reason;         (iv) if Lender has requested Borrower to do
so, all payments thereon following such request have been or shall be turned
over to Lender by Borrower;         (v) there are no setoffs, counterclaims or
disputes existing or asserted with respect thereto and Borrower has not made any
agreement with any Receivable Debtor thereof for any deduction or discount of
the sum payable thereunder except regular discounts allowed by Borrower in the
ordinary course of its business for prompt payment;         (vi) there are not
now and there shall not be at any time or times hereafter any facts, events or
occurrences which in any way impair the validity or enforcement thereof or tend
to reduce the amount payable thereunder from the amounts thereof as shown on the
certifications provided to Lender, Borrower’s books and records and the invoices
and statements delivered to Lender with respect thereto;         (vii) to the
best of Borrower’s knowledge, all Receivable Debtors thereof have the capacity
to contract and are solvent;         (viii) the goods sold or transferred and
the services furnished, giving rise thereto are not subject to a lien, claim,
encumbrance or security interest except Lender’s security interest;         (ix)
Borrower has no knowledge of any fact or circumstance which would impair the
validity or collectability thereof;         (x) to the best of Borrower’s
knowledge, there are no proceedings or actions which are threatened or pending
against any Receivable Debtor which might result in any material adverse change
in its financial condition; and         (xi) with respect to those Receivables
upon which Borrower relies for Advances, all are Eligible Receivables.

 

7

 

 

B. Inventory. With respect to all Inventory now in existence or hereafter
required, Borrower warrants and represents to Lender that, except as disclosed
to Lender in writing:

 

  (i) Inventory is kept only at the Collateral Locations described in the
Agreement;         (ii) The amount shown on all certifications provided to
Lender and on Borrower’s books and records is actually owned by Borrower without
any claim or ownership by any other Person; and         (iii) With respect to
that Inventory upon which Borrower relies for Advances, all is Eligible
Inventory.

 

7. Notification and Collection. Borrower understands that Lender will, upon
Default:

 

A. At Lender’s option, notify all Receivable Debtors that Receivables have been
assigned to Lender, that Lender has a security interest therein and payment is
to be made to the Lockbox;

 

B. To the extent Lender has not given notice previously, Lender may request all
Receivable Debtors to make payments on Receivables directly to Lender;

 

C. If deemed necessary by Lender, enforce payment and collect in Lender’s name,
by legal proceedings or otherwise, Borrower’s Receivables and to charge the
collection costs and expenses to Borrower’s Loan Account; and

 

D. If deemed necessary by Lender, take control in any manner of any cash or
non-cash proceeds of Receivables and of any rejected, returned, stopped in
transit or repossessed goods relating to Receivables.

 

8. Power of Attorney. Borrower hereby irrevocably designates, makes, constitutes
and appoints Lender (and any agents designated by Lender) as its true and lawful
attorney, with power, without notice to Borrower and at such time or times
hereafter as Lender may in its sole discretion determine, in Lender’s name or
Lender’s name and at Borrower’s expense:

 

A. To demand payment of Receivables;

 

B. To enforce payment of Receivables, by legal proceedings or otherwise;

 

C. To exercise all of Borrower’s rights and remedies with respect to the
collection of Receivables;

 

D. To settle, adjust, compromise, extend or renew any Receivables;

 

E. To settle, adjust or compromise any legal proceedings brought to collect
Receivables;

 

F. To sell or assign any Receivables upon such terms, for such amount and at
such time as Lender deems advisable;

 

G. To discharge and release any Receivables;

 

8

 

 

H. To prepare, file and sign Borrower’s name on any proof of claim in bankruptcy
or similar document against any Receivable Debtor;

 

I. To prepare, file and sign Borrower’s name on any financing statement, notice
of lien, claim of mechanic’s lien, assignment or satisfaction of lien or
mechanic’s lien, or similar document in connection with any Receivables;

 

J. To do all acts and things necessary, in Lender’s sole discretion, to fulfill
Borrower’s obligations under the Agreement and this Rider;

 

K. To endorse Borrower’s name upon any checks, notes, acceptances, money orders
or other forms of payment and to deposit the same in the Cash Collateral Account
on account of Borrower’s Obligations;

 

L. To endorse Borrower’s name upon any chattel paper, document, instrument,
freight bill, bill of lading or similar document or agreement relating to any
Receivables or goods pertaining thereto;

 

M. To sign Borrower’s name to verifications of Receivables and notices thereof
to Receivable Debtors; and

 

N. To notify the post office authorities, after Borrower’s Default under this
Agreement, to change the address for delivery of Borrower’s mail to an address
designated by Lender and to open such mail for purposes of collecting
Receivables.

 

Borrower ratifies and approves all acts of Lender and Lender’s designee. Neither
Lender nor Lender’s designee will be liable for any acts or omissions nor for
any error of judgment or mistake of fact or law, except for willful misconduct.
This power, being coupled with an interest, is irrevocable until the Obligations
have been fully satisfied.

 

9. Costs and Expenses. All costs and expenses incurred by Lender in any manner
or way with respect to Lender’s enforcement of its rights and remedies under the
Agreement or this Rider or with respect to Lender’s collection of Receivables or
protection of its security interest in Receivables and the Collateral, whether
by suit or otherwise, or with respect to Lender’s notification of Receivable
Debtors or verification of Receivables shall be a part of the Obligations and
payable on demand. Without limiting the generality of the foregoing, such costs
and expenses include reasonable attorneys’ fees, court costs, court reporting
expenses, long distance telephone charges, postage, telegram charges, wire
transfer expenses, expenses of auditors, collectors, clerks and investigators,
expenses for travel, lodging and food and expenses for repairing, altering or
supplying goods, if any, necessary to fulfill in whole or in part any purchase
order of any Receivable Debtor from which the Receivables involved have arisen.

 

10. Termination. This Rider and Lender’s and Borrower’s respective obligations
hereunder shall terminate upon payment in full of the Obligations or upon
Borrower’s execution and Lender’s acceptance of a subsequently numbered and/or
dated Term Sheet and Revolving Credit Loan Rider.

 

[Signatures on following page]

 

9

 

 

  BORROWER:         NANOFILM, LTD.,   an Ohio limited liability company        
By: /s/ Scott E. Rickert     Scott Rickert   Its: Chief Executive Officer      
  LENDER:         MACKINAC COMMERCIAL CREDIT, LLC   a Michigan limited liability
company         By: /s/ Edward P. Lewan     Edward P. Lewan   Its: Chief Lending
Officer

 

 

 

 

TERM SHEET

 

ATTACHMENT TO

REVOLVING CREDIT LOAN RIDER #1

DATED AS OF APRIL 4, 2014

TO LOAN AND SECURITY AGREEMENT

DATED AS OF APRIL 4, 2014

 

Paragraph   Provisions   Terms           2(A)(i)   Maximum Loan Amount  
$1,500,000.00           2(A)(ii)   Percentage Advance Rate         Eligible
Receivables   85%     Eligible Raw Materials   40%     Eligible Finished Goods  
50%     Inventory Cap   $500,000.00           2(D)   Default Rate   5.0% plus
the Effective Rate           2(F)   Use of Proceeds   To refinance indebtedness
owed to Fifth Third Bank and working capital           3(B)  

Lockbox Collection Basis

Float Days

 

Yes

Five (5) banking days

 

Borrower understands that this Term Sheet defines certain terms used in the
Revolving Credit Loan Rider (the “Rider”) to which this Term Sheet is attached.
Borrower has read the Rider and this Term Sheet and fully understands their
relationship. By executing both documents, Borrower acknowledges the foregoing.

 

[Signatures on following page]

 

TS-1

 

 

BORROWER:   LENDER:           NANOFILM, LTD.,   MACKINAC COMMERCIAL CREDIT, LLC,
an Ohio limited liability company   a Michigan limited liability company        
  By: /s/ Scott Rickert   By: /s/ Edward P. Lewan    Scott Rickert     Edward P.
Lewan Its: Chief Executive Officer   Its: Chief Lending Officer

 

TS-2

 

 

REVOLVING CREDIT LOAN NOTE

 

$1,500,000.00

 

Due Date: The earlier of Demand or

April 4, 2015Dated: April 4, 2014

 

FOR VALUE RECEIVED, the undersigned (whether one or more in number, “Borrower”,
and if two or more in number, shall be jointly and severally bound), promises to
pay to the order of MACKINAC COMMERCIAL CREDIT, LLC, a Michigan limited
liability company (the “Lender”), at its office at 260 E. Brown Street,
Birmingham, Michigan 48009, or at such other place as Lender may designate in
writing, the principal sum of One Million Five Hundred Thousand and 00/100
Dollars ($1,500,000.00), or such lesser sum as shall have been advanced (each an
“Advance”) by Lender to Borrower pursuant to that certain Loan and Security
Agreement dated as of the date hereof between Borrower and Lender (which,
together with all amendments and modifications thereof, is hereinafter referred
to as the “Loan Agreement”), plus interest as hereinafter provided, all lawful
money of the United States of America, in accordance with the terms hereof.
Capitalized terms used but not defined herein shall have the meanings ascribed
to such terms in the Loan Agreement.

 

The unpaid principal balance of this Revolving Credit Loan Note (the “Note”)
shall bear interest computed upon the basis of a year of 360 days for the actual
number of days elapsed in a month, at a rate of interest (the “Effective Rate”)
which is equal to seven percent (7.0%) above the LIBOR Rate (hereinafter
defined), as such rate shall vary from time to time, upwards and downwards, and
each such LIBOR Rate change shall cause an identical change in the Effective
Rate to occur effective immediately. “LIBOR Rate” means the London interbank
offered rate for three months, published from day to day in the Wall Street
Journal in its Money Rates column. Should such publication not continue to
publish LIBOR, Lender will select a comparable announced rate.

 

Interest on all principal amounts advanced by Lender from time to time and
unpaid by Borrower shall be paid on the first (1st) day of the month following
the initial Advance under this Note, and on the same day of each month
thereafter until the Due Date, upon which date the entire unpaid principal
balance of this Note, together with all accrued and unpaid interest, shall be
due and payable in full. Borrower shall pay to Lender a late charge of five
percent (5.0%) of any monthly payment not received by Lender within ten (10)
calendar days after said payment is due, which late charge shall be payable on
the next monthly payment date or on Demand. In addition to the foregoing,
Borrower shall pay to Lender on the first (1st) day of each month with respect
to the prior calendar month or portion thereof, the amount, if any, necessary to
pay the fees as set forth in the Loan Agreement.

