Exhibit
10.1


LightPath
Technologies, Inc.


 


Avidbank
Corporate Finance,


a division
of Avidbank


 


LOAN AND
SECURITY AGREEMENT


 




    	 



    	 



    

 


This Loan
And Security Agreement is entered into as of September 30, 2013, by and between Avidbank
Corporate Finance, a division of Avidbank (“Bank”) and LightPath
Technologies, Inc. (“Borrower”).


 


Recitals


 


Borrower wishes to
obtain credit from time to time from Bank, and Bank desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts owing to Bank.


 


Agreement


 


The parties agree as
follows:


 


1.           Definitions
and Construction.


 


1.1           Definitions.
As used in this Agreement, the following terms shall have the following definitions:


 


“Accounts”
means all presently existing and hereafter arising accounts, contract rights, payment intangibles, and all other forms of obligations
owing to Borrower arising out of the sale or lease of goods (including, without limitation, the licensing of software and other
technology) or the rendering of services by Borrower, whether or not earned by performance, and any and all credit insurance, guaranties,
and other security therefor, as well as all merchandise returned to or reclaimed by Borrower and Borrower’s Books relating
to any of the foregoing.


 


“Advance”
or “Advances” means a cash advance or cash advances under the Revolving Facility.


 


“Affiliate”
means, with respect to any Person, any Person that owns or controls directly or indirectly such Person, any Person that controls
or is controlled by or is under common control with such Person, and each of such Person’s senior executive officers, directors,
and partners.


 


“Bank Expenses”
means all: reasonable costs or expenses (including reasonable attorneys’ fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents; reasonable Collateral audit fees; and Bank’s
reasonable attorneys’ fees and expenses incurred in amending, enforcing or defending the Loan Documents (including fees and
expenses of appeal), incurred before, during and after an Insolvency Proceeding, whether or not suit is brought.


 


“Borrower’s
Books” means all of Borrower’s books and records including: ledgers; records concerning Borrower’s assets or
liabilities, the Collateral, business operations or financial condition; and all computer programs, or tape files, and the equipment,
containing such information.


 


“Borrowing Base”
means an amount equal to eighty percent (80%) of Eligible Accounts, as determined by Bank with reference to the most recent Borrowing
Base Certificate delivered by Borrower.


 


“Borrower’s
Knowledge” and terms and phrases of similar import, whether or not capitalized, means (i) actual knowledge, awareness or
belief possessed by the executive officers and directors of Borrower, and (ii) the knowledge, awareness or belief that the executive
officers and directors would have possessed by using reasonable care and diligence under the circumstances.


 


“Business Day”
means any day that is not a Saturday, Sunday, or other day on which banks in the State of California are authorized or required
to close.


 




    	 



    	 



    

 


“Change in Control”
shall mean a transaction in which any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934), directly or indirectly, of a sufficient number of shares of all classes of stock then outstanding of Borrower
ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect
a majority of the Board of Directors of Borrower, who did not have such power before such transaction.


 


“Chinese Subsidiary”
means Borrower’s wholly owned Subsidiary named LightPath Optical Instrumentation (Shanghai) Co., Ltd. formed under the laws
of China.


 


“Closing Date”
means the date of this Agreement.


 


“Code”
means the California Uniform Commercial Code.


 


“Collateral”
means the property described on Exhibit A attached hereto.


 


“Contingent Obligation”
means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any
indebtedness, lease, dividend, letter of credit or other obligation of another; (ii) any obligations with respect to undrawn
letters of credit, corporate credit cards, or merchant services issued or provided for the account of that Person; and (iii) all
obligations arising under any agreement or arrangement designed to protect such Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term “Contingent Obligation” shall not include endorsements
for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made
or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by Bank in good
faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee
or other support arrangement.


 


“Copyrights”
means any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship
and derivative work thereof.


 


“Credit Extension”
means each Advance, Equipment Advance or any other extension of credit by Bank for the benefit of Borrower hereunder.


 


“Current Liabilities”
means, as of any applicable date, all amounts that should, in accordance with GAAP, be included as current liabilities on the consolidated
balance sheet of Borrower and its Subsidiaries, as at such date, plus, to the extent not already included therein, all Obligations
owing under the Revolving Facility.


 


“Daily Balance”
means the amount of the Obligations owed at the end of a given day.


 


“Debt Service
Coverage Ratio” means, as of any date of determination, a ratio of (a) the sum of (i) earnings after tax annualized for the
preceding three (3) months plus interest and non-cash (i.e., depreciation and amortization, stock compensation and change in the
fair value of warrants) expenses agreed upon by Bank, annualized for the preceding three (3) months to (b) the sum of (i) current
portion of long term debt and capitalized leases plus (ii) interest expense, annualized for the preceding three (3) months.


 


“Draw Period”
means a three month period, with the first period beginning on the Closing Date and ending on the 90th day after the
Closing Date, the second period beginning on the 91st day after the Closing Date and ending on the 182nd
day after the Closing Date, the third period beginning on the 183rd day after the Closing Date and ending on the 274th
day after the Closing Date, and the fourth period beginning on the 275th day after the Closing Date and ending on the
first anniversary of the Closing Date.


 


“Eligible Accounts”
means those Accounts that arise in the ordinary course of Borrower’s business that comply with all of Borrower’s representations
and warranties to Bank set forth in Section 5.4; provided, that standards of eligibility may be fixed and revised from time
to time by Bank in Bank’s reasonable judgment and upon notification thereof to Borrower in accordance with the provisions
hereof. Unless otherwise agreed to by Bank, Eligible Accounts shall not include the following:


 




    	 



    	 



    

 


(a)           Accounts
that the account debtor has failed to pay within ninety (90) days of invoice date;


 


(b)           Accounts
with respect to an account debtor, twenty-five percent (25%) of whose Accounts the account debtor has failed to pay within ninety
(90) days of invoice date;


 


(c)           Accounts
with respect to which the account debtor is an officer, employee, or agent of Borrower;


 


(d)           Accounts
with respect to which goods are placed on consignment, guaranteed sale, sale or return, sale on approval, bill and hold, demo or
promotional, or other terms by reason of which the payment by the account debtor may be conditional;


 


(e)           Accounts
with respect to which the account debtor is an Affiliate of Borrower;


 


(f)           Accounts
with respect to which the account debtor does not have its principal place of business in the United States, except for Eligible
Foreign Accounts;


 


(g)           Accounts
with respect to which the account debtor is the United States or any department, agency, or instrumentality of the United States,
except for Accounts of the United States if the payee has assigned its payment rights to Bank, the assignment has been acknowledged
under the Assignment of Claims Act of 1940 (31 U.S.C. Section 3727), and such assignment otherwise complies with the Assignment
of Claims Act to Bank's reasonable satisfaction in the exercise of its reasonable credit judgment;


 


(h)           Accounts
with respect to which Borrower is liable to the account debtor for goods sold or services rendered by the account debtor to Borrower
or for deposits or other property of the account debtor held by Borrower, but only to the extent of any amounts owing to the account
debtor against amounts owed to Borrower;


 


(i)           Accounts
with respect to an account debtor, including Subsidiaries and Affiliates, whose total obligations to Borrower exceed thirty percent
(30%) of all Accounts, to the extent such obligations exceed the aforementioned percentage, except as approved in writing by Bank;


 


(j)           Accounts
that have not yet been billed to the account debtor or that relate to deposits (such as good faith deposits) or other property
of the account debtor held by Borrower for the performance of services or delivery of goods which Borrower has not yet performed
or delivered;


 


(k)           Prebillings,
retention billings, progress billings or bonded receivables;


 


(l)           Accounts
with respect to which the account debtor disputes liability or makes any claim with respect thereto as to which Bank believes,
in its sole discretion, that there may be a basis for dispute (but only to the extent of the amount subject to such dispute or
claim), or is subject to any Insolvency Proceeding, or becomes insolvent, or goes out of business; or


 


(m)          Accounts
which Bank reasonably determines to be unsatisfactory for inclusion as an Eligible Account.


 


“Eligible Foreign
Accounts” means Accounts with respect to which the account debtor does not have its principal place of business in the United
States and that (i) are supported by one or more letters of credit in an amount and of a tenor, and issued by a financial
institution, reasonably acceptable to Bank, (ii) covered in full by credit insurance reasonably satisfactory to Bank, less any
deductible, or (iii) that Bank approves on a case-by-case basis.


 


“Equipment”
means all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.


 




    	 



    	 



    

 


“Equipment Advance”
or “Equipment Advances” means each a cash advance or cash advances under Section 2.1(b).


 


“Equipment Maturity
Date” means, with respect to all Equipment Advances made during any particular Draw Period, the 10th day of the
thirty-sixth month following the end of such Draw Period, and in any event, no later than the fourth anniversary of the Closing
Date.


 


“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.


 


“Event of Default”
has the meaning assigned in Article 8.


