Document:

EXHIBIT 10.2

 

EIGHTH AMENDMENT

TO

LOAN AND SECURITY
AGREEMENT

 

This Eighth Amendment to Loan and Security Agreement is entered
into as of April 5, 2018 (the "Amendment"), by and among TELKONET, INC. ("Borrower"), and HERITAGE BANK OF
COMMERCE ("Bank").

 

RECITALS

 

Borrower and Bank are parties to that certain Loan and Security
Agreement dated as of September 30, 2014 and as amended from time to time, including pursuant to that certain First Amendment to
Loan and Security Agreement dated as of February 17, 2016, that certain Second Amendment to Loan and Security Agreement dated as
of October 27, 2016, that certain Third Amendment to Loan and Security Agreement dated as of January 25, 2017, that certain Fourth
Amendment to Loan and Security Agreement dated as of March 29, 2017, that certain Fifth Amendment to Loan and Security Agreement
dated as of August 29, 2017, that certain Sixth Amendment to Loan and Security Agreement dated as of October 23, 2017 and that
certain Seventh Amendment to Loan and Security Agreement dated as of February 2, 2018 (collectively, the "Agreement").

 

AGREEMENT

 

NOW, THEREFORE, the parties agree as follows:

 

1. Effective as of March 31, 2018,
the last sentence in Section 6.9(b) of the Agreement is amended and restated in its entirety to read as follows:

 

Notwithstanding the foregoing, if Telkonet, Inc. fails to comply
with the foregoing required EBITDA covenant as of any particular quarterly measurement date (the "Measurement Date"),
Borrowers shall be deemed in compliance with this Section 6.9(b) if Borrowers' unrestricted cash maintained in its accounts at
Bank (x) is in excess of $5,000,000 at all times during the fiscal quarter ending on such Measurement Date and (y) continues to
be in excess of $5,000,000 at all times following the Measurement Date, until Borrower is in compliance with the EBITDA covenant
as of a subsequent Measurement Date.

 

2. Exhibit D to the Agreement is
replaced in its entirety with the Exhibit D attached hereto.

 

3. Borrower represents and warrants
that the representations and warranties contained in the Agreement are true and correct as of the date of this Amendment, and
that no Event of Default has occurred and is continuing.

 

4. Unless otherwise defined, all
initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be
and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects.
Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver
of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof. Borrower
ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement.

 

5. This Amendment may be executed
in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.
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 hereof.

 

6. As a condition to the effectiveness
of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:

 

(a) the original
signed Amendment, duly executed by Borrower;

 

(b) payment
of all Bank Expenses incurred through the date of this Amendment; and

 

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

 

[SIGNATURE PAGE FOLLOWS]

 

 

 

 

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IN WITNESS WHEREOF, the undersigned
have executed this Amendment as of the first date above written.

 

	 	TELKONET, INC.
	 	 
	 	By: /s/ Richard E. Mushrush                  
	 	Name: Richard E. Mushrush
	 	Title: CFO
	 	 
	 	 
	 	HERITAGE BANK OF COMMERCE
	 	 
	 	By: /s/ Karla Schrader                            
	 	Name: Karla Schrader
	 	Title: VP
	 	 
	 	 
	 	 

 

 

 

 

 

 

 

 

 

    	 	2	 

     

    

 

EXHIBIT D

COMPLIANCE CERTIFICATE

 

 

	TO:	HERITAGE BANK OF COMMERCE
	FROM:	TELKONET, INC. and ETHOSTREAM LLC

 

The undersigned
authorized officer of Telkonet, Inc., on behalf of all Borrowers, hereby certifies that in accordance with the terms and
conditions of the Loan and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is in
complete compliance for the period ending _______________ with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and correct as of the date hereof Attached
herewith are the required documents supporting the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next
except as explained in an accompanying letter or footnotes.

 

Please indicate
compliance status by circling Yes/No under "Complies" column.