 

Advances of principal, repayment, and readvances may be made under this Note
from time to time, upon the terms set forth in the Loan Agreement and said Loan
Agreement is incorporated herein by reference. Mandatory repayments of principal
before the Due Date shall be made by Borrower to Lender pursuant to the Loan
Agreement. If, prior to the Due Date, Borrower pays the balance of the Note
after Demand or terminates the Loan, whether voluntarily or involuntarily,
Borrower shall pay to Lender as liquidated damages and as compensation for the
costs of being prepared to make funds available under the Loan Agreement, a
termination fee as set forth in the Loan Agreement.

 

All Advances made hereunder shall be charged to the Loan Account in Borrower’s
name on Lender’s books, and Lender shall debit to such account the amount of
each Advance made to, and credit to such account the amount of each repayment
made by Borrower. Lender shall furnish Borrower with a monthly statement of
Borrower’s Loan Account, which statement shall be deemed to be correct, accepted
by, and binding upon Borrower, unless Lender receives a written statement of
exceptions from Borrower within thirty (30) days after such statement has been
furnished. Borrower expressly assumes all risks of loss or delay in the delivery
of any payments made by mail, and no course of conduct or dealing shall affect
Borrower’s assumption of these risks.

 

 

 

 

Upon the Due Date, which Borrower acknowledges may be upon Demand, Lender,
without prior notice to Borrower, may declare the entire unpaid principal
balance of this Note and all accrued interest, together with all other
indebtedness of Borrower to Lender, to be immediately due and payable. Upon the
occurrence of any Default specified in the Loan Agreement, or on Demand, among
other remedies set forth in the Loan Agreement, the unpaid principal balance of
this Note shall bear interest at a rate which is five percent (5.0%) greater
than the Effective Rate otherwise applicable. After Default or Demand, Lender
may apply its own indebtedness or liability to Borrower to any indebtedness due
under this Note. Borrower agrees to pay all of the Lender’s costs incurred in
the collection of this Note as provided in the Loan Agreement. Upon the
occurrence of a Default, Lender may exercise all rights and remedies as set
forth in the Loan Agreement (such rights and remedies being incorporated in this
Note by this reference as though fully set forth herein) and applicable law.

 

Acceptance by Lender of any payment in an amount less than the amount then due
shall be deemed an acceptance on account only. Upon any Default or Demand,
neither the failure of the Lender promptly to exercise its right to declare the
outstanding principal and accrued unpaid interest hereunder to be immediately
due and payable, nor the failure of the Lender to demand strict performance of
any other obligation of the Borrower or any other person who may be liable
hereunder, shall constitute a waiver of any such rights, nor a waiver of such
rights in connection with any future default on the part of the Borrower or any
other person who may be liable hereunder.

  

Borrower acknowledges that no Default is necessary for Lender to make Demand.

 

Borrower and all endorsees, sureties and guarantors hereof hereby jointly and
severally waive presentment for payment, demand, notice of non-payment, notice
of protest or protest of this Note, and Lender diligence in collection or
bringing suit, and do hereby consent to any and all extensions of time,
renewals, waivers or modifications as may be granted by Lender with respect to
payment or any other provisions of this Note, and to the release of any
collateral or any part thereof, with or without substitution. The liability of
Borrower under this Note shall be absolute and unconditional, without regard to
the liability of any other party. This Note and all rights and obligations
hereunder shall be governed by the laws of the State of Michigan.

 

In no event whatsoever shall the interest rate and other charges charged
hereunder exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in the final determination, deem applicable
hereto. In the event that a court determines that Lender has received interest
or other charges hereunder in excess of the highest rate applicable hereto,
Lender shall either, in its sole discretion, promptly apply such amounts to the
principal due hereunder or refund such amount to Borrower and the provisions
herein shall be deemed amended to provide for such permissible rate.

 

BORROWER ACKNOWLEDGES THAT ITS LEGAL COUNSEL HAS ADVISED IT THAT (A) THERE MAY
BE A CONSTITUTIONAL RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY CLAIM, DISPUTE
OR LAWSUIT ARISING OUT OF THIS NOTE, AND (B) SUCH CONSTITUTIONAL RIGHT MAY BE
WAIVED. AFTER CONSULTATION WITH ITS COUNSEL OF CHOICE (OR OPPORTUNITY TO
CONSULT), WHICH HAS INCLUDED ITS COUNSEL’S REVIEW OF THIS NOTE, BORROWER
BELIEVES THAT IT IS IN ITS BEST INTEREST IN THIS COMMERCIAL TRANSACTION TO WAIVE
SUCH RIGHT. ACCORDINGLY, BORROWER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL AND
FURTHER AGREES THAT THE BEST FORUM FOR HEARING ANY CLAIM, DISPUTE OR LAWSUIT, IF
ANY, ARISING IN CONNECTION WITH THIS NOTE OR ITS RELATIONSHIP WITH LENDER, SHALL
BE A COURT OF COMPETENT JURISDICTION SITTING WITHOUT A JURY.

 

 

 

 

This Note is issued pursuant to the terms of the Loan Agreement and is secured
by the Collateral, as defined in the Loan Agreement. All of the terms, covenants
and conditions of the Loan Agreement are hereby made a part of this Note and are
hereby incorporated by reference.

  

 
BORROWER:         NANOFILM, LTD.,   an Ohio limited liability company        
By: /s/ Scott E. Rickert   Name: Scott Rickert   Its: Chief Executive Officer

 

 

 

 

LOAN AND SECURITY AGREEMENT

 

This Loan And Security Agreement (“Agreement”), effective as of April 4, 2014,
is made by and between NANOFILM, LTD., an Ohio limited liability company (the
“Borrower”) and MACKINAC COMMERCIAL CREDIT, LLC, a Michigan limited liability
company (together with its successors and assigns, the “Lender”).

 

1. DEFINITIONS. As used herein:

 

(a) “Advances” means loans to Borrower under this Agreement and the Revolving
Credit Loan Rider attached hereto, evidenced by the Revolving Credit Note.

 

(b) “Affiliate” means, with respect to any Person other than an individual, any
other Person (i) directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person or (ii) directly or
indirectly owning or holding ten percent (10%) or more of the Ownership
Interests in such Person. For purposes of this definition, “control” when used
with respect to any Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
Ownership Interests, by contract or otherwise; and the terms “controlling” and
“controlled” have meanings correlative to the foregoing.

 

(c) “APNT” means Applied Nanotech Holdings, Inc., a Texas corporation.

 

(d) “Borrower” means nanoFILM, Ltd., an Ohio limited liability company, also
styled from time to time as “Nanofilm, Ltd.”.

 

(e) “Capital Expenditures” shall mean, as to any Person, with respect to any
period, the aggregate of all expenditures (whether paid in cash or accrued as
liabilities and including capital lease obligations) by such Person during such
period that are required by GAAP, consistently applied, to be included in or
reflected by the property, plant and equipment or similar fixed asset accounts
(or intangible accounts subject to amortization) on the balance sheet of such
Person.

 

(f) “Collateral” means all of Borrower’s assets and property, real and personal,
tangible and intangible, whether presently owned or hereafter acquired or
arising, including without limitation:

  

  (i) accounts (whether or not earned by performance), letter of credit rights,
chattel paper, contracts, contract rights, instruments, documents and supporting
obligations (individually and collectively referred to as “Receivables”);      
  (ii) general intangibles (including, without limitation, tax refunds, tax
refund claims, trade names, goodwill, trademarks, copyrights, processes,
patents, patent rights, patent applications, licenses, inventories, royalties,
and/or commissions and permits, choses-in-action, judgments and tort claims)
(individually and collectively referred to as “Intangibles”);         (iii)
goods, inventory, merchandise and other personal property, wherever located, to
be furnished under any contract of service or held for sale or lease, all raw
materials, work in process, finished goods and materials and supplies of any
kind, nature or description which are or might be used or consumed in Borrower’s
business or used in connection with the manufacture, packing, shipping,
advertising, selling or finishing of such goods, merchandise and other personal
property including without limitation such goods which give rise to any
Receivables and which goods have been returned to or repossessed or stopped in
transit by Borrower (“Inventory”);

  

 

 

 

  (iv) tangible goods (other than Inventory), machinery, equipment and fixtures
including without limitation office machines, tools, dies, furniture, and
vehicles together with all accessions, parts and appurtenances thereto
appertaining or attached or kept or used or intended for use in connection
therewith, and all substitutions, renewals, improvements and replacements of and
additions thereto (sometimes hereinafter individually and collectively referred
to as “Equipment”);         (v) property now or at any time hereafter in
Lender’s possession (including monies, deposit accounts, claims and credit
balances);         (vi) all deposit accounts and investment property;        
(vii) all interests in any lease of real property or personal property, whether
as a lessor or lessee, including all options to purchase any leased property,
and all leasehold improvements;         (viii) books, blueprints, drawings and
records related to any of the foregoing as described in subsection (i) through
(vii) above;

 

and all proceeds (including proceeds of any insurance policies, including
business interruption or business income insurance policies) and products of and
accessions to all the foregoing described property in which Borrower has any
right, title or interest.

 

(g) “Commitment Fee” As defined and set forth on the Term Sheet.

 

(h) “Default” shall have the meaning set forth in Section 11 of this Agreement.

 

(i) “Demand” or “Demanded” shall mean the act of giving written notice by Lender
to Borrower demanding payment in full of the Obligations, which demand shall be
effective (i) if a Default then exists, when such written notice is given, (ii)
if a Default shall occur within the ten (10) business day period following the
date such written notice is given, when the Default occurs, or (iii) if no
Default has occurred, on the eleventh (11th) business day following the date
such written notice is given.

 

(j) “Due Diligence Investigation Fee” means all fee deposits of Borrower with
Lender for the payment of Lender’s costs and expenses of its due diligence
investigation of Borrower relating to the Loan.

 

(k) “EBITDA” shall mean net income plus, to the extent deducted from revenues in
determining net income, (a) interest expense, (b) expense for taxes paid or
accrued, (c) depreciation, (d) amortization and other non-cash charges and (e)
extraordinary losses (as determined in accordance with GAAP), minus, to the
extent included in net income, extraordinary gains (as determined in accordance
with GAAP), all calculated for Borrower and Borrower’s Subsidiaries on a
consolidated basis.

 

(l) “Fiscal Year” means beginning on January 1 and ending on December 31.

 

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(m) “Fixed Charges” shall mean, with reference to any period, without
duplication, cash, interest expense, plus prepayments and scheduled principal
payments on Indebtedness made during such period, plus expense for taxes paid in
cash, plus dividends or distributions paid in cash, plus capital lease payments,
plus unfinanced Capital Expenditures, all calculated for Borrower and Borrower’s
Subsidiaries on a consolidated basis.