 


“GAAP”
means generally accepted accounting principles as in effect from time to time.


 


“Indebtedness”
means (a) all indebtedness for borrowed money or the deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes,
bonds, debentures or similar instruments, (c) all capital lease obligations and (d) all Contingent Obligations.


 


“Insolvency Proceeding”
means any proceeding commenced by or against any person or entity under any provision of the United States Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.


 


“Intellectual
Property” means all of Borrower’s right, title, and interest in and to the following: Copyrights, Trademarks and Patents;
all trade secrets, all design rights, claims for damages by way of past, present and future infringement of any of the rights included
above, all licenses or other rights to use any of the Copyrights, Patents or Trademarks, and all license fees and royalties arising
from such use to the extent permitted by such license or rights; all amendments, renewals and extensions of any of the Copyrights,
Trademarks or Patents; and all proceeds and products of the foregoing, including without limitation all payments under insurance
or any indemnity or warranty payable in respect of any of the foregoing.


 


“Inventory”
means all inventory in which Borrower has or acquires any interest, including work in process and finished products intended for
sale or lease or to be furnished under a contract of service, of every kind and description now or at any time hereafter owned
by or in the custody or possession, actual or constructive, of Borrower, including such inventory as is temporarily out of its
custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above, and Borrower’s
Books relating to any of the foregoing.


 


“Investment”
means any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any loan, advance
or capital contribution to any Person.


 


“IRC” means
the Internal Revenue Code of 1986, as amended, and the regulations thereunder.


 


“Lien”
means any mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance.


 


“Loan Documents”
means, collectively, this Agreement, any note or notes executed by Borrower, any guarantees by third parties, and any other agreement
entered into in connection with this Agreement or any other credit facilities or services provided by Bank to Borrower (including
pursuant to that certain Lockbox Service Agreement between Borrower and Bank dated as of August 6, 2013 and as amended from time
to time), all as amended or extended from time to time.


 


“Material Adverse
Effect” means a material adverse effect on (i) the business operations or condition (financial or otherwise) of Borrower
and its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the Obligations or otherwise perform its obligations
under the Loan Documents or (iii) the value or priority of Bank’s security interests in the Collateral.


 




    	 



    	 



    

 


“Negotiable Collateral”
means all letters of credit of which Borrower is a beneficiary, notes, drafts, instruments, securities, documents of title, and
chattel paper, and Borrower’s Books relating to any of the foregoing.


 


“Obligations”
means all debt, principal, interest, Bank Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now existing or hereafter arising, including any interest
that accrues after the commencement of an Insolvency Proceeding and including any debt, liability, or obligation owing from Borrower
to others that Bank may have obtained by assignment or otherwise.


 


“Patents”
means all patents, patent applications and like protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.


 


“Periodic Payments”
means all installments or similar recurring payments that Borrower may now or hereafter become obligated to pay to Bank pursuant
to the terms and provisions of any instrument, or agreement now or hereafter in existence between Borrower and Bank.


 


“Permitted Indebtedness”
means:


 


(a)           Indebtedness
of Borrower in favor of Bank arising under this Agreement or any other Loan Document;


 


(b)           Indebtedness
existing on the Closing Date and disclosed in the Schedule;


 


(c)           Indebtedness
secured by a lien described in clause (c) of the defined term “Permitted Liens,” provided (i) such Indebtedness
does not exceed the lesser of the cost or fair market value of the equipment financed with such Indebtedness and (ii) such
Indebtedness (excluding such Indebtedness in favor of Bank) does not exceed $250,000 in the aggregate at any given time;


 


(d)           Subordinated
Debt;


 


(e)           Indebtedness
incurred in connection with the terms of any lease agreement for facilities to which Borrower or its foreign Subsidiary is currently
a party to or any lease agreement hereinafter entered into by Borrower or its foreign Subsidiary in the ordinary course of business,
including, but not limited to any tenant improvements; and


 


(f)           Indebtedness
incurred in connection with the extension, renewal or refinancing of the indebtedness described in clauses (a) through (e) above,
provided that the principal amount of the indebtedness being extended, renewed or refinanced does not increase or the terms modified
do not impose more burdensome terms upon Borrower or its Subsidiary, as the case may be.


 


“Permitted Investment”
means:


 


(a)           Investments,
including the ownership of Shares, existing on the Closing Date and disclosed in the Schedule; and


 


(b)           (i) marketable
direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing
within one (1) year from the date of acquisition thereof, (ii) commercial paper maturing no more than one (1) year from the
date of creation thereof and currently having rating of at least A-2 or P-2 from either Standard & Poor’s Corporation
or Moody’s Investors Service, (iii) certificates of deposit maturing no more than one (1) year from the date of investment
therein issued by Bank and (iv) Borrower’s money market accounts at Bank or disclosed in the Schedule (provided that
such accounts are subject to account control agreement(s) in form and substance satisfactory to Bank).


 




    	 



    	 



    

 


“Permitted Liens”
means the following:


 


(a)           Any Liens
existing on the Closing Date and disclosed in the Schedule or arising under this Agreement or the other Loan Documents;


 


(b)           Liens
for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of Bank’s security interests;


 


(c)           Liens
(i) upon or in any equipment which was not financed by Bank acquired or held by Borrower or any of its Subsidiaries to secure
the purchase price of such equipment or indebtedness incurred solely for the purpose of financing the acquisition of such equipment,
(ii) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property
so acquired and improvements thereon, and the proceeds of such equipment or (iii) upon or in any equipment which was leased by
Borrower as disclosed in the Schedule or is leased hereafter; and


 


(d)           Liens
incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered
by the existing Lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase.


 


“Person”
means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or governmental agency.


 


“Prime Rate”
means the variable rate of interest, per annum, that appears in The Wall Street Journal from time to time, whether or not
such announced rate is the lowest rate available from Bank. If the Prime Rate is no longer published in the Wall Street Journal
or is otherwise no longer available, Bank will choose a new index within its reasonable discretion that is determined by the Bank
to be based upon comparable information.


 


“Required Approvals”
means the filing of an application and registration with, and the approval by the Ministry of Commerce, the State Administration
for Industry and Commerce, the foreign exchange authority and other applicable governmental agencies of the Peoples Republic of
China required for the grant, creation, attachment, perfection and enforceability of a security interest in the equity interests
of the Chinese Subsidiary.


 


“Responsible
Officer” means each of the Chief Executive Officer and the Chief Financial Officer of Borrower.


 


“Revolving Facility”
means the facility under which Borrower may request Bank to issue Advances, as specified in Section 2.1(a) hereof.


 


“Revolving Line”
means a credit extension of up to One Million Dollars ($1,000,000).


 


“Revolving Maturity
Date” means the first anniversary of the Closing Date.


 


“Schedule”
means the schedule of exceptions attached hereto and approved by Bank, if any.


 


“Shares”
is one hundred percent (100%) of the issued and outstanding capital stock, membership units or other securities owned or held of
record by a Borrower or any Subsidiary of Borrower, in any direct or indirect domestic Subsidiary; and sixty five percent (65%)
of the issued and outstanding capital stock, membership units or other securities owned or held of record by a Borrower or any
Subsidiary of Borrower, in any direct or indirect foreign Subsidiary; provided however the Shares shall not include any shares
of the Chinese Subsidiary (the “PRC Shares”) until the Required Approvals have been obtained.


 




    	 



    	 



    

 


“Subordinated
Debt” means any debt incurred by Borrower that is subordinated to the debt owing by Borrower to Bank on terms acceptable
to Bank (and identified as being such by Borrower and Bank).


 


“Subsidiary”
means any corporation, company or partnership in which (i) any general partnership interest or (ii) more than 50% of
the stock or other units of ownership which by the terms thereof has the ordinary voting power to elect the Board of Directors,
managers or trustees of the entity, at the time as of which any determination is being made, is owned by Borrower, either directly
or through an Affiliate.


 


“Trademarks”
means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.


 


1.2           Accounting
Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the terms “financial statements” shall include
the notes and schedules thereto.


 


2.           Loan
and Terms Of Payment.


 


2.1           Credit Extensions.


 


Borrower promises to
pay to the order of Bank, in lawful money of the United States of America, the aggregate unpaid principal amount of all Credit
Extensions made by Bank to Borrower hereunder. Borrower shall also pay interest on the unpaid principal amount of such Credit Extensions
at rates in accordance with the terms hereof.


 


(a)          Revolving
Advances.


 


(i)           Subject
to and upon the terms and conditions of this Agreement, Borrower may request Advances in an aggregate outstanding amount not to
exceed the lesser of (i) the Revolving Line or (ii) the Borrowing Base. Subject to the terms and conditions of this Agreement,
amounts borrowed pursuant to this Section 2.1(a) may be repaid and reborrowed at any time prior to the Revolving Maturity Date,
at which time all Advances under this Section 2.1(a) shall be immediately due and payable. Interest hereunder shall be due and
payable on the last business day of each month during the term hereof. Borrower may prepay any Advances without penalty or premium.