 

	Reporting Covenant	Required	Complies
	Borrower prepared financial statements	Quarterly within 45 days	Yes	No
	Compliance Certificate	Quarterly within 45 days	Yes	No
	Wells Fargo bank statements	Monthly within 15 days	Yes	No
	A/R & A/P Agings	Within 5 days of 15th and last day of each month	Yes	No
	Customer deposit listing	Within 5 days of 15th and last day of each month	Yes	No
	Borrowing base certificate	Within 5 days of 15th and last day of each month	Yes	No
	Inventory report	Monthly within 15 days	Yes	No
	Offsite Inventory listing	Monthly within 15 days	Yes	No
	Deferred revenue schedule	Quarterly within 15 days	Yes	No
	Annual financial statements (CPA Audited)	FYE within 120 days	Yes	No
	Annual financial projections and budget	Annual within 30 days before FYE	Yes	No
	Federal Tax Returns	Annual, within 15 days of filing	Yes	No
	10K and 10Q	(as applicable)	Yes	NO
	A/R Audit	Initial and semi-annual	Yes	No
	IP Notices	As required under Section 6.10	Yes	No

 

	Financial Covenant	Required	Actual	Complies
	Minimum Asset Coverage Ratio (Monthly)	1.25 : 1.00	_____: 1.00	Yes	No
	Telkonet, Inc. YTD EBITDA Loss as of:	 	 	 	 
	March 31, 2018	($1,059,000)	$_________	Yes	No
	June 30, 2018	($1271,000)	$ _________	Yes	No
	September 30, 2018	($1,911,000)	$ _________	Yes	No
	December 31, 2018	($2,090,000)	$ _________	Yes	No
	OR	 	 	 	 
	If not in compliance with EBITDA covenant,	3 $5,000,000	$ _________	Yes	No
	Minimum Unrestricted Cash at Bank at all times	 	 	 	 
	 	 	 	 	 

 

 

 

 

 

    	 	3EXHIBIT 10.3

 

NINTH AMENDMENT

TO

LOAN AND SECURITY AGREEMENT

 

This Ninth Amendment to Loan and Security Agreement
is entered into as of November 7, 2018 (the “Amendment”), by and among TELKONET, INC. (“Borrower”), and
HERITAGE BANK OF COMMERCE (“Bank”).

 

RECITALS

 

Borrower and Bank are parties to that certain Loan
and Security Agreement dated as of September 30, 2014 and as amended from time to time, including pursuant to that certain First
Amendment to Loan and Security Agreement dated as of February 17, 2016, that certain Second Amendment to Loan and Security Agreement
dated as of October 27, 2016, that certain Third Amendment to Loan and Security Agreement dated as of January 25, 2017, that certain
Fourth Amendment to Loan and Security Agreement dated as of March 29, 2017, that certain Fifth Amendment to Loan and Security Agreement
dated as of August 29, 2017, that certain Sixth Amendment to Loan and Security Agreement dated as of October 23, 2017, that certain
Seventh Amendment to Loan and Security Agreement dated as of February 2, 2018 and that certain Eighth Amendment to Loan and Security
Agreement dated as of April 5, 2018 (collectively, the “Agreement”).

 

AGREEMENT 

 

NOW, THEREFORE, the parties agree as follows:

 

1. Effective as of
September 30, 2018, the last sentence in Section 6.9(b) of the Agreement is amended and restated in its entirety to read as
follows:

 

Notwithstanding the foregoing, if Telkonet, Inc.
fails to comply with the foregoing required EBITDA covenant as of any particular quarterly measurement date (the “Measurement
Date”), Borrowers shall be deemed in compliance with this Section 6.9(b) if Borrowers’ unrestricted cash maintained
in its accounts at Bank (x) is in excess of $3,000,000 at all times during the fiscal quarter ending on such Measurement Date and
(y) continues to be in excess of $3,000,000 at all times following the Measurement Date, until Borrower is in compliance with the
EBITDA covenant as of a subsequent Measurement Date.