  

(n) “Indebtedness” means all of Borrower’s present and future obligations,
liabilities, debts, claims and indebtedness, contingent, fixed or otherwise,
however evidenced, created, incurred acquired, owing or arising, whether under
written or oral agreement, operation of law, or otherwise, and includes, without
limiting the foregoing: (i) the Obligations, (ii) obligations and liabilities of
any Person secured by a lien, claim, encumbrance, or security interest upon
property owned by Borrower, even though Borrower has not assumed or become
liable therefor, (iii) obligations and liabilities created or arising under any
lease (including capitalized leases) or conditional sales contract or other
title retention agreement with respect to property used or acquired by Borrower,
even though the rights and remedies of the lessor, seller or lender are limited
to repossession, (iv) all unfunded pension fund obligations and liabilities, and
(v) deferred taxes.

 

(o) “Guarantor” means Scott E. Rickert, an individual.

 

(p) “LIBOR Rate” means the London interbank offered rate for three months,
published from day to day in the Wall Street Journal in its Money Rates column.
Should such publication not continue to publish LIBOR, Lender will select a
comparable announced rate.

 

(q) “Loan Account” means an account maintained by Lender for the Loan.

 

(r) “Loan” means the Revolving Credit Loan.

 

(s) “Loan Documents” means collectively, this Agreement, the Note, and all other
documents and instruments executed in connection therewith.

 

(t) “Merger” means a merger transaction pursuant to which (I) all of the voting
stock of APNT is exchanged for 38% of the Class A voting stock of PEN, and APNT
is merged into PEN, and (II) all of the voting power of NanoHolding is exchanged
for Class A and Class B voting stock constituting in the aggregate 98% of the
voting power for PEN and the Class Z membership interests of Zeiss are exchanged
for non-voting stock (with the right to appoint one director) of PEN, all
pursuant to the Merger Agreement.

 

(u) “Merger Agreement” means the Agreement and Plan of Merger and Exchange
between APNT, PEN and NanoMerger Sub, NanoHolding and Zeiss dated March 10,
2014, as amended.

 

(v) “Nanofilm Equityholders” means (i) Alan Evans, Charles Evans Family Trust,
Malcolm Myers and Bruce Vereecken and (ii) Rickert Family Limited Partnership,
respectively, the beneficial holders, as of the date hereof, of one hundred
percent (100%) of the outstanding Class A stock and 100% of the outstanding
Class B stock of NanoHolding.

 

(w) “Nanofilm Voting Control” means voting control of NanoHolding and, in turn,
Nanofilm, Ltd., for all purposes.

 

(x) “NanoHolding” means NANOHOLDING INC., a Delaware corporation, formed on
February 24, 2014, and the holder of 100% of the outstanding stock of Borrower.

 

3

 

 

(y) “NanoMerger Sub” means NanoMerger Sub, Inc., a Delaware corporation, wholly
owned by PEN.

 

(z) “Note” means the Revolving Credit Note.

 

(aa) “Obligations” means all present and future loans, advances, debts,
liabilities, obligations, covenants, duties and Indebtedness owing by Borrower
to Lender, whether evidenced by any note, or other instrument or document,
whether arising from an extension of credit, opening of a letter of credit,
loan, guaranty, indemnification or otherwise, whether direct or indirect
(including, without limitation, those acquired by assignment and any
participation by Lender in Borrower’s debts owing to others), absolute or
contingent, due or to become due, including, without limitation, all interest,
charges, expenses, fees, attorneys’ fees and any other sums chargeable to
Borrower hereunder or under any other agreement with Lender.

 

(bb) “Obligor” means Borrower, Guarantor or any other guarantor of the
Obligations, individually or collectively.

 

(cc) “Ownership Interest” means all shares, interests, participations, rights to
purchase, options, warrants, general or limited partnership interests, limited
liability company membership interests or other equivalents (regardless of how
designated) of or in a corporation, partnership, limited liability company or
equivalent entity, whether voting or nonvoting, including common stock,
preferred stock or any other “equity security” (as such term is defined in Rule
3a11-1 of the Rules and Regulations promulgated by the Securities and Exchange
Commission (17 C.F.R. § 240.3a11-1) under the Securities and Exchange Act of
1934, as amended).

 

(dd) “PEN” means PEN Inc., a Delaware corporation, formed by APNT and Borrower
for the purpose of consummating the PEN Merger.

 

(ee) “PEN Voting Control” means voting control of PEN for all purposes subject
only to the right of Zeiss to elect one (1) member of the PEN Board of
Directors.

 

(ff) “Person” means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.

 

(gg) “Receivable” means an account as defined in Article 9 of the Uniform
Commercial Code.

 

(hh) “Receivables Aging” means an aged listing of all Receivables of Borrower as
of the close of business on the Business Day that is no earlier than the
Business Day immediately preceding the date of delivery thereof to Lender,
including an aging column for 91-120 days and which is otherwise in form and
content acceptable to Lender in its sole discretion.

 

(ii) “Subsidiary” shall mean any corporation of which more than fifty percent
(50%) of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether,
at the time, stock of any other class of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned by Borrower, or any partnership, joint venture or
limited liability company of which more than fifty percent (50%) of the
outstanding equity interests are at the time, directly or indirectly, owned by
Borrower, or any partnership of which Borrower is a general partner.

 

4

 

 

(jj) “Term Sheet” means any document attached to this Agreement and to any Rider
which contains other terms and conditions of this transaction.

 

(kk) “Vendor Location(s)” means premises owned or solely controlled by vendors
of Borrower who possess Inventory of Borrower for processing and/or return
shipment to Borrower or shipment to customers of Borrower.

 

Any accounting terms used in this Agreement, unless otherwise indicated, shall
have the meanings customarily given to them in accordance with generally
accepted accounting principles (“GAAP”).

 

All other terms contained in this Agreement, unless otherwise indicated, shall
have the meanings provided by the Uniform Commercial Code of the state set forth
in Section 15(b) (“Code”) to the extent the same are defined therein.

 

2. REVOLVING CREDIT LOAN.

 

(a) Revolving Credit Loan; Loan Advances; Revolving Credit Loan Note. Lender
will establish a revolving credit loan facility (the “Revolving Credit Loan”) in
the amount of the Maximum Loan Amount as set forth on the Term Sheet, and
subject to the terms of this Agreement, Lender may, upon Borrower’s request, but
at all times in Lender’s sole discretion, make Advances to Borrower from time to
time, pursuant to the Revolving Credit Loan Rider attached hereto and made a
part hereof (the “Rider”). Lender may, in Lender’s sole discretion and without
notice to Borrower, disburse any or all of the proceeds of any or all of the
Advances made by Lender to such person or persons as Lender deems necessary to
insure that the security interest in or lien upon the Collateral shall at all
times have the priority represented by Borrower in this Agreement. Lender may,
in Lender’s sole discretion, at any time reduce the Percentage Advance Rate (as
defined in the Rider) or the Advance amounts set forth in any Rider. Lender may,
from time to time, reimburse itself for any loan, interest due, fees or
expenses, or any third party for any of Borrower’s Obligations by charging
Borrower’s Loan Account. Lender may deduct from the Advances under this
Agreement reserves for accrued interest and such other reserves as Lender deems
proper and necessary.

 

(b) Revolving Credit Loan Note. Borrower’s obligation to repay Advances under
the Revolving Credit Loan shall be evidenced by a Revolving Credit Loan Note, in
form satisfactory to Lender executed simultaneously herewith, the terms of which
are incorporated herein by this reference.

 

(c) Interest and Other Charges. Borrower shall pay interest on the daily
outstanding balance of the Note at the rates as set forth in the Rider. In
addition, Borrower shall pay on the first day of each month, with respect to the
prior calendar month or portion thereof (i) an underutilization fee equal to
one-fourth of one percent (0.25%) of the average amount of the Maximum Loan
Amount not utilized during the prior month, and (ii) a processing fee equal to
thirty-five one-hundredths of one percent (0.35%) of the average balance
outstanding under the Loan during the prior month. In no event whatsoever shall
the interest rate and other charges charged hereunder exceed the highest rate
permissible under any law which a court of competent jurisdiction shall, in the
final determination, deem applicable hereto. In the event that a court
determines that Lender has received interest or other charges hereunder in
excess of the highest rate applicable hereto, Lender shall promptly, in Lender’s
sole discretion, either apply such amount to the Obligations or refund such
amount to Borrower and the provisions herein shall be deemed amended to provide
for such permissible rate.

 

5

 

 

(d) Termination Premium. Borrower may, at any time or from time to time upon
three (3) business days’ written notice to Lender, prepay the Note in whole or
in part prior to the Maturity Date (including any extension of the Maturity Date
pursuant to Section 2(e) below or otherwise) provided that (i) if Borrower
prepays the Revolving Credit Loan Note in full and terminates the Revolving
Credit Loan after the date hereof, or (ii) Lender, after the date hereof,
terminates the Revolving Credit Loan after Default (in either case, a
“Termination”), then Borrower shall pay, in addition to all other amounts due to
Lender and/or paid by Borrower, a termination premium equal to two percent
(2.0%) of the Maximum Loan Amount (“Termination Premium”).

 

(e) Term; Automatic Renewal. The term of this Agreement and of the Loan shall be
on Demand, but if Demand is not made, then no later than the date set forth on
the Term Sheet (the “Maturity Date”). Notwithstanding anything to the contrary
or inconsistent contained herein, provided no Default exists, the original
Maturity Date will automatically be extended one time for one (1) year (“Renewal
Term”), unless either party notifies the other party in writing of its intent
not to so extend the Maturity Date at least sixty (60) days prior to the
original Maturity Date. If the Maturity Date is extended, Borrower shall pay to
Lender a renewal fee in the amount of one percent (1.0%) of the Maximum Loan
Amount, which shall be due and payable on or before the beginning of the Renewal
Term.

 

(f) Monthly Accounting. Lender will provide Borrower a monthly accounting of
charges and payments, with an accounting of Advances, made pursuant to this
Agreement. Such accounting shall be deemed correct, accurate and binding upon
Borrower and an account stated (except for reverses and reapplications of
payments made as provided in Section 15(g) hereof, and corrections or errors
discovered by Lender), unless Borrower notifies Lender in writing to the
contrary within thirty (30) days after each accounting is rendered.

 

3. COLLATERAL.

 

(a) Grant of Security Interest. As security for the Obligations, Borrower hereby
pledges, assigns, and grants to Lender a continuing security interest in and
lien upon, and a right of setoff against, all of the Collateral, including any
Collateral not deemed eligible for Advances. Borrower acknowledges that nothing
contained in this Agreement or in any Rider shall be (i) construed as Lender’s
agreement to resort or look to a particular type of Collateral as security for
any loan to Borrower, or limit in any way Lender’s right to resort to any or all
of the Collateral as security for any of the Obligations, or (ii) deemed to
limit or reduce any security interest in or lien upon any portion of the
Collateral for the Obligations.