 


(ii)           Whenever
Borrower desires an Advance, Borrower will notify Bank by email, facsimile transmission or telephone no later than 2:00 p.m. Pacific
Time, on the Business Day that is one day before the Business Day the Advance is to be made. Each such notification shall be promptly
confirmed by a Borrowing Base Certificate in substantially the form of Exhibit C hereto. Bank is authorized to make
Advances under this Agreement, based upon instructions received from a Responsible Officer or a designee of a Responsible Officer,
or without instructions if in Bank’s discretion such Advances are necessary to meet Obligations which have become due and
remain unpaid. Bank shall be entitled to rely on any email or telephonic notice given by a person who Bank reasonably believes
to be a Responsible Officer or a designee thereof, and Borrower shall indemnify and hold Bank harmless for any damages or loss
suffered by Bank as a result of such reliance. Bank will credit the amount of Advances made under this Section to Borrower’s
deposit account at Bank.


 


(b)          Equipment
Advances.


 


(i)           Subject
to and upon the terms and conditions of this Agreement, at any time from the date hereof through the first anniversary of the Closing
Date, Bank agrees to make Equipment Advances to Borrower, each in a minimum amount of $100,000, and in an aggregate amount not
to exceed One Million Dollars ($1,000,000). Each Equipment Advance shall not exceed one hundred percent (100%) of the invoice amount
of Equipment and software approved by Bank from time to time (which Borrower shall, in any case, have closed the purchase within
90 days of the date of the corresponding Equipment Advance), and not more than twenty five percent (25%) of each Equipment Advance
being used for taxes, shipping, warranty charges, freight discounts and installation expense and other soft costs.


 




    	 



    	 



    

 


(ii)           Interest
shall accrue from the date of each Equipment Advance at the rate specified in Section 2.3, and shall be payable monthly on the
tenth day of each month so long as any Equipment Advances are outstanding. Equipment Advances made during any particular Draw Period
shall be payable in thirty six (36) equal monthly installments of principal, plus all accrued interest, beginning on the tenth
day of the month following the end of such Draw Period, and continuing on the tenth day of each month thereafter through the Equipment
Maturity Date, at which time all amounts owing under this Section 2.1(b) and any other amounts owing under this Agreement shall
be immediately due and payable. Equipment Advances, once repaid, may not be reborrowed. Borrower may prepay any Equipment Advances
without penalty or premium.


 


(iii)           When
Borrower desires to obtain an Equipment Advance, Borrower shall notify Bank (which notice shall be irrevocable) by electronic mail
or facsimile transmission to be received no later than 3:00 p.m. Pacific time three (3) Business Days before the day on which the
Equipment Advance is to be made. Such notice shall be substantially in the form of the Equipment Advance Request Form attached
hereto as Exhibit B. The notice shall be signed by a Responsible Officer or its designee and include a copy of the invoice
and proof of payment of such invoice for any Equipment to be financed and such other information as Bank may reasonably request.


 


2.2          Overadvances.
If the aggregate amount of the outstanding Advances exceeds the lesser of the Revolving Line or the Borrowing Base at any time,
Borrower shall immediately pay to Bank, in cash, the amount of such excess.


 


2.3          Interest Rates,
Payments, and Calculations.


 


(a)           Interest
Rates. 


 


(i)           Except
as set forth in Section 2.3(b), the Advances shall bear interest, on the outstanding Daily Balance thereof, at a per annum rate
equal to one percent (1%) above the Prime Rate.


 


(ii)           Except
as set forth in Section 2.3(b), the Equipment Advances shall bear interest, on the outstanding Daily Balance thereof, at a per
annum rate equal to one and one half percent (1.5%) above the Prime Rate.


 


(b)          Late Fee;
Default Rate. If any payment is not made within ten (10) days after the date such payment is due, Borrower shall pay Bank a
late fee equal to the lesser of (i) five percent (5%) of the amount of such unpaid amount or (ii) the maximum amount
permitted to be charged under applicable law. All Obligations shall bear interest, from and after the occurrence and during the
continuance of an Event of Default, at a rate equal to five (5) percentage points above the interest rate applicable immediately
prior to the occurrence of the Event of Default.


 


(c)          Payments.
Bank shall, at its option, charge such interest, all Bank Expenses, and all Periodic Payments against any of Borrower’s deposit
accounts or against the Revolving Line, in which case those amounts shall thereafter accrue interest at the rate then applicable
hereunder. Any interest not paid when due shall be compounded by becoming a part of the Obligations, and such interest shall thereafter
accrue interest at the rate then applicable hereunder. All payments shall be free and clear of any taxes, withholdings, duties,
impositions or other charges, to the end that Bank will receive the entire amount of any Obligations payable hereunder, regardless
of source of payment.


 


(d)          Lockbox.
After an Event of Default has occurred: (i) upon Bank’s request, Borrower shall cause all account debtors to wire any amounts
owing to Borrower to such account (the “Bancontrol Account”) as Bank shall specify, and to mail all payments made by
check to a post office box under Bank’s control. All invoices shall specify such post office box as the payment address;
(ii) Bank shall have sole authority to collect such payments and deposit them to the Bancontrol Account; (iii) if Borrower receives
any amount despite such instructions, Borrower shall immediately deliver such payment to Bank in the form received, except for
an endorsement to the order of Bank and, pending such delivery, shall hold such payment in trust for Bank; and (iv) within two
(2) Business Days after clearance of any checks, Bank may, in its sole discretion, credit any amounts paid into the Bancontrol
Account first against any amounts outstanding under the Revolving Line, and then any remaining balance of such amount shall be
credited to Borrower’s operating account maintained at Bank. Bank may, at its option, conduct a credit check of the Account
Debtor for each Eligible Account requested by Borrower for inclusion in the Borrowing Base. Bank may also verify directly with
the respective account debtors the validity, amount and other matters relating to the Eligible Accounts, and notify any account
debtor of Bank’s security interest in the Borrower’s Accounts.


 




    	 



    	 



    

 


(e)           Computation.
In the event the Prime Rate is changed from time to time hereafter, the applicable rate of interest hereunder shall be increased
or decreased, effective as of the day the Prime Rate is changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a three hundred sixty (360) day year for the actual number
of days elapsed.


 


2.4          Crediting Payments.
Prior to the occurrence of an Event of Default, Bank shall credit a wire transfer of funds, check or other item of payment to such
deposit account or Obligation as Borrower specifies. After the occurrence of an Event of Default, the receipt by Bank of any wire
transfer of funds, check, or other item of payment shall be immediately applied to conditionally reduce Obligations, but shall
not be considered a payment on account unless such payment is of immediately available federal funds or unless and until such check
or other item of payment is honored when presented for payment. Notwithstanding anything to the contrary contained herein, any
wire transfer or payment received by Bank after 12:00 noon Pacific Time shall be deemed to have been received by Bank as of
the opening of business on the immediately following Business Day. Whenever any payment to Bank under the Loan Documents would
otherwise be due (except by reason of acceleration) on a date that is not a Business Day, such payment shall instead be due on
the next Business Day, and additional fees or interest, as the case may be, shall accrue and be payable for the period of such
extension.


 


2.5          Fees. Borrower
shall pay to Bank the following:


 


(a)           Facility
Fees. On the Closing Date, a facility fee equal to $5,000, which shall be fully earned and nonrefundable; and


 


(b)           Bank Expenses.
On the Closing Date, all Bank Expenses incurred through the Closing Date, including reasonable attorneys’ fees and expenses
and, after the Closing Date, all Bank Expenses, including reasonable attorneys’ fees and expenses, as and when they are incurred
by Bank.


 


2.6           Term. This
Agreement shall become effective on the Closing Date and, subject to Section 12.8, shall continue in full force and effect for
so long as any Obligations remain outstanding or Bank has any obligation to make Credit Extensions under this Agreement. Notwithstanding
the foregoing, Bank shall have the right to terminate its obligation to make Credit Extensions under this Agreement immediately
and without notice upon the occurrence and during the continuance of an Event of Default. Notwithstanding termination, Bank’s
Lien on the Collateral shall remain in effect for so long as any Obligations are outstanding.