 

2. Exhibit D to the Agreement is
replaced in its entirety with the Exhibit D attached hereto.

 

3. Borrower represents and
warrants that the representations and warranties contained in the Agreement are true and correct as of the date of this
Amendment, and that no Event of Default has occurred and is continuing.

 

4. Unless otherwise defined,
all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall
be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects.
Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver
of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof. Borrower
ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement.

 

 

 

 

 

    	 	1	 

     

    

 

5. This Amendment may be
executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute
one instrument. 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 hereof.

 

6. As a condition to the effectiveness
of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:

 

(a) the original signed Amendment, duly
executed by Borrower;

 

(b) payment of an amendment
fee in the amount of $1,000 plus all Bank Expenses incurred through the date of this Amendment; and

 

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

 

[SIGNATURE
PAGE FOLLOWS]

 

 

 

 

 

 

 

 

    	 	2	 

     

    

 

 

IN WITNESS WHEREOF, the undersigned
have executed this Amendment as of the first date above written.

 

	 	TELKONET, INC.
	 	 
	 	By: /s/ Richard E. Mushrush                  
	 	Name: Richard E. Mushrush
	 	Title: CFO
	 	 
	 	 
	 	HERITAGE BANK OF COMMERCE
	 	 
	 	By: /s/ Karla Schrader                            
	 	Name: Karla Schrader
	 	Title: VP
	 	 
	 	 
	 	 

 

 

 

 

 

 

 

 

 

    	 	3	 

     

    

 

EXHIBIT D

COMPLIANCE CERTIFICATE

 

 

	TO:	HERITAGE BANK OF COMMERCE
	FROM:	TELKONET, INC. and ETHOSTREAM LLC

 

The undersigned
authorized officer of Telkonet, Inc., on behalf of all Borrowers, hereby certifies that in accordance with the terms and
conditions of the Loan and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is in
complete compliance for the period ending _______________ with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and correct as of the date hereof Attached
herewith are the required documents supporting the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next
except as explained in an accompanying letter or footnotes.

 

Please indicate
compliance status by circling Yes/No under "Complies" column.

 

	Reporting Covenant	Required	Complies
	Borrower prepared financial statements	Quarterly within 45 days	Yes	No
	Compliance Certificate	Quarterly within 45 days	Yes	No
	Wells Fargo bank statements	Monthly within 15 days	Yes	No
	A/R & A/P Agings	Within 5 days of 15th and last day of each month	Yes	No
	Customer deposit listing	Within 5 days of 15th and last day of each month	Yes	No
	Borrowing base certificate	Within 5 days of 15th and last day of each month	Yes	No
	Inventory report	Monthly within 15 days	Yes	No
	Offsite Inventory listing	Monthly within 15 days	Yes	No
	Deferred revenue schedule	Quarterly within 15 days	Yes	No
	Annual financial statements (CPA Audited)	FYE within 120 days	Yes	No
	Annual financial projections and budget	Annual within 30 days before FYE	Yes	No
	Federal Tax Returns	Annual, within 15 days of filing	Yes	No
	10K and 10Q	(as applicable)	Yes	NO
	A/R Audit	Initial and semi-annual	Yes	No
	IP Notices	As required under Section 6.10	Yes	No

 

	Financial Covenant	Required	Actual	Complies
	Minimum Asset Coverage Ratio (Monthly)	1.25 : 1.00	_____: 1.00	Yes	No
	Telkonet, Inc. YTD EBITDA Loss as of:	 	 	 	 
	March 31, 2018	($1,059,000)	$_________	Yes	No
	June 30, 2018	($1271,000)	$ _________	Yes	No
	September 30, 2018	($1,911,000)	$ _________	Yes	No
	December 31, 2018	($2,090,000)	$ _________	Yes	No
	OR	 	 	 	 
	If not in compliance with EBITDA covenant,	3 $3,000,000	$ _________	Yes	No
	Minimum Unrestricted Cash at Bank at all times	 	 	 	 
	 	 	 	 	 

 

 

 

 

 

    	 	4

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