 

(b) Perfection and Protection of Security Interest. Borrower shall, at
Borrower’s expense, perform all steps requested by Lender at any time to
perfect, maintain, protect, and enforce Lender’s security interest in the
Collateral, including, without limitation, executing and filing financing and
continuation statements and amendments thereof, performing searches to confirm
the priority of Lender’s security interests, placing notations on Borrower’s
books of account to disclose Lender’s security interest therein, delivering to
Lender all letters of credit on which Borrower is named beneficiary, and taking
such other steps as are deemed necessary by Lender to maintain Lender’s control
of and security interest in the Collateral. Lender may file, without Borrower’s
signature, one or more financing statements disclosing Lender’s security
interest under this Agreement. Borrower agrees that a carbon, photographic,
photostatic, or other reproduction of this Agreement or of a financing statement
is sufficient as a financing statement. If any Collateral is at any time in the
possession or control of any warehouseman, bailee or any of Borrower’s agents or
processors, Borrower shall notify such person of Lender’s security interest in
such Collateral and, upon Lender’s request, instruct them to hold all such
Collateral for Lender’s account subject to Lender’s instructions. From time to
time, Borrower shall, upon Lender’s request, execute and deliver confirmatory
written instruments pledging to Lender the Collateral, but Borrower’s failure to
do so shall not affect or limit Lender’s security interest or other rights in
and to the Collateral. Until all Obligations have been fully satisfied, Lender’s
security interest in the Collateral shall continue in full force and effect.

 

6

 

 

(c) Attorney-in-Fact. Borrower hereby appoints Lender and any designee of Lender
as Borrower’s attorney-in-fact and authorizes Lender or such designee, at
Borrower’s sole expense, to exercise at any time in Lender’s or such designee’s
sole discretion all or any of the following powers, which powers of attorney,
being coupled with an interest, shall be irrevocable until all Obligations have
been paid in full: (a) receive, take, endorse, assign, deliver, accept and
deposit, in Lender’s name or Borrower’s name, any and all cash, checks,
commercial paper, drafts, remittances and other instruments and documents
relating to the Collateral or the proceeds thereof, (b) after a Default,
transmit to account debtors, other obligors or any bailees notice of Lender’s
interest in the Collateral or request from account debtors or such other
obligors or bailees at any time, in Borrower’s or Lender’s name or any designee,
information concerning the Collateral and any amounts owing with respect
thereto, (c) after a Default, notify account debtors or other obligors to make
payment directly to Lender, or notify bailees as to the disposition of
Collateral, (d) after a Default, take or bring, in Lender’s or Borrower’s name,
all steps, actions, suits or proceedings deemed by Lender to be necessary or
desirable to effect collection of or other realization upon the accounts and
other Collateral, (e) after a Default, change the address for delivery of mail
to Borrower and to receive and open mail addressed to Borrower, (f) after a
Default, extend the time of payment of, compromise or settle for cash, credit,
return of merchandise, and upon any terms or conditions, any and all accounts or
other Collateral which includes a monetary obligation and discharge or release
the account debtor or other obligor, without affecting any of the Obligations,
and (g) execute financing statements or amendments with respect to the
Collateral, against Borrower and in Lender’s favor.

 

4. CHARGES AND INSURANCE.

 

(a) Lender may at any time, in Lender’s sole discretion, discharge any lien or
encumbrance or bond the same, pay any insurance, maintain guards, pay any
service bureau, or obtain any record and charge the cost thereof to Borrower’s
Loan Account.

 

(b) Borrower shall, at all times, insure the Collateral in Lender’s name against
loss or damage by fire, theft, burglary, pilferage, loss in transit, business
interruption and such other hazards as Lender shall specify in amounts, under
policies and by insurers acceptable to Lender in its sole discretion. Each
policy shall include a provision for ten (10) days’ prior written notice to
Lender of any cancellation or substantial modification and shall show Lender as
mortgagee/secured party, loss payee and additional insured in a manner
acceptable to Lender. Borrower shall execute and deliver to Lender,
simultaneously herewith and at any other time hereafter, such assignments of
policies of insurance, including business interruption insurance, as Lender
shall require. Borrower shall pay all and the policies shall be delivered to
Lender. If Borrower fails to do so, Lender may, but shall not be obligated to,
procure such insurance at Borrower’s expense.

 

7

 

 

5. EXAMINATION OF RECORDS; REPORTING.

 

(a) Lender may, at all reasonable times, but no less than once every fiscal
quarter, have access to, examine, audit, make extracts from and inspect
Borrower’s records, files, books of account and the Collateral. Borrower shall
deliver to Lender any instrument necessary for Lender to obtain records from any
service bureau maintaining records for Borrower. All instruments and
certificates prepared by Borrower showing the value of any of the Collateral
shall be accompanied by copies of related purchase orders and invoices, upon
Lender’s request. Lender may, at any time after a Default, remove from
Borrower’s premises any and all books of account and records, or require
Borrower to deliver them to Lender. Lender may, at Borrower’s expense, use
Borrower’s personnel, supplies and premises as may be reasonably necessary for
maintaining or enforcing Lender’s security interest in the Collateral.

 

(b) Borrower shall furnish, or cause to be furnished, to Lender, information and
statements showing Borrower’s business affairs, financial condition and the
results of Borrower’s operations, upon Lender’s request. Borrower shall provide
to Lender:

 

(i) photocopies of sales invoices, customer statements and credit memos issued,
remittance advices and reports and copies of deposit slips, on a daily basis,
upon Lender’s request;

 

(ii) copies of shipping and delivery documents, upon Lender’s request;

 

(iii) an internally prepared income statement and balance sheet of Borrower, in
a form consistent with such statements prepared in prior periods, satisfactory
to Lender in its sole discretion and prepared in accordance with GAAP, within
twenty (20) days after the end of each Interim Financial Statement Period set
forth on the Term Sheet,

 

(iv) annual financial statements of Borrower in a form consistent with such
prior year-end statements, satisfactory to Lender in its sole discretion, and
audited by independent certified public accountants acceptable to Lender, in
accordance with GAAP and, within ninety (90) days after the end of each Fiscal
Year of Borrower,

 

(v) complete copies of all income tax returns and all payroll, sales and use tax
returns of Borrower, within ten (10) days of filing (including all extension
requests), upon Lender’s request, and

 

(vi) compliance certificates relating to the foregoing as Lender may request,
and in form and content acceptable to Lender in its sole discretion.

 

6. OTHER LIENS. Borrower represents and warrants that all Collateral is and will
continue to be owned by Borrower free and clear of all liens, claims and
encumbrances whatsoever, whether prior or subordinate to the liens granted to
Lender, except for Permitted Liens, if any, as set forth on the Term Sheet; and
that Borrower will not, without Lender’s prior written approval, which may be
withheld in Lender’s sole discretion, sell, encumber or dispose of or permit the
sale, encumbrance or disposal of any Collateral, except for sales of Inventory
in the ordinary course of business.

 

7. GENERAL WARRANTIES AND REPRESENTATIONS. Borrower warrants and represents
that:

 

(a) Borrower is a limited liability company, duly organized and existing in good
standing under the laws of the Formation State set forth on the Term Sheet, is
qualified to do business and is in good standing in all states in which
qualification and good standing are necessary in order for Borrower to conduct
its business and own its property, and Borrower has all requisite power and
authority to conduct its business, to own its property and to execute, deliver
and perform all of its Obligations;

 

(b) Borrower has not, during the preceding five (5) years, been known by or used
any other Assumed Names or Trade Names other than as set forth on the Term
Sheet;

 

(c) The execution, delivery and performance by Borrower of this Agreement will
not constitute a violation of any applicable law or of Borrower’s Articles of
Organization or Operating Agreement, or a breach or default under any other
agreement, instrument, judgment, order, decree, permit, license or undertaking
binding upon or applicable to Borrower or any of its properties;

 

8

 

 

(d) Borrower possesses adequate assets, licenses, patents, patent applications,
copyrights, trademarks, trademark applications, and trade names for the conduct
of its business;

 

(e) Borrower has capital sufficient to conduct its business, is solvent and able
to pay its debts as they mature, and owns property having a fair value greater
than the amount required to pay Borrower’s debts;

 

(f) Except for trade payables arising in the ordinary course of Borrower’s
business and except as heretofore disclosed to Lender in writing, Borrower has
(i) no pending or threatened litigation, actions or proceedings which would
materially and adversely affect its business assets, operations or condition,
financial or otherwise, or the Collateral and (ii) no Indebtedness, other than
the Obligations;

 

(g) Borrower has good, indefeasible, and merchantable title to the Collateral,
and there is no lien or encumbrance thereon other than the security interest
granted to Lender and Permitted Liens as set forth on the Term Sheet;

 

(h) Borrower is not a party to any contract, or subject to any charge, corporate
restriction, judgment, decree or order materially and adversely affecting its
business, assets, operations or condition, financial or otherwise, and is not
subject to any labor dispute; and, no labor contract is scheduled to expire
during the term of this Agreement, except as heretofore disclosed to Lender in
writing;

 

(i) Borrower is not in violation of any applicable statute, regulation or
ordinance, in any respect materially and adversely affecting the Collateral or
its business, assets, operations or condition, financial or otherwise;

 

(j) Borrower is not in default with respect to any note, indenture, loan
agreement, mortgage, lease, deed or other agreement to which it is a party or
bound;

 

(k) The financial statements delivered to Lender fairly present Borrower’s
financial condition and results of operations and those of such other Persons
described therein as of the date thereof; and there has been no material and
adverse change in such financial condition or operations since the date of the
statements;

 

(l) Borrower has received no notice that it is not in full compliance with any
of the requirements of the Employee Retirement Income Security Act of 1974, as
amended, (“ERISA”) and its regulations and, to the best of its knowledge, there
exists no event described in Section 4043 of ERISA, excluding subsections
4043(b)(2) and 4043(b)(3) thereof, with respect to Borrower;

 

(m) Borrower has filed all tax returns and other reports it is required by law
to file and has paid all taxes and similar charges that are due and payable;

 

(n) Borrower’s Chief Executive Office, Principal Place of Business and the
Location of Collateral Records is at the location set forth on the Term Sheet;

 

9

 

 

(o) Borrower has not received any notice alleging, and is not aware of, any
facts indicating noncompliance with any State or Federal law governing the use,
generation, storage or release of any hazardous waste or substance;

 

(p) Borrower has no Subsidiaries or Affiliates other than as set forth on the
Term Sheet. To the extent any Subsidiary or Affiliate is shown on the Term
Sheet, neither the assets nor chief executive officer of such Subsidiary or
Affiliate is located at one or more of Borrower’s locations specified in Section
7(n) hereof, except NanoHolding;

 

(q) Borrower owns all properties on which Collateral is located other than the
Leased Properties set forth on the Term Sheet and Vendor Locations; and

 

(r) All Collateral which is tangible personal property is kept only at the
Collateral Locations, or, in the case of Inventory, at the Collateral Locations
or at the Vendor Locations, all as set forth on the Term Sheet.