 


3.           Conditions
of Loans.


 


3.1          Conditions
Precedent to Initial Credit Extension. The obligation of Bank to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance reasonably satisfactory to Bank, the following:


 


(a)           this
Agreement;


 


(b)           a certificate
of the Secretary of Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Agreement;


 


(c)           UCC National
Form Financing Statement;


 




    	 



    	 



    

 


(d)          an intellectual
property security agreement;


 


(e)           landlord
waiver with respect to Borrower’s leased locations in Florida;


 


(f)           certificate(s)
of insurance naming Bank as loss payee and additional insured for insurance policies of Borrower and its domestic Subsidiaries;


 


(g)           payment
of the fees and Bank Expenses then due specified in Section 2.5 hereof;


 


(h)          current
financial statements of Borrower as disclosed in Borrower’s Form 10-K;


 


(i)           unconditional
guaranty duly executed by Borrower’s wholly owned Subsidiary, GELTECH INC., and a certificate of the Secretary of such entity
with respect to incumbency and resolutions authorizing the execution and delivery of the guaranty;


 


(j)           delivery
of the share certificates representing the Shares, if certificated, and stock powers held by Borrower;


 


(k)          an audit
of the Collateral, the results of which shall be satisfactory to Bank;


 


(l)           execution
of lockbox agreements and related arrangements with respect to the Bancontrol Account; and


 


(m)         such
other documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate.


 


3.2          Conditions
Precedent to all Credit Extensions. The obligation of Bank to make each Credit Extension, including the initial Credit Extension,
is further subject to the following conditions:


 


(a)           timely
receipt by Bank of the Payment/Advance Form as provided in Section 2.1; and


 


(b)           the representations
and warranties contained in Section 5 shall be true and correct in all material respects on and as of the date of Borrower’s
request for such Credit Extension and on the effective date of each Credit Extension as though made at and as of each such date,
and no Event of Default shall have occurred and be continuing, or would exist after giving effect to such Credit Extension. The
making of each Credit Extension shall be deemed to be a representation and warranty by Borrower on the date of such Credit Extension
as to the accuracy of the facts referred to in this Section 3.2.


 


4.           Creation
of Security Interest.


 


4.1           Grant of Security
Interest. Borrower grants and pledges to Bank a continuing security interest in all presently existing and hereafter acquired
or arising Collateral in order to secure prompt repayment of any and all Obligations and in order to secure prompt performance
by Borrower of each of its covenants and duties under the Loan Documents. Such security interest constitutes a valid, first priority
security interest in the presently existing Collateral, and will constitute a valid, first priority security interest in Collateral
acquired after the date hereof (subject only to Permitted Liens that are permitted pursuant to the terms of this Agreement to have
superior priority to Bank’s Lien in this Agreement, and, with respect to the PRC Shares, subject to the obtainment of the
Required Approvals).


 


4.2           Delivery of
Additional Documentation Required. Borrower shall from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank may reasonably request, in form satisfactory to Bank,
to perfect and continue the perfection of Bank’s security interests in the Collateral and in order to fully consummate all
of the transactions contemplated under the Loan Documents. Borrower from time to time may deposit with Bank specific time deposit
accounts to secure specific Obligations. Borrower authorizes Bank to hold such balances in pledge and to decline to honor any drafts
thereon or any request by Borrower or any other Person to pay or otherwise transfer any part of such balances for so long as the
Obligations are outstanding.


 




    	 



    	 



    

 


4.3           Right to Inspect.
Bank (through any of its officers, employees, or agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower’s usual business hours but no more than twice a year (unless an Event of Default has occurred and is continuing),
to inspect Borrower’s Books and to make copies thereof and to check, test, and appraise the Collateral in order to verify
Borrower’s financial condition or the amount, condition of, or any other matter relating to, the Collateral.


 


4.4           Pledge of Shares.
Borrower hereby pledges, assigns and grants to Bank, a security interest in all the Shares, together with all proceeds and substitutions
thereof, all cash, stock and other moneys and property paid thereon, all rights to subscribe for securities declared or granted
in connection therewith, and all other cash and noncash proceeds of the foregoing, as security for the performance of the Obligations.
On the Closing Date, or, to the extent not certificated as of the Closing Date, within ten (10) days of the certification of any
Shares, the certificate or certificates for the Shares will be delivered to Bank, accompanied by an instrument of assignment duly
executed in blank by Borrower. To the extent required by the terms and conditions governing the Shares, Borrower shall cause the
books of each entity whose Shares are part of the Collateral and any transfer agent to reflect the pledge of the Shares. Upon the
occurrence of an Event of Default hereunder, Bank may effect the transfer of any securities included in the Collateral (including
but not limited to the Shares) into the name of Bank and cause new (as applicable) certificates representing such securities to
be issued in the name of Bank or its transferee. Borrower will execute and deliver such documents, and take or cause to be taken
such actions, as Bank may reasonably request to perfect or continue the Shares. Unless an Event of Default shall have occurred
and be continuing, Borrower shall be entitled to exercise any voting rights with respect to the Shares, to give consents, waivers
and ratifications in respect thereof, and receive and retain any and all dividends and other distributions paid with respect to
the Shares, provided that no vote shall be cast or consent, waiver or ratification given or action taken which would be inconsistent
with any of the terms of this Agreement or which would constitute or create any violation of any of such terms. All such rights
to vote and give consents, waivers and ratifications shall terminate upon the occurrence and continuance of an Event of Default.


 


5.           Representations
and Warranties.


 


Borrower represents
and warrants as follows:


 


5.1           Due Organization
and Qualification. Borrower and each Subsidiary is a corporation duly existing under the laws of its state of incorporation
and qualified and licensed to do business in any state in which the conduct of its business or its ownership of property requires
that it be so qualified in which the failure to so qualify could reasonably be expected to have a Material Adverse Effect.


 


5.2           Due Authorization;
No Conflict. The execution, delivery, and performance of the Loan Documents are within Borrower’s powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any provision contained in Borrower’s Articles of Incorporation
or Bylaws, nor will they constitute an event of default under any material agreement to which Borrower is a party or by which Borrower
is bound. Borrower is not in default under any material agreement to which it is a party or by which it is bound.


 


5.3           No Prior Encumbrances.
Borrower has good and marketable title to its property, free and clear of Liens, except for Permitted Liens.


 


5.4           Bona Fide Eligible
Accounts. The Eligible Accounts are bona fide existing obligations. The property and services giving rise to such Eligible
Accounts has been delivered or rendered to the account debtor or to the account debtor’s agent for immediate and unconditional
acceptance by the account debtor. Borrower has not received notice of actual or imminent Insolvency Proceeding of any account debtor
that is included in any Borrowing Base Certificate as an Eligible Account.


 




    	 



    	 



    

 


5.5           Merchantable
Inventory. All Inventory is in all material respects of good and marketable quality, free from all material defects, except
for Inventory for which adequate reserves have been made.


 


5.6           Intellectual
Property. Borrower is the sole owner of the Intellectual Property, except for non-exclusive licenses granted by Borrower to
its customers in the ordinary course of business and those exclusive licenses granted by Borrower and disclosed in the Schedule.
Each of the Patents is valid and enforceable, and no part of the Intellectual Property has been judged invalid or unenforceable,
in whole or in part, and to Borrower’s Knowledge, no written claim has been made that any part of the Intellectual Property
violates the rights of any third party. Except as set forth in the Schedule, Borrower’s rights as a licensee of intellectual
property do not give rise to more than five percent (5%) of its gross revenue in any given month, including without limitation
revenue derived from the sale, licensing, rendering or disposition of any product or service. Borrower is not a party to, or bound
by, any agreement that restricts the grant by Borrower of a security interest in Borrower’s rights under such agreement.


 


5.7           Name; Location
of Chief Executive Office. Except as disclosed in the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof; or, in the past five (5) years, changed its jurisdiction of formation, corporate structure,
organizational type, or any organizational number assigned by its jurisdiction. The chief executive office of Borrower is located
at the address indicated in Section 10 hereof. All Borrower’s Inventory and Equipment is located only at the locations
set forth in the Schedule.


 


5.8           Litigation.
Except as set forth in the Schedule, there are no actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency which would, if there were an unfavorable decision, has or could reasonably be expected to result
in a Material Adverse Effect.


 


5.9           No Material
Adverse Change in Financial Statements. All consolidated and consolidating financial statements related to Borrower and any
Subsidiary that Bank has received from Borrower fairly present in all material respects Borrower’s financial condition as
of the date thereof and Borrower’s consolidated and consolidating results of operations for the period then ended. There
has not been a material adverse change in the consolidated or the consolidating financial condition of Borrower since the date
of the most recent of such financial statements submitted to Bank.


 


5.10         Solvency,
Payment of Debts. Borrower is solvent and able to pay its debts (including trade debts) as they mature.


 


5.11         Regulatory
Compliance. Borrower and each Subsidiary have met the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA, and no event has occurred resulting from Borrower’s failure to comply with ERISA that could result
in Borrower’s incurring any material liability. Borrower is not an “investment company” or a company “controlled”
by an “investment company” within the meaning of the Investment Company Act of 1940. Borrower is not engaged principally,
or as one of the important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulations T and U of the Board of Governors of the Federal Reserve System). Borrower and each Subsidiary
have complied in all material respects with all the provisions of the Federal Fair Labor Standards Act. Borrower and each Subsidiary
have not violated any material statutes, laws, ordinances or rules applicable to it.


