Exhibit 10.5


 


DEMAND REVOLVING LINE OF CREDIT NOTE


 


	$250,000	October 4, 2021
	 	Gardner, Massachusetts




 


FOR VALUE RECEIVED, PRECISION OPTICS CORPORATION,
INC., a Massachusetts corporation with its principal place of business at 22 East Broadway, Gardner, Massachusetts 01440 (the “Borrower”),
promises to pay to MAIN STREET BANK, a Massachusetts bank with its principal place of business at 81 Granger Boulevard, Marlborough,
Massachusetts 01752 (its successors, assigns and any future holder or holders of this instrument collectively, the “Lender”),
or order, at the Lender’s place of business, the principal sum of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000), or such
lesser amount as is outstanding hereunder, in lawful money of the United States of America in immediately available funds, with interest
on the unpaid balance hereof at the rate and in the manner hereafter provided.


 


This Note is issued contemporaneously with that
certain Loan Agreement between the Borrower and the Lender of even date, as amended, modified and/or restated from time to time (the “Loan
Agreement”), all of the terms and conditions of which are incorporated herein by reference. Capitalized terms used herein and not
defined herein have the meanings ascribed in the Loan Agreement.


 


An Event of Default under the Loan Agreement shall
also constitute an Event of Default hereunder. The enumeration of Events of Default in the Loan Agreement shall not alter or vitiate the
demand nature of this Note. At its option, and at any time, whether or not an Event of Default has occurred, the Lender may declare all
amounts hereunder, immediately due and payable without notice, presentment, demand, protest or other notice of dishonor of any kind, all
of which are expressly waived.


 


Except as otherwise set forth in this Note, the
Borrower may borrow, repay or prepay without penalty or premium and reborrow hereunder, from the date hereof until demand
by the Lender, or the occurrence of Default, whichever occurs first. It is the intention of the parties that the outstanding principal
amount of this Note shall at no time exceed the Revolving Line of Credit Borrowing Base and if, at any time, the outstanding principal
amount of this Note shall exceed such amount, the full amount of such excess shall be immediately due and payable in full. The proceeds
of this Note will be disbursed, if at all, from time to time in accordance with Section 2.4 of the Loan Agreement. The Lender will
have no obligation to make Advances hereunder after the occurrence of a Default under the Loan Agreement.


 


The unpaid principal of this Note from time to
time outstanding shall bear interest, payable monthly in arrears, computed on the basis of the actual number of days elapsed over a year
assumed to have 360 days, at an adjustable per annum rate equal to the aggregate of (a) the “Prime Rate” as published in the
Wall Street Journal (or any successor publication selected by the Lender), plus (b) one hundred fifty (150) basis points (collectively,
the “Note Rate”); provided, however, in no event will the Note Rate be less than four and three-quarters percent (4.75%) per
annum. Each change in the Note Rate applicable hereunder shall be effective upon any change in the “Prime Rate” as published
in the Wall Street Journal.


 


The Borrower agrees to pay interest monthly in
arrears on the 15th day of each month commencing November 15, 2021. The entire indebtedness evidenced by this Note, if not
earlier paid, shall be due and payable ON DEMAND. To the extent that any payment is due on a day which is not a Business Day, the
due date will be the first following Business Day.


 


Purpose of Loan; Use of Proceeds. The Borrower
shall use the proceeds of this Loan to support its working capital needs, and shall not use the proceeds for any other purpose. No portion
of any loan is to be used for (i) the purpose of purchasing or carrying any “margin security” or “margin stock”
as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. 221 and 224 or (ii) primarily
personal, family or household purposes. The Collateral is not used or acquired primarily for personal, family or household purposes.


 


 


 


 






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If no Event of Default has occurred, each payment
under this Note will be applied first to interest then due, then, at the discretion of the Lender, to fees, costs and expenses, and then
to principal. After DEMAND or the occurrence of an Event of Default, payments will be applied to fees, costs of collection, interest
and/or principal in which order as determined by the Lender in its discretion.


 


The Borrower hereby authorizes the Lender to automatically
deduct from any of the Borrower’s accounts the amount of any loan payment including all payments of interest, principal and other
sums due (“Automatic Payment”), from time to time, under this Note and/or the Loan Agreement and the Lender will thereafter
notify the Borrower of the amount so charged. If the funds in the account are insufficient to cover any payment due, the Lender shall
not be obligated to advance funds to cover the payment. The failure of the Lender so to charge any account or to give any such notice
shall not affect the obligation of the Borrower to pay interest, principal or other sums as provided herein or in the Loan Agreement.
At any time and for any reason, the Lender may terminate the Automatic Payment.