 

8. CONDITIONS TO OBLIGATIONS OF LENDER.

 

(a) Conditions for Closing. Lender’s obligation to close the Loan hereunder is
subject to its receipt of the following documents, fully executed, and
completion of the following matters, all in form and substance satisfactory to
Lender in its sole discretion:

 

(i) Formation Documents. Certificates of recent date of the appropriate
authority or official of Borrower’s Formation State (listing all of Borrower’s
articles of organization and related documents on file in that office if such
listing is available) certifying as to Borrower’s good standing and existence
together with copies of such organizational documents, certified as of a recent
date by such authority or official and certified as true and correct as of the
date hereof by a duly authorized officer of Borrower;

 

(ii) Certification of Good Standing. Certificates of recent date of the
appropriate authority or official of each state in which Borrower is legally
qualified to do business, each certifying as to Borrower’s good standing;

 

(iii) Operating Agreement and Authorizations. Copies of Borrower’s Operating
Agreement together with all authorizing resolutions and evidence of other
company action taken by Borrower to authorize the execution, delivery and
performance by Borrower of this Agreement and the other Loan Documents, and the
consummation by Borrower of the transactions contemplated hereby, certified as
true and correct as of the date hereof by a duly authorized officer of the
Borrower;

 

(iv) Incumbency Certificates. A certificate of incumbency for Borrower
containing, and attesting to the genuineness of, the signatures of those
officers authorized to act on Borrower’s behalf in connection with the Loan
Documents to which Borrower and the consummation by it of the transactions
contemplated hereby, certified as true and correct as of the date hereof by a
duly authorized officer of Borrower;

 

(v) Note. The Revolving Credit Note duly executed by Borrower;

 

(vi) Security Documents. This Loan and Security Agreement duly executed on
Borrower’s behalf granting to Lender, as collateral security for the
Obligations, the Collateral intended to be provided pursuant to Section 3,
together with the following in fully executed form:

 

10

 

 

a. Recording, Filing, Etc. Evidence of the recordation, filing and other action
(including payment of any applicable taxes or fees) in such jurisdictions as
Lender may deem necessary or appropriate with respect to any security interest,
including the filing of financing statements and similar documents which Lender
may deem necessary or appropriate to create, preserve or perfect the liens,
security interests and other rights intended to be granted to Lender thereunder,
together with Uniform Commercial Code record searches in such offices as Lender
may request;

 

b. Validity Guaranty. A Validity Guaranty constituting the unconditional,
unlimited validity guaranty of the Obligations by the Guarantor;

 

c. Casualty and Other Insurance. Evidence that the casualty and other insurance
required pursuant to Section 4 of this Agreement is in full force and effect and
assignments of policies of insurance as Lender shall require;

 

d. UCC Insurance. A policy of insurance insuring the priority of Lender’s
security interests in the Collateral as senior to all other security interests
in the Collateral in an amount not less than the aggregate amount of the Loans
with only such exceptions as are acceptable to Lender and with such endorsements
as Lender shall require (the “UCC Policy”);

 

(vii) Closing Certificate; Borrowing Authorization. A closing certificate and a
borrowing resolution in form satisfactory to Lender, in its sole discretion,
duly executed by a duly authorized officer of Borrower;

 

(viii) Guarantor Financial Statement. Receipt and review by Lender of a current
personal financial statement of Guarantor which is satisfactory in all respects
to Lender;

 

(ix) Legal Opinions. The favorable written opinion of counsel for Borrower with
respect to such matters as Lender may reasonably request;

 

(x) Consents, Approvals, Etc. Copies of all governmental and nongovernmental
consents, approvals, authorizations, declarations, registrations or filings, if
any, required on Borrower’s part in connection with the execution, delivery and
performance of the Loan Documents or the transactions contemplated hereby or as
a condition to the legality, validity or enforceability of the Loan Documents,
certified as true and correct and in full force and effect as of the date hereof
by Borrower by a duly authorized officer of Borrower, or, if none is required, a
certificate of such officer to that effect;

 

(xi) Fee. The balance of the Commitment Fee in the amount of Fifteen Thousand
and 00/100 Dollars ($15,000.00). Any unused amount of the Due Diligence
Investigation Fees of Six Thousand Five Hundred and 00/100 Dollars ($6,500.00)
paid to Lender to date shall be credited against amounts due hereunder. The
Commitment Fee shall be deemed fully earned upon execution of this Agreement;

 

(xii) Payoff Letters and Lien Terminations. A payoff letter from Fifth Third
Bank, an Ohio banking corporation, in form and substance acceptable to Lender,
in its sole discretion, together with an authorization for the filing of UCC
financing statement terminations and other documents and instruments necessary
or reasonably desired by Lender to effect and evidence the release and discharge
of all liens and security interests its favor with respect to the Collateral;

 

11

 

 

(xiii) Debt Extinguishment. Borrower shall use the proceeds of the Loan
disbursed at Closing to retire and extinguish all Indebtedness of Borrower to
Fifth Third Bank;

 

(xiv) Merger Documents. The fully executed Merger Agreement.

 

(xv) Receivables Aging. A Receivables Aging.

 

(xvi) Excess Availability. After the funding of Advances in connection with the
transactions contemplated by this Agreement, the Gross Availability (as defined
in the Rider) shall be no less than $200,000.00; and

 

(xvii) Other Matters. Such other documents, and completion of such other
matters, as Lender may reasonably request.

 

(b) Further Conditions for Disbursement. Lender’s obligation to make any Advance
(including the initial Advance) is further subject to the satisfaction of the
following conditions precedent:

 

(i) The representations and warranties contained in Section 7 hereof and in any
of the Loan Documents shall be true and correct on and as of the date such
Advance is made (both before and after such Advance is made) as if such
representations and warranties were made on and as of such date;

 

(ii) No Default shall exist or shall have occurred and be continuing on the date
such Advance is made (whether before or after such Advance is made); and

 

(iii) In the case of any Advance under the Revolving Credit Loan, Lender shall
have received, when due, all Reports required pursuant to Section 5(b) as of the
close of business on the last business day of the week next preceding the date
such Advance is made.

 

Borrower shall be deemed to have made a representation and warranty to Lender at
the time of the making of, and the continuation or conversion of, each Advance
to the effects set forth in clauses (a) and (b) of this Section 8. For purposes
of this Section 8(b), the representations and warranties contained in Section 7
hereof shall be deemed made with respect to both the financial statements
referred to therein and the most recent financial statements delivered pursuant
to Section 5(b).

 

(c) Post-Closing Conditions. After the date hereof, Borrower agrees to provide
Lender with the following:

 

(i) UCC Searches. Uniform Commercial Code searches in all jurisdictions in which
Lender has filed UCC Financing Statements or in which Borrower conducts
business;

 

(ii) Evidence of Use of Loan Proceeds. All documents Lender requires to evidence
the use by Borrower of the proceeds of the Loan; and

 

(iii) Merger Documents. Upon consummation of the Merger, copies of each of the
following: (a) the fully executed Merger Agreement and all documents and
instruments executed in connection therewith, (b) formation documents of
NanoHolding, and (c) resolutions of NanoHolding authorizing the Merger.

 

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9. AFFIRMATIVE COVENANTS. Borrower covenants that, so long as any Obligations
remain outstanding and this Agreement is in effect, it shall:

 

(a) Pay to Lender on demand all fees and expenses which Lender incurs in
connection with (i) the forwarding of loan proceeds, (ii) the processing of
Advances, (iii) the establishment and maintenance of the lock box and of all
other accounts created in connection with the transaction contemplated hereby,
and (iv) examination of the Collateral;

 

(b) Promptly file all tax returns and other reports which Borrower is required
to file and promptly pay all taxes, assessments and other charges;

 

(c) Promptly notify Lender in writing of any litigation affecting Borrower,
whether or not the claim is covered by insurance, and of any suit or
administrative proceeding which may materially and adversely affect the
Collateral or Borrower’s business, assets, operations or condition, financial or
otherwise;

 

(d) Notify Lender in writing (i) promptly upon the occurrence of any event
described in Section 4043 of ERISA, other than a termination, partial
termination or merger of a “Plan” (as defined in ERISA) or a transfer of a
Plan’s assets, and (ii) prior to any termination, partial termination or merger
of a Plan or a transfer of a Plan’s assets;

 

(e) Give Lender thirty (30) days’ prior written notice of Borrower’s opening or
closing any place of business;

 

(f) Maintain Borrower’s limited liability company or corporate, as applicable,
existence and its qualification and good standing in all states necessary to
conduct its business and own its property and maintain adequate assets,
licenses, patents, copyrights, trademarks and trade names to conduct its
business;

 

(g) Promptly notify Lender in writing of any labor dispute to which Borrower is
or may become subject and the expiration of any labor contract to which Borrower
is a party or bound;

 

(h) Promptly notify Lender in writing of any violation of any law, statute,
regulation or ordinance of any governmental entity, or of any agency thereof,
applicable to Borrower which may materially and adversely affect the Collateral
or its business, assets, operations or condition, financial or otherwise;

 

(i) Notify Lender in writing within five (5) business days of its default under
any note, indenture, loan agreement, mortgage, lease, or other agreement to
which Borrower is a party or bound;

 

(j) Promptly notify Lender in writing of any default under any Indebtedness or
indebtedness owing to Borrower;

 

(k) Execute and deliver to Lender, upon request, such documents and agreements
as Lender may, from time to time, reasonably request to carry out the terms and
conditions of this Agreement;

 

(l) Promptly, and in any event within five (5) days of the receipt thereof,
deliver any communication in any way concerning any act or omission on
Borrower’s part regarding the use, generation, storage or release of a hazardous
waste or substance. Borrower agrees to indemnify and hold Lender harmless from
any and all loss, damage, cost, liability or expense (including reasonable
attorneys’ fees) arising out of Borrower’s use, generation, storage or release
of any hazardous waste or substance;

 

13

 

 

(m) Promptly, and in any event within five (5) days of the receipt thereof,
deliver to Lender a copy of any communication from the Federal Department of
Labor concerning any alleged act or omission on Borrower’s part in connection
with the payment of minimum and/or overtime wages to an employee;

 

(n) Promptly, and in any event within five (5) days of the receipt thereof,
deliver to Lender a copy of any communication concerning any violation of a
State or Federal law which could result in the forfeiture of the Collateral;

 

(o) Deliver to Lender photocopies of Borrower’s monthly bank statements;

 

(p) Maintain the liens and security interests granted to Lender as first, prior
and only liens upon the Collateral, except for Permitted Liens;

 

(q) Ensure that at all times the Nanofilm Equityholders beneficially hold voting
control of PEN for all purposes;

 

(r) Maintain at all times balance sheet solvency and liquid assets sufficient to
pay all Indebtedness when due; and

 

(s) Promptly notify Lender in writing of any new Vendor Locations.