 


5.12         Environmental
Condition. None of Borrower’s or any Subsidiary’s properties or assets has ever been used by Borrower or any Subsidiary
or, to Borrower’s Knowledge, by previous owners or operators, in the disposal of, or to produce, store, handle, treat, release,
or transport, any hazardous waste or hazardous substance other than in accordance with applicable law; to Borrower’s Knowledge,
none of Borrower’s properties or assets has ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or a candidate for closure pursuant to any environmental
protection statute; no lien arising under any environmental protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any Subsidiary has received a summons, citation, notice,
or directive from the Environmental Protection Agency or any other federal, state or other governmental agency concerning any action
or omission by Borrower or any Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste or hazardous substances
into the environment.


 




    	 



    	 



    

 


5.13         Taxes.
Borrower and each Subsidiary have filed or caused to be filed all tax returns required to be filed, and have paid, or have made
adequate provision for the payment of, all taxes reflected therein.


 


5.14         Subsidiaries.
Except as set forth on the Schedule, Borrower does not own any stock, partnership interest or other equity securities of any Person,
except for Permitted Investments.


 


5.15         Government
Consents. Borrower and each Subsidiary have obtained all material consents, approvals and authorizations of, made all declarations
or filings with, and given all notices to, all governmental authorities that are necessary for the continued operation of Borrower’s
business as currently conducted, except in each case as could not have or reasonably be expected to result in a Material Adverse
Effect.


 


5.16         Operating,
Depository and Investment Accounts. As of the Closing Date, all of Borrower’s or any Subsidiary’s operating, depository
and investment accounts are listed on the Schedule (collectively, the “Permitted Accounts”). On and after the 45th
day following the Closing Date, none of Borrower’s nor any domestic Subsidiary’s accounts are maintained or invested
with a Person other than Bank, except as permitted under Section 6.8.


 


5.17         Shares.
Subject to the satisfaction of and obtaining the Required Approvals and compliance with applicable laws as to the PRC Shares, Borrower
has full power and authority to create a first lien on the Shares and no disability or contractual obligation exists that would
prohibit Borrower from pledging the Shares pursuant to this Agreement. To Borrower’s Knowledge, there are no subscriptions,
warrants, rights of first refusal or other restrictions on transfer relative to, or options exercisable with respect to the Shares.
The Shares have been and will be duly authorized and validly issued, and are fully paid and non-assessable. To Borrower’s
Knowledge, the Shares are not the subject of any present or threatened suit, action, arbitration, administrative or other proceeding,
and Borrower knows of no reasonable grounds for the institution of any such proceedings. Borrower shall use commercially reasonable
efforts to make any filings or registrations or obtain any approvals that are required in connection with the grant and creation
of the security interest in the PRC Shares as soon as reasonably practicable following request from Bank.


 


5.18         Full Disclosure.
To Borrower’s Knowledge, no representation, warranty or other statement made by Borrower in any certificate or written statement
furnished to Bank contains any untrue statement of a material fact or omits to state a material fact necessary in order to make
the statements contained in such certificates or statements not misleading.


 


5.19         PRC Shares.
Notwithstanding anything in this Agreement to the contrary, all representations and warranties with respect to any matter related
to the Chinese Subsidiary, including, without limitation, any representation or warranty regarding the grant, creation, attachment,
perfection or enforceability of a security interest in any of the PRC Shares are subject to the satisfaction of and obtaining the
Required Approvals and compliance with applicable laws as to the PRC Shares.


 


6.           Affirmative
Covenants.


 


Borrower shall do all
of the following:


 


6.1           Good Standing.
Borrower shall maintain its and each of its Subsidiaries’ corporate existence and good standing in its jurisdiction of incorporation
and maintain qualification in each jurisdiction in which the failure to do so could reasonably be expected to have a Material Adverse
Effect. Borrower shall maintain, and shall cause each of its Subsidiaries to maintain, in force all licenses, approvals and agreements,
the loss of which could reasonably be expected to have a Material Adverse Effect.


 


6.2           Government
Compliance. Borrower shall meet, and shall cause each Subsidiary to meet, the minimum funding requirements of ERISA with respect
to any employee benefit plans subject to ERISA. Borrower shall comply, and shall cause each Subsidiary to comply, with all statutes,
laws, ordinances and government rules and regulations to which it is subject, noncompliance with which could have a Material Adverse
Effect.


 




    	 



    	 



    

 


6.3           Financial Statements,
Reports, Certificates. Borrower shall deliver the following to Bank: (a) within thirty (30) days after the last day of each
month, aged listings of accounts receivable and accounts payable, together with a deferred revenue listing and a Borrowing Base
Certificate signed by a Responsible Officer in substantially the form of Exhibit C hereto; (b) as soon as available,
but in any event within forty-five (45) days after the end of each month, a Compliance Certificate signed by a Responsible Officer
in substantially the form of Exhibit D hereto; (c) as soon as available, but in any event within (45) days after
the end of each quarter, a Borrower prepared consolidated and consolidating balance sheet, income, and cash flow statement covering
Borrower’s consolidated operations during such period, prepared in accordance with GAAP, consistently applied, in a form
reasonably acceptable to Bank; provided, however, that the filing of such financial statements with the Securities and Exchange
Commission through EDGAR will satisfy Borrower’s delivery obligations hereunder upon notice to Bank of such filings; (d) as
soon as available, but in any event within one hundred twenty (120) days after the end of Borrower’s fiscal year, audited
consolidated and consolidating financial statements of Borrower prepared in accordance with GAAP, consistently applied, together
with an unqualified opinion on such financial statements of an independent certified public accounting firm reasonably acceptable
to Bank; provided, however that the filing of such financial statements and opinion of an independent certified public accounting
firm with the Securities and Exchange Commission through EDGAR will satisfy Borrower’s delivery obligations hereunder upon
notice to Bank of such filings; (e) unless complete copies of the following are not available on EDGAR, copies of all statements,
reports and notices sent or made available generally by Borrower to its security holders or to any holders of Subordinated Debt;
(f) promptly upon receipt of notice thereof, a report of any legal actions pending or threatened against Borrower or any Subsidiary
that could result in damages or costs to Borrower or any Subsidiary of One Hundred Thousand Dollars ($100,000) or more, or any
commercial tort claim (as defined in the Code) acquired by
Borrower; (g) within 30 days following the end of each month, copies of all bank statements with respect to all accounts of Borrower
or any Subsidiary; and (h) such budgets, sales projections, operating plans, other financial information including information
related to the verification of Borrower’s Accounts as Bank may reasonably request from time to time. For the avoidance of
doubt, all information disclosed by Borrower, or any of its Subsidiaries, to Bank pursuant to this Section 6.3, shall be kept confidential
by Bank in accordance with Section 12.9.


 


6.4           Audits. Bank
shall have a right from time to time hereafter to audit Borrower’s Accounts and appraise Collateral at Borrower’s expense,
provided that such audits will be conducted no more often than every twelve (12) months unless an Event of Default has occurred
and is continuing.


 


6.5           Inventory;
Returns. Borrower shall keep all Inventory in good and marketable condition, free from all material defects except for Inventory
for which adequate reserves have been made. Returns and allowances, if any, as between Borrower and its account debtors shall be
on the same basis and in accordance with the usual customary practices of Borrower, as they exist at the time of the execution
and delivery of this Agreement. Borrower shall promptly notify Bank of all returns and recoveries and of all disputes and claims,
where the return, recovery, dispute or claim involves more than One Hundred Thousand Dollars ($100,000).


 


6.6           Taxes.
Borrower shall make, and shall cause each Subsidiary to make, due and timely payment or deposit of all material federal, state,
and local taxes, assessments, or contributions required of it by law, and will execute and deliver to Bank, on demand, appropriate
certificates attesting to the payment or deposit thereof; and Borrower will make, and will cause each Subsidiary to make, timely
payment or deposit of all material tax payments and withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal income taxes, and will, upon request,
furnish Bank with proof satisfactory to Bank indicating that Borrower or a Subsidiary has made such payments or deposits; provided
that Borrower or a Subsidiary need not make any payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP) by Borrower.


 


6.7           Insurance.


 


 (a)           Borrower,
at its expense, shall keep the Collateral insured against loss or damage by fire, theft, explosion, sprinklers, and all other hazards
and risks, and in such amounts, as ordinarily insured against by other owners in similar businesses conducted in the locations
where Borrower’s business is conducted on the date hereof. Borrower shall also maintain insurance relating to Borrower’s
business, ownership and use of the Collateral in amounts and of a type that are customary to businesses similar to Borrower’s.