 


If a regularly scheduled payment is ten (10) days
or more late, the Borrower will be charged a late charge equal to the greater of (a) $15.00 or (b) five percent (5%) of the unpaid portion
of the regularly scheduled payment (the “Late Charge”). The Borrower agrees that any such Late Charge shall not be deemed
to be additional interest or penalty, but shall be deemed to be liquidated damages because of the difficulty in computing the actual amount
of damages in advance.


 


After demand
or upon the occurrence and during the continuance of an Event of Default, the unpaid principal of all indebtedness hereunder shall, at
the option of the Lender, bear interest at a per annum rate equal to the greater of (a) eighteen percent (18%), or (b) the maximum rate
permitted by law.


 


The Borrower shall not be obligated to pay and
the Lender shall not collect interest at a rate higher than the maximum permitted by law or the maximum that will not subject the Lender
to any civil or criminal penalties. If, because of the acceleration of maturity the payment of interest in advance or any other reason,
the Borrower is required, under the provisions of this Note or otherwise, to pay interest at a rate in excess of such maximum rate, the
rate of interest under such provisions shall immediately and automatically be reduced to such maximum rate and any payment made in excess
of such maximum rate, together with interest thereon at the rate provided herein from the date of such payment, shall be immediately and
automatically applied to the reduction of the unpaid principal balance of this Note as of the date on which such excess payment was made.
If the amount to be so applied to reduction of the unpaid principal balance exceeds the unpaid principal balance, the amount of such excess
shall be refunded by the Lender to the Borrower.


 


The Borrower agrees to pay all reasonable costs,
including but not limited to reasonable attorneys’ fees, incurred by the Lender in connection with collecting or enforcing any obligation
of the Borrower to the Lender hereunder or legal representation with respect to bankruptcy or insolvency proceedings. Such costs may include
the allocable costs of the Lender’s internal legal counsel. No course of dealing by the Lender and no delay in exercising any right
under this Note will operate as a waiver by the Lender of its rights, and a waiver of a right on one occasion may not be construed as
a waiver of the right on a future occasion.


 


The Borrower hereby grants to the Lender a lien,
security interest and a right of setoff as security for all Obligations, whether now existing or hereafter arising, upon and against all
deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of the Lender or any entity
under the control of the Lender, or in transit to any of them. At any time, without demand or notice, the Lender may set off the same
or any part thereof and apply the same to any Obligations even though unmatured and regardless of the adequacy of any other collateral
securing this Note and the Obligations. ANY AND ALL RIGHTS TO REQUIRE THE LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO
ANY OTHER COLLATERAL WHICH SECURES THIS NOTE, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER
PROPERTY OF THE BORROWER OR ANY GUARANTORS, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED. The Lender shall not be required
to marshal any present or future security for, or guarantees of, the Obligations or to resort to any such security or guarantee in any
particular order and the Borrower waives, to the fullest extent that it lawfully can, (i) any right it might have to require the Lender
to pursue any particular remedy before proceeding against it and (ii) any right to the benefit of, or to direct the application of, the
proceeds of any Collateral until the Obligations are paid in full.


The Lender may at any time pledge, endorse, assign,
or transfer all or any portion of its rights under the Loan Documents including any portion of this Note to any of the twelve (12) Federal
Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or enforcement thereof shall
release the Lender from its obligations under the Loan Agreement, this Note or any of the Loan Documents.


 


 


 






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The Borrower, any guarantors, endorsers or other
persons now or hereafter liable for the payment of any of the indebtedness evidenced by this Note, severally agree, by making, guaranteeing
or endorsing this Note or by making any agreement to pay any of the indebtedness evidenced by this Note, to waive presentment for payment,
protest and demand, notice of protest, demand and of dishonor and nonpayment of this Note, and consent, on one or more occasions, without
notice or further assent (i) to the substitution, exchange or release of the collateral securing this Note or any part thereof at any
time, (ii) to the acceptance or release by the holder or holders hereof at any time of any additional collateral or security for or other
guarantors of this Note, (iii) to the modification or amendment, at any time and from time to time, of this Note, the Loan Agreement,
or any of the Loan Documents, (iv) to the granting by the holder hereof of any extension of the time for payment of this Note or for the
performance of the agreements, covenants and conditions contained in this Note, the Loan Agreement, or any of the Loan Documents, at the
request of any person liable thereon, and (v) to any and all forbearances and indulgences whatsoever. Such consent shall not alter or
diminish the liability of any person.