 

10. NEGATIVE COVENANTS. Without Lender’s prior written consent, Borrower
covenants that, so long as any Obligations remain outstanding and this Agreement
is in effect, it shall not:

 

(a) Merge or consolidate with or acquire any other Person, except for the
Merger;

 

(b) Make any Capital Expenditures materially affecting its business, assets,
operations or conditions, financial or otherwise, except as permitted in this
Agreement, provided however that for the 2014 calendar year, Borrower may make
Capital Expenditures not to exceed $214,000.00 in the aggregate;

 

(c) Declare or pay cash dividends upon any of its stock or distribute any of its
property or make (except in the ordinary course of business) any loans or
extensions of credit, or investments in, any Person, or redeem, retire, purchase
or acquire, directly or indirectly any of its stock, or make any material change
in its capital structure or in its business or operations which might adversely
affect the repayment of the Obligations, except for consummation of the Merger;

 

(d) Enter into any transaction which materially and adversely affects the
Collateral or Borrower’s ability to repay the Obligations, including any
secondary liens thereon;

 

(e) Become liable for the indebtedness of any Person, except by endorsement of
instruments for deposit;

 

(f) Incur Indebtedness, other than trade payables arising in the ordinary course
of Borrower’s business, and the Obligations;

 

14

 

 

(g) Make a sale to any customer on a bill-and-hold, guaranteed sale, sale and
return, sale on approval, consignment, or any other repurchase or return basis;

 

(h) Remove the Collateral which is tangible personal property from the
Collateral Locations set forth on the Term Sheet unless Borrower gives Lender
thirty (30) days prior written notice and the same is removed to a location
within the continental United States of America;

 

(i) Use any other corporate or fictitious name;

 

(j) Prepay any Indebtedness, except the Loan;

 

(k) Pay salary increases, bonuses or commissions to any principal or officer; or

 

(l) Open or close any bank accounts.

 

11. DEFAULT. Any one or more of the following events shall constitute a default
(“Default”) under this Agreement:

 

(a) Payment. The failure of Borrower to pay when due, declared due, or Demanded
by Lender, any of the Obligations, or the failure of Guarantor to pay when due,
declared due, or Demanded by Lender, any of the Guaranteed Obligations;

 

(b) Breach of this Agreement and the Loan Documents. The failure of any Obligor
to perform, keep or observe any of the covenants, conditions, promises,
agreements or obligations of such Obligor under this Agreement or any of the
Loan Documents for more than ten (10) days following receipt of written notice
thereof;

 

(c) Breaches of Other Obligations. The failure of Obligor to pay when due or
within any applicable grace period any obligation of Obligor in excess of
$20,000.00 (other than its Obligations under this Agreement) for the payment of
Indebtedness, or the becoming due and payable, or declaration to be due and
payable, of such obligation before the expressed maturity of the obligation, or
the occurrence of an event that, with the giving of notice or lapse of time, or
both, would cause any such obligation to become, or allow any such obligation to
be declared to be, due and payable;

 

(d) Breach of Representations and Warranties. The making or furnishing by any
Obligor to Lender of any representation, warranty, certificate, schedule, report
or other communication within or in connection with this Agreement or the Loan
Documents, or in connection with any other agreement among such Obligor and
Lender which is untrue or misleading in any material respect as of the date
made;

 

(e) Levy, Seizure or Attachment. The making or any attempt by any Person to make
any levy, seizure or attachment upon any of the Collateral;

 

(f) Bankruptcy or Similar Proceedings. The commencement of any proceedings in
bankruptcy by or against any Obligor or for the liquidation or reorganization of
any Obligor, or alleging that such Obligor is insolvent or unable to pay its
debts as they mature, or for the readjustment or arrangement of any Obligor’s
debts, whether under the Bankruptcy Code or under any other law, whether state
or federal, now or hereafter existing, for the relief of debtors, or the
commencement of any analogous statutory or non-statutory proceedings involving
any Obligor; provided, however, that if such commencement of proceedings against
such Obligor is involuntary, such action shall not constitute a Default unless
such proceedings are not dismissed within forty five (45) days after the
commencement of such proceedings;

 

15

 

 

(g) Appointment of Receiver. The appointment of a receiver or trustee for any
Obligor, for any of the Collateral or for any substantial part of any Obligor’s
assets or the institution of any proceedings for the dissolution, or the full or
partial liquidation, or the merger or consolidation, of any Obligor that is a
corporation, limited liability company or a partnership; provided, however,
that, if such appointment or commencement of proceedings against such Obligor is
involuntary, such action shall not constitute a Default unless such appointment
is not revoked or such proceedings are not dismissed within forty five (45) days
after the commencement of such proceedings;

 

(h) Judgment. The entry of any judgments or orders aggregating in excess of
$50,000.00 against any Obligor that remain unsatisfied or undischarged and in
effect for thirty (30) days after such entry without a stay of enforcement or
execution;

 

(i) Death or Dissolution of Obligor. The death of any Obligor who is a natural
person, or of any general partner who is a natural person of any Obligor that is
a partnership, or any member who is a natural person of any Obligor that is a
limited liability company or the dissolution of any Obligor that is a
partnership, limited liability company, corporation or other entity, other than
in accordance with the terms and conditions of the Merger Agreement;

 

(j) Default or Revocation of Guaranty or Collateral Document. The occurrence of
a default or an event of default under, or the revocation or termination of, any
agreement, instrument or document executed and delivered by any Person to Lender
pursuant to which such Person has guaranteed to Lender the payment of all or any
of the Obligations or has granted Lender a Lien upon some or all of such
Person’s real and/or personal property to secure the payment of all or any of
the Obligations;

 

(k) Criminal Proceedings. The institution in any court of a criminal proceeding
against any Obligor that would have a material adverse effect on such Obligor,
or the indictment of any Obligor for any crime other than vehicle tickets and
misdemeanors not punishable by jail terms;

 

(l) Change of Control. The failure at any time of the Nanofilm Equityholders to
(1) prior to consummation of the Merger, maintain Nanofilm Voting Control, and
(2) after consummation of the Merger maintain PEN Voting Control; provided,
however, that Lender shall be notified in writing at least ten (10) days in
advance of any issuance of equity interests of Borrower and/or PEN and Lender
shall be satisfied that such issuance will not impair the Nanofilm Voting
Control or the PEN Voting Control, as applicable;

 

(m) Change of Management. If Scott E. Rickert shall cease to be the Chief
Executive Officer or a manager of Borrower at any time;

 

(n) Material Adverse Change. Any material adverse change in the Collateral,
business, property, assets, prospects, operations or condition, financial or
otherwise of any Obligor, as determined by Lender in its sole judgment or the
occurrence of any event which, in Lender’s sole judgment, would either (i)
impair the prospect of payment or performance of the Obligations or (ii) have
Lender believe that the Collateral is not sufficient to secure fully the
Obligations;

 

(o) Lockbox. If Borrower fails, within five (5) business days of receipt, to
forward proceeds of accounts to the applicable lockbox account, or if Borrower
directs any account debtor to make a payment in respect of any such account to
any place or account other than the applicable lockbox and such directions are
not reversed within five (5) business days; or

 

16

 

 

(p) Misrepresentation. Borrower makes any misrepresentation to Lender or fails
to observe or perform any covenants or conditions in connection with this
Agreement, any Rider or any other instrument related to the Loan hereto.

 

OBLIGOR ACKNOWLEDGES THAT WHILE THERE ARE EVENTS OF DEFAULT SET FORTH, THE
OBLIGATIONS ARE DUE UPON DEMAND, AND IF DEMAND IS NOT MADE, THEN UPON THE
MATURITY DATE OR EXTENDED MATURITY DATE, AS APPLICABLE, SET FORTH IN THE TERM
SHEET. DEMAND MAY OCCUR WITH OR WITHOUT THERE BEING AN EVENT OF DEFAULT.

 

12. LENDER’s RIGHTS AND REMEDIES UPON A DEFAULT.

 

(a) Upon the occurrence and during the continuance of a Default, or if Lender
has made Demand, the Loan shall immediately and automatically terminate and all
of the Obligations shall immediately and automatically become due and payable,
in each case, without notice of any kind. Upon the occurrence and during the
continuance of a Default, at Lender’s option, and without Demand, notice or
legal process of any kind, the Loan may be terminated and all of the Obligations
may be declared, and immediately shall become, due and payable.

 

(b) Upon the occurrence and during the continuance of a Default, or if Lender
has made Demand, Lender may exercise from time to time any rights and remedies
available to Lender under the Uniform Commercial Code and any other applicable
law in addition to, and not in lieu of, any rights and remedies expressly
granted in this Agreement or in any of the Loan Documents and all of Lender’s
rights and remedies shall be cumulative and non-exclusive to the extent
permitted by law. In particular, but not by way of limitation of the foregoing,
Lender may, without notice, Demand or legal process of any kind, take possession
of any or all of the Collateral (in addition to Collateral of which Lender
already has possession), wherever it may be found, and for that purpose may
pursue the same wherever it may be found and, may enter onto any of Borrower’s
premises where any of the Collateral may be, and search for, take possession of,
remove, keep and store any of the Collateral until the same shall be sold or
otherwise disposed of, and Lender shall have the right to store the same at any
of Borrower’s premises without cost to Lender. At Lender’s request, Borrower
shall, at Borrower’s expense, assemble the Collateral and make it available to
Lender at one or more places to be designated by Lender and reasonably
convenient to both parties. Borrower recognizes that if it fails to perform,
observe or discharge any of its obligations under this Agreement or the Loan
Documents, no remedy at law will provide adequate relief to Lender, and agrees
that Lender shall be entitled to temporary and permanent injunctive relief in
any such case without the necessity of proving actual damages. Any notification
of intended disposition of any of the Collateral required by law will be deemed
to be a reasonable authenticated notification of disposition if given at least
ten (10) days prior to such disposition and such notice shall (i) describe
Lender and Borrower, (ii) describe the Collateral that is the subject of the
intended disposition, (iii) state the method of the intended disposition, (iv)
state that Borrower is entitled to an accounting of the Obligations and state
the charge, if any, for an accounting and (v) state the time and place of any
public disposition or the time after which any private sale is to be made.
Lender may disclaim any warranties that might arise in connection with the sale,
lease or other disposition of the Collateral and has no obligation to provide
any warranties at such time. Any proceeds of any disposition by Lender of any of
the Collateral may be applied by Lender to the payment of expenses in connection
with the Collateral, including, without limitation, legal expenses and
reasonable attorneys’ fees, and any balance of such proceeds may be applied by
Lender toward the payment of the Obligations.