 




    	 



    	 



    

 


(b)           All such
policies of insurance shall be in such form, with such companies, and in such amounts as are reasonably satisfactory to Bank. All
such policies of property insurance insuring property located in the United States shall contain a lender’s loss payable
endorsement, in a form reasonably satisfactory to Bank, showing Bank as an additional loss payee thereof, and all liability insurance
policies issued to Borrower or its domestic Subsidiaries shall show the Bank as an additional insured and shall specify that the
insurer must give at least twenty (20) days’ notice to Bank before canceling its policy for any reason. Upon Bank’s
request, Borrower shall deliver to Bank certified copies of such policies of insurance and evidence of the payments of all premiums
therefor. All proceeds payable under any such policy shall, at the option of Bank, be payable to Bank to be applied on account
of the Obligations. Notwithstanding the foregoing, (x) so long as no Event of Default has occurred that is continuing, Borrower
shall have the option of applying the proceeds of any casualty policy up to One Million Dollars ($1,000,000) in the aggregate for
all losses under all casualty policies in any one year, toward the replacement or repair of destroyed or damaged property; provided
that any such replaced or repaired property shall be of equal or like value as the replaced or repaired Collateral and shall be
deemed Collateral in which Bank has been granted a first priority security interest, and (y) after the occurrence and during the
continuance of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Bank, be payable to
Bank on account of the Obligations. Borrower shall give Bank prompt written notice (which shall in no event be greater than ten
(10) days following such occurrence) of the occurrence of any casualty affecting the Collateral or properties covered by the insurance
policies required by this Section 6.7(b) or any portion thereof.


 


6.8         Operating,
Depository and Investment Accounts. On and after the 45th day following the Closing Date, Borrower shall maintain
and shall cause each of its domestic Subsidiaries to maintain its primary depository and operating accounts with Bank. For each
operating, depository or investment account, including each Permitted Account, that Borrower maintains outside of Bank, Borrower
shall either: (a) cause the applicable bank or financial institution at or with which any such account is maintained to execute
and deliver an account control agreement or other appropriate instrument in form and substance reasonably satisfactory to Bank;
or (b) maintain an account balance in each such Permitted Account in an amount not to exceed Ten Thousand Dollars ($10,000) at
any given time.


 


6.9         Financial Covenants.


 


(a)           Minimum Quick
Ratio. Borrower shall maintain at a ratio of unrestricted cash and cash equivalents (not including any cash held in Bancontrol
Account) plus all accounts receivable to Current Liabilities of at least 1.50 to 1.00, measured on a quarterly basis.


 


(b)           Debt Service
Coverage Ratio. Borrower’s Debt Service Coverage Ratio, measured on a quarterly basis, shall be at least 1.25 to 1.00.


 


6.10        Intellectual
Property Rights.


 


(a)           Protect,
defend and maintain the validity and enforceability of its Intellectual Property; (ii) promptly advise Bank in writing of material
infringements of its Intellectual Property; and (iii) not allow any Intellectual Property material to Borrower’s business
to be abandoned, forfeited or dedicated to the public without Bank’s written consent.


 


(b)           Borrower
shall promptly give Bank written notice of any applications or registrations of intellectual property rights filed with the United
States Patent and Trademark Office, including the date of such filing and the registration or application numbers, if any. Borrower
shall (i) give Bank not less than thirty (30) days prior written notice of the filing of any applications or registrations with
the United States Copyright Office, including the title of such intellectual property rights to be registered, as such title will
appear on such applications or registrations, and the date such applications or registrations will be filed, and (ii) prior to
the filing of any such applications or registrations, shall execute such documents as Bank may reasonably request for Bank to maintain
its perfection in such intellectual property rights to be registered by Borrower, and upon the request of Bank, shall file such
documents simultaneously with the filing of any such applications or registrations. Upon filing any such applications or registrations
with the United States Copyright Office, Borrower shall promptly provide Bank with (i) a copy of such applications or registrations,
without the exhibits, if any, thereto, (ii) evidence of the filing of any documents requested by Bank to be filed for Bank to maintain
the perfection and priority of its security interest in such intellectual property rights, and (iii) the date of such filing.


 




    	 



    	 



    

 


(c)           Bank
may audit Borrower's Intellectual Property to confirm compliance with this Section, provided such audit may not occur more often
than twice per year, unless an Event of Default has occurred and is continuing. Bank shall have the right, but not the obligation,
to take, at Borrower's sole expense, any actions that Borrower is required under this Section to take but which Borrower fails
to take, after fifteen (15) days' notice to Borrower. Borrower shall reimburse and indemnify Bank for all reasonable costs and
reasonable expenses incurred in the reasonable exercise of its rights under this Section.


 


6.11         Further Assurances.
At any time and from time to time Borrower shall execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.


 


7.           Negative
Covenants.


 


Borrower will not do
any of the following:


 


7.1           Dispositions.
Convey, sell, lease, transfer or otherwise dispose of (collectively, a “Transfer”), or permit any of its Subsidiaries
to Transfer, all or any part of its business or property, other than: (i) Transfers of Inventory in the ordinary course of
business; (ii) Transfers of non-exclusive licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business; or (iii) Transfers of worn-out or obsolete Equipment which was not financed
by Bank.


 


7.2           Change in Business;
Change in Control or Executive Office. Engage in any business, or permit any of its Subsidiaries to engage in any business,
other than the businesses currently engaged in by Borrower and any business substantially similar or related thereto (or incidental
thereto); cease to conduct business substantially in the manner conducted by Borrower as of the Closing Date; or suffer or permit
a Change in Control; or without thirty (30) days prior written notification to Bank, relocate its chief executive office or state
of incorporation or change its legal name; or without Bank’s prior written consent, change the date on which its fiscal year
ends.


 


7.3           Mergers or
Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property
of another Person, provided however, that Borrower may acquire all or substantially all of the capital stock or property of another
Person with prior notice to Bank (but without the prior written consent of Bank) if each the following conditions is applicable:
(i) no Event of Default has occurred, is continuing or would exist after giving effect to such transactions, (ii) such transactions
do not result in a Change in Control, (iii) Borrower is the surviving entity, and (iv) after giving effect to such transaction,
Borrower remains in full compliance with all financial covenants set forth herein.


 


7.4           Indebtedness.
Create, incur, guarantee, assume or be or remain liable with respect to any Indebtedness, or permit any Subsidiary so to do, other
than Permitted Indebtedness.


 


7.5           Encumbrances.
Create, incur, assume or suffer to exist any Lien with respect to any of its property, or assign or otherwise convey any right
to receive income, including the sale of any Accounts, or permit any of its Subsidiaries so to do, except for Permitted Liens,
or enter into any agreement with any Person other than Bank not to grant a security interest in, or otherwise encumber, any of
its property, or permit any Subsidiary to do so.


 


7.6           Distributions.
Pay any dividends or make any other distribution or payment on account of or in redemption, retirement or purchase of any capital
stock, or permit any of its Subsidiaries to do so, except that Borrower may repurchase the stock of former employees pursuant to
stock repurchase agreements as long as an Event of Default does not exist prior to such repurchase or would not exist after giving
effect to such repurchase, and the aggregate amount of such repurchase does not exceed $100,000 in any fiscal year.


 




    	 



    	 



    

 


7.7           Investments.
Directly or indirectly acquire or own, or make any Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments; or maintain or invest any of its property with a Person other than Bank or permit any of its
Subsidiaries to do so unless such Person has entered into an account control agreement with Bank in form and substance reasonably
satisfactory to Bank (provided however that Borrower and its Chinese Subsidiary may maintain accounts with foreign financial institutions
that are not subject to an account control agreement in favor of Bank, consistent with past practices and in the ordinary course
of business); or suffer or permit any Subsidiary to be a party to, or be bound by, an agreement that restricts such Subsidiary
from paying dividends or otherwise distributing property to Borrower.


 


7.8           Transactions
with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower
except for (i) transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms that are
no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person; and (ii)
transactions with Chinese Subsidiary pursuant to transfer pricing arrangements consistent with past practices and in the ordinary
course of business.


 


7.9           Subordinated
Debt. Make any payment in respect of any Subordinated Debt, or permit any of its Subsidiaries to make any such payment, except
in compliance with the terms of such Subordinated Debt, or amend any provision contained in any documentation relating to the Subordinated
Debt without Bank’s prior written consent.


 


7.10         Inventory
and Equipment. Store the Inventory or the Equipment with a bailee, warehouseman, or other third party unless the third party
has been notified of Bank’s security interest and Bank (a) has received an acknowledgment from the third party that it is
holding or will hold the Inventory or Equipment for Bank’s benefit or (b) is in pledge possession of the warehouse receipt,
where negotiable, covering such Inventory or Equipment. Store or maintain any Equipment or Inventory at a location other than the
locations set forth in the Schedule.


 


7.11         Compliance.
Become an “investment company” or be controlled by an “investment company,” within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of its important activities, the business of extending
credit for the purpose of purchasing or carrying margin stock, or use the proceeds of any Credit Extension for such purpose. Fail
to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to
occur, fail to comply with the Federal Fair Labor Standards Act or violate any law or regulation, which violation could reasonably
be expected to have a Material Adverse Effect, or a material adverse effect on the Collateral or the priority of Bank’s Lien
on the Collateral, or permit any of its Subsidiaries to do any of the foregoing.