 


The Lender shall have the unrestricted right at
any time or from time to time, and without the Borrower’s consent, to sell, assign, endorse, or transfer all or any portion of its
rights and obligations hereunder to one or more banks or other entities (each, an “Assignee”) and, the Borrower agrees that
it shall execute, or cause to be executed such documents including without limitation, amendments to this Note and to any other document,
instrument and agreement executed in connection herewith as the Lender shall deem necessary to effect the foregoing. In addition, at the
request of the Lender and any such Assignee, the Borrower shall issue one or more new promissory notes, as applicable, to any such Assignee
and, if the Lender has retained any of its rights and obligations hereunder following such assignment, to the Lender, which new promissory
notes shall be issued in replacement of, but not in discharge of, the liability evidenced by the note held by the Lender prior to such
assignment and shall reflect the amount of the respective commitments and loans held by such Assignee and the Lender after giving effect
to such assignment. Upon the execution and delivery of appropriate assignment documentation, amendments and any other documentation required
by the Lender in connection with such assignment, and the payment by Assignee of the purchase price agreed to by the Lender and such Assignee,
such Assignee shall be a party to this Note and shall have all of the rights and obligations of the Lender hereunder (and under any and
all other guaranties, documents, instruments and agreements executed in connection herewith) to the extent that such rights and obligations
have been assigned by the Lender pursuant to the assignment documentation between the Lender and Assignee, and the Lender shall be released
from its obligations hereunder and thereunder to a corresponding extent.


 


The Lender shall have the unrestricted right at
any time and from time to time, and without the consent of or notice to the Borrower, to grant to one or more institutions or other Persons
(each a “Participant”) participating interests in the Lender’s obligations to lend hereunder and/or any or all of the
loans held by the Lender hereunder. In the event of any such grant by the Lender of a participating interest to a Participant, whether
or not upon notice to the Borrower, the Lender shall remain responsible for the performance of its obligations hereunder and the Borrower
shall continue to deal solely and directly with the Lender in connection with the Lender’s rights and obligations hereunder. The
Lender may furnish any information concerning the Borrower in its possession from time to time to any prospective assignees and Participants,
provided that the Lender shall require any such prospective assignee or Participant to maintain the confidentiality of such information.


 


This Note shall be governed by the laws of the
Commonwealth of Massachusetts.


 


The Borrower and the Lender irrevocably and unconditionally
submit to the jurisdiction of any Massachusetts court or any federal court sitting within the Commonwealth of Massachusetts over any suit,
action or proceeding arising out of or relating to this Note or the other Loan Documents. The Borrower and the Lender irrevocably waive,
to the fullest extent permitted by law, (i) any and all rights they may have to contest the appropriateness of any such action or proceeding,
whether based on lack of personal jurisdiction, lack or insufficiency of service, improper venue, forum non conveniens or any other
basis and (ii) the right, if any, to claim or recover any special, exemplary, punitive or consequential damages or any damages other
than actual damages. The Borrower and the Lender agree that final judgment in any such suit, action or proceeding brought in such a court
shall be enforced in any court of proper jurisdiction by a suit upon such judgment, provided that service of process in such action, suit
or proceeding shall have been effected upon the Borrower in any manner permitted by applicable law. Nothing contained herein, however,
shall prevent the Lender from bringing a suit, action or proceeding or exercising any rights against any Collateral and against the Borrower
and against any property of the Borrower in any other state or jurisdiction. Initiating such suit, action or proceeding or taking such
action in any other state or jurisdiction will not constitute a waiver of the agreement that the Laws of the Commonwealth of Massachusetts
govern the rights and obligations of the Borrower and the Lender or the Borrower’s agreement to submit to personal jurisdiction
within the Commonwealth of Massachusetts.


 


 


 


 






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Upon receipt of an affidavit of an officer of the
Lender as to the loss, theft, destruction or mutilation of this Note or any other security document which is not of public record, and,
in the case of any such loss, theft, destruction or mutilation, upon cancellation of this Note or other security document, the Borrower
will issue, in lieu thereof, a replacement note or other security document in the same principal amount thereof and otherwise of like
tenor.


 


THE BORROWER AND THE LENDER (BY ACCEPTANCE OF
THIS NOTE) MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT TO ANY CLAIM BASED ON
THIS NOTE, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR THE LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH
OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION,
ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE LENDER RELATING TO THE ADMINISTRATION OF THE LOANS OR ENFORCEMENT
OF THIS NOTE AND THE LOAN DOCUMENTS, AND AGREE THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH
A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE BORROWER CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE LENDER HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE LENDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. This
waiver constitutes a material inducement for Lender to accept this Note and make the LoanS.


 


The Obligations, including without limitation,
the obligations of the Borrower under this Note are secured by the Security Agreement.


 


 


[SIGNATURE PAGE FOLLOWS]


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 






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Executed as a sealed instrument as of the 4th
day of October, 2021.


 





	 	 	PRECISION OPTICS CORPORATION, INC.
	 	 	 	 	 
	 	 	 	 	 
	 	 	By:	/s/ Joseph N. Forkey
	Witness	 	Name:	Joseph N. Forkey
	 	 	Title:	President and Treasurer
	 	 	 	 	 



 



 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


[Signature Page to Demand Revolving
Line of Credit Note]






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