 

17

 

 

13. WAIVER; AMENDMENTS; SUCCESSORS AND ASSIGNS. Lender’s failure to exercise any
right, remedy or option under this Agreement or any Rider or other agreement
between Lender and Borrower, or delay by Lender in exercising the same will not
operate as a waiver. No waiver by Lender will be effective unless in writing and
then only to the extent stated. No waiver by Lender shall affect its right to
require strict performance of this Agreement. Lender’s rights and remedies will
be cumulative and not exclusive. This Agreement cannot be changed or terminated
orally. All terms, conditions, promises, covenants, provisions and warranties
shall inure to the benefit of and bind Lender’s and Borrower’s respective
representatives, successors and assigns.

 

14. BANKRUPTCY PROVISIONS. In consideration of Lender’s agreements hereunder and
under the Loan Documents, Borrower agrees that, in the event Borrower (as a
“Debtor”) files for relief under Title 11 of the United States Code (“Bankruptcy
Code”) or is otherwise subject to an order for relief under the Bankruptcy Code:

 

(a) Relief From Stay. Lender shall be entitled to relief from the automatic stay
imposed by Bankruptcy Code Section 362 on or against the exercise of any and all
rights and remedies available to Lender under this Agreement, the Loan Documents
or applicable law, if Debtor fails to file a Plan of Reorganization within 120
days or fails to obtain confirmation of a Plan of Reorganization within 180
days, after entry of the order for relief. Borrower specifically acknowledges
that “cause” exists for such relief within the meaning of Section 362(d) of the
Bankruptcy Code.

 

(b) Cash Collateral. Any attempt by Debtor to use “Cash Collateral” (as defined
in Section 363 of the Bankruptcy Code) shall be subject to the prior entry of an
order pursuant to Section 363 of the Bankruptcy Code (“Cash Collateral Order”)
specifically incorporating the principal terms set forth on Schedule 14(b)
attached hereto and the Debtor shall under no circumstances seek to use Cash
Collateral other than on the terms provided in this Agreement. Any such Cash
Collateral Order shall permit the use of Cash Collateral only until the earliest
to occur of: (i) a Default under any of the provisions of this Agreement or the
Loan Documents (other than a Default occasioned solely by the bankruptcy of
Debtor), (ii) the appointment of a Chapter 11 trustee or examiner in Debtor’s
case, (iii) the dismissal of Debtor’s case or its conversion to a case under
Chapter 7 of the Bankruptcy Code, or (iv) the entry of an order modifying or
terminating the automatic stay or prohibiting the further use of cash
collateral. Upon the occurrence of any of the events described in (i) through
(iv) of the preceding sentence, Debtor’s ability to use Cash Collateral shall
terminate immediately and automatically; such termination shall not, however,
affect or impair the rights, interests or liens granted to Lender under this
Agreement or the other Loan Documents.

 

All existing and future revenue and cash shall constitute Cash Collateral,
subject to Lender’s choate, fully perfected and presently enforceable liens and
security interests, and, to the extent they are used and consumed by Debtor
after filing of the petition or entry of the order for relief, Debtor
specifically agrees that they are collateral for Lender’s secured claims under
Section 506 of the Bankruptcy Code in the amount so used.

 

To the extent it is determined that Section 552(a) of the Bankruptcy Code
applies to limit Lender’s interest under the Loan Documents and this Agreement,
Lender shall be deemed to have, as adequate protection for the use of Cash
Collateral, a continuing perfected protection for the use of Cash Collateral, a
continuing perfected post-bankruptcy lien and security interest in all
Collateral, and all revenue and cash, whether derived from operations prior to
or subsequent to or the filing of a voluntary of involuntary petition for relief
with respect to Debtor. As further adequate protection for Debtor’s use of Cash
Collateral, Debtor shall maintain at all times an adequate and appropriate
amount and type of coverage of insurance, including endorsements issued
therewith covering the Collateral in amounts not less than that required under
the Loan Documents. To the extent that the collateral securing Lender’s claims
in Debtor’s bankruptcy case is deemed or proves to be insufficient to pay its
claims in full, Lender’s secured claims shall be deemed to have been
inadequately protected by the provisions of the Cash Collateral Order, and they
shall therefore have administrative expenses of the kind specified in Sections
503(b) and 507(b) of the Bankruptcy Code, which superpriority shall be equal to
the priority provided under the provisions of Section 364(c)(1) of the
Bankruptcy Code over all other costs and administrative expenses incurred in the
case of the kind specified in, or ordered pursuant to, Sections 105, 326, 327,
330, 331, 503(b), 506(c), 507(a), 507(b) or 726 of the Bankruptcy Code and shall
at all times be senior to the rights of Debtor or any successor trustee in the
resulting bankruptcy proceeding or any subsequent proceeding under the
Bankruptcy Code.

 

18

 

 

During the pendency of Debtor’s bankruptcy, if it is determined that any of the
rights granted hereunder or by any of the Loan Documents are security interests
or liens, they shall be deemed perfected without the necessity of the filing of
any documents or commencement of proceedings otherwise required under
non-bankruptcy law for the perfection of security interests, with such
perfection being binding upon any subsequently appointed trustee, either in
Chapter 11 or under any other Chapter of the Bankruptcy Code, and upon other
creditors of Debtor who have or may hereafter extend secured or unsecured credit
to Debtor.

 

(c) Surcharge Waiver. Debtor and/or any other representative of Debtor’s
bankruptcy estate waives any right to seek a surcharge of Lender’s collateral
under 11 U.S.C. § 506(c) or any other provision of applicable law.

 

(d) Other Waivers. Debtor waives any right to seek an order under 11 U.S.C. §§
363, 364, 1129 or any other provision of the Bankruptcy Code, imposing liens or
security interests of senior or equal priority with Lender’s liens and security
interests in the Collateral or the Cash Collateral.

 

(e) Other Actions Not Prohibited. Nothing contained in this Section 14 shall be
deemed to limit or restrict Lender’s rights to seek in the bankruptcy court any
relief that it may deem appropriate in the event of a bankruptcy commenced by or
against Debtor, and in particular, Lender shall be free to seek the dismissal or
conversion of any case filed by Debtor, the appointment of a trustee or
examiner, and relief from the automatic stay.

 

15. MISCELLANEOUS.

 

(a) If any provision of this Agreement shall be prohibited or invalid, under
applicable law, it shall be ineffective only to such extent, without
invalidating the remainder of this Agreement.

 

(b) This Agreement shall be interpreted in accordance with the Governing Law of
the state set forth on the Term Sheet.

 

(c) All of Borrower’s representations and warranties contained in this Agreement
shall survive the execution, delivery and acceptance thereof by the parties.

 

(d) No termination of this Agreement or of any guaranty of the Obligations shall
affect or impair the powers, obligations, duties, rights, warranties,
representations or liabilities of the parties hereto and all shall survive such
termination.

 

(e) Each Obligation may, in Lender’s sole discretion, be evidenced by notes or
other instruments issued or made by Borrower to Lender. If not so evidenced,
such Obligation shall be evidenced solely by entries upon Lender’s books and
records.

 

19

 

 

(f) Lender may, in its sole discretion: (i) exchange, enforce, waive or release
any of the Collateral or (ii) apply Collateral and direct the order or manner
without affecting its right to take any other action with respect to any other
Collateral.

 

(g) Lender shall have the continuing and exclusive right to apply or reverse and
re-apply any and all payments to any portion of the Obligations. To the extent
that Borrower makes a payment or Lender receives any payment or proceeds of the
Collateral for Borrower’s benefit, which are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to a
trustee, debtor in possession, receiver or any other party under any bankruptcy
law, common law or equitable cause, then, to such extent, the Obligations or
part thereof intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by Lender.

 

(h) Borrower shall reimburse Lender for all expenses incurred or to be incurred
by Lender in connection with (a) the negotiation, preparation and closing of
this Agreement; (b) the protection, perfection or preservation of Lender’s
security interest in or lien upon the Collateral; (c) Lender’s inspection or
verification of the Collateral; (d) background investigations as Lender deems
necessary; (e) any court or bankruptcy proceeding relating to the Agreement or
any claim or action by any Person against Lender which would not have been
asserted were it not for Lender’s relationship with Borrower hereunder or
otherwise; (f) actions taken with respect to the Collateral and Lender’s
security interest or lien therein; and (g) enforcement of any of Lender’s rights
and remedies with respect to the Obligations or Collateral. The foregoing
expenses shall include, without limitation: (i) reasonable fees, costs and
expenses of Lender’s attorneys and paralegals; (ii) interest on the foregoing at
the highest applicable interest rate provided under this Agreement, which shall
be part of the Obligations, payable on demand and secured by the Collateral. In
addition, Borrower shall pay those fees set forth on the Term Sheet at the times
specified therein. In recognition of Lender’s right to have all its expenses
incurred or to be incurred in connection with this Agreement and the fees due
Lender secured by the Collateral, Lender shall not be required to record any
discharge of its lien or termination of its security interest unless and until
Borrower delivers to Lender a general release acceptable to Lender, in its sole
discretion.

 

(i) Borrower agrees to give Lender written notice of any action or omission by
Lender or its agents in connection with this Agreement that may be actionable
against Lender or that may be a defense to payment of the Obligations for any
reasons. Borrower further agrees that unless such a notice specifically
describing the action or omission is given by it within thirty (30) days after
it has knowledge or with the exercise of reasonable diligence should have had
knowledge of the occurrence of said action or omission, Borrower shall not
assert, and Borrower shall be deemed to have waived, any claim or defense
arising therefrom.