 


8.           Events
of Default.


 


Any one or more of
the following events shall constitute an Event of Default by Borrower under this Agreement:


 


8.1           Payment Default.
If Borrower fails to pay, when due, any of the Obligations;


 


8.2           Covenant Default.


 


 (a)           If Borrower
fails to perform any obligation under Article 6 other than Section 6.1, 6.2, or 6.10(a) or violates any of the covenants contained
in Article 7 of this Agreement; or


 


 (b)           If Borrower
fails or neglects to perform or observe any provision of Section 6.1, 6.2, 6.10(a) or any other material term, provision, condition,
covenant contained in this Agreement, in any of the Loan Documents, or in any other present or future agreement between Borrower
and Bank and as to any default under such other term, provision, condition or covenant that can be cured, has failed to cure such
default within twenty (20) days after Borrower receives notice thereof or any officer of Borrower becomes aware thereof; provided,
however, that if the default cannot by its nature be cured within the twenty (20) day period or cannot after diligent attempts
by Borrower be cured within such twenty (20) day period, and such default is likely to be cured within a reasonable time, then
Borrower shall have an additional reasonable period (which shall not in any case exceed an additional twenty (20) days) to attempt
to cure such default, and within such reasonable time period the failure to have cured such default shall not be deemed an Event
of Default but no Credit Extensions will be made.


 




    	 



    	 



    

 


8.3           Material Adverse
Effect. If there occurs any circumstance or circumstances that could reasonably be expected to have a Material Adverse Effect;


 


8.4           Attachment.
If any portion of Borrower’s assets is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any trustee, receiver or person acting in a similar capacity and such attachment, seizure, writ or distress
warrant or levy has not been removed, discharged or rescinded within twenty (20) days, or if Borrower is enjoined, restrained,
or in any way prevented by court order from continuing to conduct all or any part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any portion of Borrower’s assets, or if a notice of lien, levy, or assessment
is filed of record with respect to any of Borrower’s assets by the United States Government, or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or governmental agency, and the same is not paid within twenty (20)
days after Borrower receives notice thereof, provided that none of the foregoing shall constitute an Event of Default where such
action or event is stayed or an adequate bond has been posted pending a good faith contest by Borrower (provided that no Credit
Extensions will be required to be made during such cure period);


 


8.5           Insolvency.
If Borrower becomes insolvent, or if an Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within forty five (45) days (provided that no Credit Extensions will be made prior
to the dismissal of such Insolvency Proceeding);


 


8.6           Other Agreements.
If there is a default or other failure to perform in any agreement to which Borrower is a party or by which it is bound resulting
in a right by a third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in
excess of One Hundred Thousand Dollars ($100,000) or which could reasonably be expected to have a Material Adverse Effect;


 


8.7           Subordinated
Debt. If Borrower makes any payment on account of Subordinated Debt, except to the extent the payment is allowed under any
subordination agreement entered into with Bank;


 


8.8           Judgments.
If a judgment or judgments for the payment of money in an amount, individually or in the aggregate, of at least One Hundred Thousand
Dollars ($100,000) shall be rendered against Borrower and shall remain unsatisfied and unstayed for a period of twenty (20) days
(provided that no Credit Extensions will be made prior to the satisfaction or stay of such judgment);


 


8.9           Misrepresentations.
If any material misrepresentation or material misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer pursuant to this Agreement or to induce Bank to enter
into this Agreement or any other Loan Document; or


 


8.10         Guaranty.
If any guaranty of all or a portion of the Obligations (a “Guaranty”) ceases for any reason to be in full force
and effect, or any guarantor fails to perform any obligation under any Guaranty or a security agreement securing any Guaranty (collectively,
the “Guaranty Documents”), or any event of default occurs under any Guaranty Document or any guarantor revokes or purports
to revoke a Guaranty, or any material misrepresentation or material misstatement exists now or hereafter in any warranty or representation
set forth in any Guaranty Document or in any certificate delivered to Bank in connection with any Guaranty Document, or if any
of the circumstances described in Sections 8.3 through 8.8 occur with respect to any guarantor or becomes subject to any criminal
prosecution, or any circumstances arise causing Bank, in good faith, to become insecure as to the satisfaction of any of any guarantor’s
obligations under the Guaranty Documents.


 




    	 



    	 



    

 


9.           Bank’s
Rights and Remedies.


 


9.1           Rights and
Remedies. Upon the occurrence and during the continuance of an Event of Default, Bank may, at its election, without notice
of its election and without demand, do any one or more of the following, all of which are authorized by Borrower:


 


(a)           Declare
all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of Default described in Section 8.5, all Obligations shall become immediately
due and payable without any action by Bank);


 


(b)           Cease
advancing money or extending credit to or for the benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;


 


(c)           Make
such payments and do such acts as Bank considers necessary or reasonable to protect its security interest in the Collateral. Borrower
agrees to assemble the Collateral if Bank so requires, and to make the Collateral available to Bank as Bank may designate. Borrower
authorizes Bank to enter the premises where the Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance, charge, or lien which in Bank’s determination appears
to be prior or superior to its security interest and to pay all expenses incurred in connection therewith. With respect to any
of Borrower’s owned premises, Borrower hereby grants Bank a license to enter into possession of such premises and to occupy
the same, without charge, in order to exercise any of Bank’s rights or remedies provided herein, at law, in equity, or otherwise;


 


(d)           Set off
and apply to the Obligations any and all (i) balances and deposits of Borrower held by Bank, or (ii) indebtedness at
any time owing to or for the credit or the account of Borrower held by Bank;


 


(e)           Ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein)
the Collateral. Bank is hereby granted a license or other right, solely pursuant to the provisions of this Section 9.1, to use,
without charge, Borrower’s labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production
of, advertising for sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this Section 9.1,
Borrower’s rights under all licenses and all franchise agreements shall inure to Bank’s benefit;


 


(f)           Dispose
of the Collateral by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including
Borrower’s premises) as Bank determines is commercially reasonable, and apply any proceeds to the Obligations in whatever
manner or order Bank deems appropriate;


 


(g)           Bank
may credit bid and purchase at any public sale; and


 


(h)           Any deficiency
that exists after disposition of the Collateral as provided above will be paid immediately by Borrower.


 


9.2           Power of Attorney.
Effective only upon the occurrence and during the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank’s designated officers, or employees) as Borrower’s true and lawful attorney to: (a) send requests
for verification of Accounts or notify account debtors of Bank’s security interest in the Accounts; (b) notify all account
debtors with respect to the Accounts to pay Bank directly; (c) sign Borrower’s name on any invoice or bill of lading relating
to any Account, drafts against account debtors, schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) make, settle, and adjust all claims under and decisions with respect to Borrower’s policies of insurance;
(e) demand, collect, receive, sue, and give releases to any account debtor for the monies due or which may become due upon or with
respect to the Accounts and to compromise, prosecute, or defend any action, claim, case or proceeding relating to the Accounts;
(f) settle and adjust disputes and claims respecting the accounts directly with account debtors, for amounts and upon terms which
Bank determines to be reasonable; (g) sell, assign, transfer, pledge, compromise, discharge or otherwise dispose of any Collateral;
(h) receive and open all mail addressed to Borrower for the purpose of collecting the Accounts; (i) endorse Borrower’s name
on any checks or other forms of payment or security that may come into Bank’s possession; (j) execute on behalf of Borrower
any and all instruments, documents, financing statements and the like to perfect Bank's interests in the Accounts and Collections
and file, in its sole discretion, one or more financing or continuation statements and amendments thereto, relative to any of the
Collateral; and (k) do all acts and things necessary or expedient, in furtherance of any such purposes; provided however Bank may
exercise such power of attorney with respect to any actions described in clause (j) above, regardless of whether an Event of Default
has occurred. The appointment of Bank as Borrower’s attorney in fact, and each and every one of Bank’s rights and powers,
being coupled with an interest, is irrevocable until all of the Obligations have been fully repaid and performed and Bank’s
obligation to provide Credit Extensions hereunder is terminated.


 




    	 



    	 



    

 


9.3           Accounts Collection.
In addition to the foregoing, at any time after the occurrence of an Event of Default, Bank may notify any Person owing funds to
Borrower of Bank’s security interest in such funds and verify the amount of such Account. Borrower shall collect all amounts
owing to Borrower for Bank, receive in trust all payments as Bank’s trustee, and immediately deliver such payments to Bank
in their original form as received from the account debtor, with proper endorsements for deposit.