 

(j) If Lender breaches its obligation under this Agreement to make an advance,
notwithstanding Borrower’s conformance with the provisions thereof, Borrower
agrees that its sole remedy on account thereof shall be to recover liquidated
damages on account of such breach, computed as hereinafter provided, in
recognition of the fact that the damages which Borrower might incur are
uncertain and speculative. Liquidated damages to which Borrower shall be
entitled shall be equal to sixty (60) times the interest payable for one day on
the loans outstanding as of the day that Lender is deemed to have failed to
fund. In any event, Lender shall never be liable to Borrower for special,
indirect or consequential damages, whatever the nature of its breach hereunder.

 

(k) Borrower authorizes and directs Lender to disburse, for Borrower’s account,
the proceeds of loans made by Lender to Borrower to such Person as any of
Borrower’s officers or directors shall direct in writing.

 

20

 

 

(l) Any notice required hereunder shall be in writing, and addressed to the
party to be notified as follows:

 

  If to Lender: Mackinac Commercial Credit, LLC     260 E. Brown Street    
Birmingham, Michigan 48009     Attn:Edward P. Lewan         If to Borrower:

The Borrower’s Address set forth on the Term Sheet. 

 

or to such other address as each party may designate for itself by like notice.

 

(m) Borrower represents and warrants to Lender that, with respect to the
financing transaction herein contemplated, no Person is entitled to any
brokerage fee or other commission and Borrower agrees to indemnify and hold
Lender harmless against any and all such claims.

 

(n) The paragraph titles contained in this Agreement are without substantive
meaning and are not part of the Agreement.

 

(o) Borrower hereby releases and exculpates Lender, its officers, employees and
designee, from any liability arising from any acts under this Agreement or in
furtherance thereof, whether as attorney-in-fact or otherwise, whether of
omission or commission, and whether based upon any error of judgment or mistake
of law or fact, except for willful misconduct. In no event will Lender have any
liability to Borrower for lost profits or other special or consequential
damages.

 

(p) Lender may, at its option, cure any default by Borrower under any agreement
with a third party or pay or bond on appeal any judgment entered against
Borrower, discharge taxes, liens, security interests or other encumbrances at
any time levied on or existing with respect to the Collateral and pay any
amount, incur any expense or perform any act which, in Lender’s sole judgment,
is necessary or appropriate to preserve, protect, insure, maintain, or realize
upon the Collateral. Lender may charge Borrower’s Loan Account for any amounts
so expended, such amounts to be repayable by Borrower on demand. Lender shall be
under no obligation to effect such cure, payment, bonding or discharge, and
shall not, by doing so, be deemed to have assumed any obligation or liability of
Borrower’s.

 

(q) All representations and warranties by Borrower contained in this Agreement
or any of the other agreements contemplated herein shall survive the execution
and delivery of this Agreement until the termination hereof and the indefeasible
satisfaction in full of all Obligations.

 

16. WAIVER OF JURY TRIAL. BORROWER ACKNOWLEDGES THAT ITS LEGAL COUNSEL HAS
ADVISED IT THAT (I) THERE MAY BE A CONSTITUTIONAL RIGHT TO A JURY TRIAL IN
CONNECTION WITH ANY CLAIM, DISPUTE OR LAWSUIT ARISING OUT OF THIS AGREEMENT OR
ANY RIDER AND (II) SUCH CONSTITUTIONAL RIGHT MAY BE WAIVED. AFTER CONSULTATION
WITH ITS COUNSEL (OR OPPORTUNITY TO CONSULT), WHICH HAS INCLUDED BORROWER’S
COUNSEL’S REVIEW OF THIS AGREEMENT, BORROWER BELIEVES THAT IT IS IN ITS BEST
INTEREST IN THIS COMMERCIAL TRANSACTION TO WAIVE SUCH RIGHT. ACCORDINGLY,
BORROWER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL, AND FURTHER AGREES THAT THE
BEST FORUM FOR HEARING ANY CLAIM, DISPUTE OR LAWSUIT, IF ANY, ARISING IN
CONNECTION WITH THIS AGREEMENT OR ANY RIDER OR BORROWER’S RELATIONSHIP WITH
LENDER, SHALL BE A COURT OF COMPETENT JURISDICTION SITTING WITHOUT A JURY.

 

17. NO ORAL AGREEMENTS. Borrower acknowledges that this Agreement and each Rider
represents the final agreement between Lender and Borrower and the terms of such
documents may not be contradicted by evidence of prior, contemporaneous, or
subsequent oral agreements that may have or will be exchanged between Lender
(including its officers, employees and agents) and Borrower.

 

[Signatures on following page]

 

21

 

 

IN WITNESS WHEREOF, the parties have caused this Loan and Security Agreement to
be executed under seal by their respective duly authorized officers as of the
date first above written.

 

  BORROWER:       NANOFILM, LTD.,   an Ohio limited liability company       By:
/s/ Scott E. Rickert   Name: Scott E. Rickert   Its: Chief Executive Officer    
  LENDER:       MACKINAC COMMERCIAL CREDIT, LLC,   a Michigan limited liability
company       By: /s/ Edward P. Lewan   Name: Edward P. Lewan   Its: Chief
Lending Officer

 

 

 

 

Schedule 14(b)

 

CASH COLLATERAL ORDER PRINCIPAL TERMS

 

In addition to such terms and conditions as Debtor and Lender shall mutually
agree, the Cash Collateral Order shall contain the following principal terms:

 

1. An acknowledgment by Debtor that the indebtedness owed to Lender constitutes
the valid and binding obligation of Debtor and is secured by liens and security
interests granted by Debtor to Lender in Debtor’s tangible and intangible
personal property as described in the Loan Documents; and Lender’s security
interests and liens in the Collateral are valid, properly perfected and recorded
and are unavoidable and indefeasible in the pending bankruptcy proceeding; and
are not subject to avoidance, defeasance, offset, defense or counterclaim of any
kind.

 

2. Debtor may use Cash Collateral only for “necessary operating expenses.” The
term “necessary operating expenses” shall be limited to the payment of current
taxes incurred after the petition date, unpaid withholding taxes for the last
pay period before and pay periods after the petition date, wages and salaries,
property insurance, necessary repairs and maintenance, utilities, purchase of
inventory and other ordinary charges necessary for Debtor’s operations. The term
“necessary operating expenses” does not include payments to pay or cure any
prepetition obligations of Debtor including any arrearages under any lease,
equipment or a statutory contract obligation, except that such expenses may be
paid with Lender’s prior written consent.

 

3. All principal, interest, costs and expenses, including reasonable attorneys’
fees heretofore, now or hereafter incurred by Lender in connection with the
indebtedness or in the administration of this bankruptcy proceeding, and all
sums at any time owing by Debtor under this Cash Collateral Order, the Note(s)
or any other notes or other agreements with Lender, is and shall continue to be
secured by a post-petition first and senior security interest in and lien upon
all property of Debtor and property of the estate of whatever kind or nature,
acquired by Debtor or the estate on or after the petition date.

 

4. Lender shall continue to receive all reports as provided under the Loan
Documents. Lender shall continue to have access to Debtor’s books and records
for the purpose of conducting audits of the Collateral. All of the provisions of
the Loan Documents shall remain in full force and effect and Debtor shall
continue to provide to Lender all other documents and information required to be
provided to it under the Loan Documents.

 

5. Interest will continue to accrue and be paid at the non-default rate or the
default rate of interest, whichever is in effect as of the petition date and
shall continue to accrue under the Note(s).

 

6. Until the indebtedness to Lender is repaid in full, Debtor will not, without
Lender’s prior written consent, engage in any transaction which is not in the
ordinary course of its business, including the dispositions of any assets,
engaging in any new or different business activities, increase its investment in
fixed or capital assets, or create, assume or suffer to exist any lien or
security interest in favor of any person other than Lender in any of the
collateral.

 

7. Such other reasonable and ordinary terms and conditions as Lender shall
require subject to approval of the bankruptcy court.

 

Schedule-1

 

 

 

 

LOAN AND SECURITY AGREEMENT

DATED AS OF APRIL 4, 2014

 

TERM SHEET

 

Paragraph   Provisions   Terms           2(a)   Maximum Loan Amount:  
$1,500,000.00           2(c)   Interest Rate:   LIBOR Rate plus 7.0%          
2(e)  

Maturity Date:

 

  Earlier of Demand or April 4, 2015 5(b)(iii)   Interim Financial Statement
Period   Monthly           7(a)   Formation State:   Ohio           7(b)  
Assumed Names or Trade Names:   None           7(g)   Permitted Liens  

U.S. Bank Equipment

Finance (UCC Filing No.

OH00169414059 – 8/6/13)

          7(n)   Chief Executive Office, Principal Place of Business and
Location of Collateral Records:   10111 Sweet Valley, Valley
View, Ohio 44125           7(p)   Subsidiaries or Affiliates:  

NANOHOLDING INC.
(Parent – holder of 100% of Class A and Class B stock)

 

Rickert Family Limited
Partnership (holder of 100% of NANOHOLDING, INC. Class B voting stock)

          7(q)   Leased Properties:  

10111 Sweet Valley,
Valley View, Ohio 44125

 

6030 Carey Drive,
Valley View, Ohio 44125

         

7(r)

 

 

Collateral Locations:

 

 

 

10111 Sweet Valley, Valley
View, Ohio 44125

 

6030 Carey Drive, Valley
View, Ohio 44125

              Vendor Locations:   See attachment hereto           15(b)  
Governing Law:   Michigan           15(h)   Fees:                   (i)
Commitment Fee:   1% of the Maximum Loan Amount, payable as of date hereof;    
          (ii) Under Utilization Fee:   0.25% of the Loan Amount not drawn,
payable monthly;               (iii) Loan Processing Fee:   0.35% of the average
monthly amount outstanding under the Loan, payable monthly;               (iv)
Collateral Evaluation Fee:  

$1,000 per day plus expenses, payable as incurred.

                  All monthly fees are payable with the interest payment; and  
            (v) Fees for Lockbox and Other Accounts:   as specified by
depository institutions or Lender.           15(L)   Borrower’s Address:  

10111 Sweet Valley

Valley View, Ohio 44125

  

[Signatures on following page]

 

Term Sheet-1

 

 

 

 

Borrower understands that this Term Sheet defines certain terms used in the
attached Loan and Security Agreement (“Attachment”). Borrower has read the
Attachment and this Term Sheet and fully understands their relationship. By
executing both documents, Borrower acknowledges the foregoing.

 

LENDER: BORROWER:     MACKINAC COMMERCIAL CREDIT, LLC, NANOFILM, LTD., a
Michigan limited liability company an Ohio limited liability company

 

By: /s/ Edward P. Lewan   By: /s/ Scott E. Rickert Name: Edward P. Lewan  
Name:  Scott E. Rickert Its: Chief Lending Officer   Its: Chief Executive
Officer

 

 Term Sheet-2