 


9.4           Bank Expenses.
If Borrower fails to pay any amounts or furnish any required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following after reasonable notice to Borrower: (a) make payment
of the same or any part thereof; (b) set up such reserves under a loan facility in Section 2.1 as Bank deems necessary to
protect Bank from the exposure created by such failure; or (c) obtain and maintain insurance policies of the type discussed
in Section 6.7 of this Agreement, and take any action with respect to such policies as Bank deems prudent. Any amounts so paid
or deposited by Bank shall constitute Bank Expenses, shall be immediately due and payable, and shall bear interest at the then
applicable rate hereinabove provided, and shall be secured by the Collateral. Any payments made by Bank shall not constitute an
agreement by Bank to make similar payments in the future or a waiver by Bank of any Event of Default under this Agreement.


 


9.5           Bank’s
Liability for Collateral. So long as Bank complies with reasonable banking practices, Bank shall not in any way or manner be
liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto occurring or arising
in any manner or fashion from any cause; (c) any diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of loss, damage or destruction of the Collateral
shall be borne by Borrower.


 


9.6           Shares.
Borrower recognizes that Bank may be unable to effect a public sale of any or all the Shares, by reason of certain prohibitions
contained in federal securities laws and applicable state and provincial securities laws or otherwise, and may be compelled to
resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things,
to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Borrower
acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a
public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially
reasonable manner. Bank shall be under no obligation to delay a sale of any of the Shares for the period of time necessary to permit
the issuer thereof to register such securities for public sale under federal securities laws or under applicable state and provincial
securities laws, even if such issuer would agree to do so. Upon the occurrence of an Event of Default which continues, Bank shall
have the right to exercise all such rights as a secured party under the Code as it, in its sole judgment, shall deem necessary
or appropriate, including without limitation the right to liquidate the Shares and apply the proceeds thereof to reduce the Obligations.
Effective only upon the occurrence and during the continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank’s designated officers, or employees) as such Borrower’s true and lawful attorney to enforce such Borrower’s
rights against any Subsidiary, including the right to compel any Subsidiary to make payments or distributions owing to such Borrower.


 




    	 



    	 



    

 


9.7           Remedies Cumulative.
Bank’s rights and remedies under this Agreement, the Loan Documents, and all other agreements shall be cumulative. Bank shall
have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by Bank
of one right or remedy shall be deemed an election, and no waiver by Bank of any Event of Default on Borrower’s part shall
be deemed a continuing waiver. No delay by Bank shall constitute a waiver, election, or acquiescence by it. No waiver by Bank shall
be effective unless made in a written document signed on behalf of Bank and then shall be effective only in the specific instance
and for the specific purpose for which it was given.


 


9.8           Demand; Protest.
Borrower waives, to the extent permitted by applicable law, demand, protest, notice of protest, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees at any time held by Bank on which Borrower may in any
way be liable.


 


10.          Notices.


 


Unless otherwise provided
in this Agreement, all notices or demands by any party relating to this Agreement or any other agreement entered into in connection
herewith shall be in writing and (except for financial statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized overnight delivery service, certified mail, postage
prepaid, return receipt requested, or by email or telefacsimile to Borrower or to Bank, as the case may be, at its addresses set
forth below:


 


	If to Borrower:	LightPath Technologies, Inc.
	 	2603 Challenger Tech Ct., Suite 100
	 	Orlando, FL 32826
	 	Attn:  Dorothy Cipolla
	 	FAX:  (407)  382-4007
	 	Email: dcipolla@lightpath.com
	 	 
	 	with a copy to:
	 	Baker & Hostetler LLP
	 	200 South Orange Avenue, Suite 2300
	 	Orlando, FL 32801
	 	Attn: Jeffrey E. Decker, Esq.
	 	FAX: (407) 841-0168
	 	Email: jdecker@bakerlaw.com
	 	 
	If to Bank:	Avidbank Corporate Finance,
	 	a division of Avidbank
	 	400 Emerson Street
	 	Palo Alto, CA 94301
	 	Attn:  Jon Krogstad
	 	FAX: 650-323-6527
	 	Email: jkrogstad@avidbank.com
	 	 
	 	and
	 	 
	 	FAX:  (650) 289-0124
	 	Email: corpfinance@avidbank.com


 


The parties hereto
may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the
other.


 




    	 



    	 



    

 


11.           CHOICE
OF LAW AND VENUE; JURY TRIAL WAIVER.


 


This Agreement shall
be governed by, and construed in accordance with, the internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive jurisdiction of the state and Federal courts located
in the County of Santa Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY
RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY
REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.


 


If the jury waiver
set forth in this Section is not enforceable, then any dispute, controversy or claim arising out of or relating to this Agreement,
the Loan Documents or any of the transactions contemplated therein shall be settled by judicial reference pursuant to Code of Civil
Procedure Section 638 et seq. before a referee sitting without a jury, such referee to be mutually acceptable to the parties or,
if no agreement is reached, by a referee appointed by the Presiding Judge of the California Superior Court for Santa Clara County.
This Section shall not restrict a party from exercising remedies under the Code or from exercising pre-judgment remedies under
applicable law.


 


12.         General
Provisions.


 


12.1           Successors
and Assigns. This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of each
of the parties; provided, however, that neither this Agreement nor any rights hereunder may be assigned by Borrower without Bank’s
prior written consent, which consent may be granted or withheld in Bank’s sole discretion. Bank shall have the right without
the consent of or notice to Borrower to sell, transfer, negotiate, or grant participation in all or any part of, or any interest
in, Bank’s obligations, rights and benefits hereunder.


 


12.2           Indemnification.
Borrower shall defend, indemnify and hold harmless Bank and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party in connection with the transactions contemplated by this
Agreement; and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank as a result of or in any way
arising out of, following, or consequential to transactions between Bank and Borrower whether under this Agreement, or otherwise
(including without limitation reasonable attorneys’ fees and expenses), except for losses caused by Bank’s gross negligence
or willful misconduct.


 


12.3           Time of Essence.
Time is of the essence for the performance of all obligations set forth in this Agreement.


 


12.4           Severability
of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.


 


12.5           Correction
of Loan Documents. Bank may correct patent errors and fill in any blanks in this Agreement and the other Loan Documents consistent
with the agreement of the parties.


 


12.6           Amendments
in Writing, Integration. Neither this Agreement nor the Loan Documents can be amended or terminated orally. All prior agreements,
understandings, representations, warranties, and negotiations between the parties hereto with respect to the subject matter of
this Agreement and the Loan Documents, if any, are merged into this Agreement and the Loan Documents.


 


12.7           Counterparts.
This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one
and the same Agreement. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf”
format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature
is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
Notwithstanding the foregoing, Borrower shall deliver all original signed documents requested by Bank no later than ten (10) Business
Days following the Closing Date.


 




    	 



    	 



    

 


12.8           Survival.
All covenants, representations and warranties made in this Agreement shall continue in full force and effect so long as any Obligations
remain outstanding or Bank has any obligation to make Credit Extensions to Borrower. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described in Section 12.2 shall survive until all applicable
statute of limitations periods with respect to actions that may be brought against Bank have run.


 


12.9           Confidentiality.
In handling any confidential information Bank and all employees and agents of Bank, including but not limited to accountants, shall
exercise the same degree of care that it exercises with respect to its own proprietary information of the same types to maintain
the confidentiality of any non-public information thereby received or received pursuant to this Agreement except that disclosure
of such information may be made (i) to the subsidiaries or affiliates of Bank in connection with their present or prospective
business relations with Borrower, (ii) to prospective transferees or purchasers of any interest in the loans, provided that
they are similarly bound by confidentiality obligations, (iii) as required by law, regulations, rule or order, subpoena, judicial
order or similar order, (iv) as may be required in connection with the examination, audit or similar investigation of Bank
and (v) as Bank may determine in connection with the enforcement of any remedies hereunder. Confidential information hereunder
shall not include information that either: (a) is in the public domain or in the knowledge or possession of Bank when disclosed
to Bank, or becomes part of the public domain after disclosure to Bank through no fault of Bank; or (b) is disclosed to Bank
by a third party, provided Bank does not have actual knowledge that such third party is prohibited from disclosing such information.


 


12.10           Patriot Act
Notice. Bank hereby notifies Borrower that, pursuant to the requirements of the USA Patriot Act, Title III of Pub. L. 107-56
(signed into law on October 26, 2001) (the “ Patriot Act "), it is required to obtain, verify and record information
that identifies the Borrower, which information includes names and addresses and other information that will allow Bank, as applicable,
to identify the Borrower in accordance with the Patriot Act.


 


[signature
page follows]


 




    	 



    	 



    

 


IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be executed as of the date first above written.


 


	 	LightPath Technologies, Inc.
	 	 
	 	By:	/s/ J. James Gaynor
	 	 	 
	 	Title:	President & CEO
	 	 
	 	Avidbank Corporate Finance, 
	 	a division of Avidbank
	 	 
	 	By:	/s/ Jon Krogstad
	 	 	 
	 	Title:	Senior Vice President