Document:

Exhibit 10.7

 

SECURITY AGREEMENT

(All Assets)

 

SECURITY AGREEMENT, dated as of October 4, 2021,
between PRECISION OPTICS CORPORATION, INC., a Massachusetts corporation with its principal place of business at 22 East Broadway,
Gardner, Massachusetts 01440 (the “Company”) and MAIN STREET BANK, a Massachusetts bank with its principal place of
business at 81 Granger Boulevard, Marlborough, Massachusetts 01752 (the “Lender”).

 

WHEREAS, the Company and the Lender are
parties to that certain Loan Agreement dated of even date (as amended, modified and/or restated from time to time, the “Loan Agreement”);

 

WHEREAS, it is a condition precedent to
the Lender making any loans or otherwise extending credit to the Company that the Company execute and deliver to the Lender a security
agreement in substantially the form hereof; and

 

WHEREAS, the Company wishes to grant security
interests in favor of the Lender as herein provided.

 

NOW, THEREFORE, in consideration of the
promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

 

1.                 
DEFINITIONS. All capitalized terms used herein without definitions shall have the meanings provided therefore in the
Loan Agreement. The term “State”, as used herein, means the Commonwealth of Massachusetts. All terms defined in the Uniform
Commercial Code of the State and used herein shall have the same definitions herein as specified therein. However, if a term is defined
in Article 9 of the Uniform Commercial Code of the State differently than in another Article of the Uniform Commercial Code of the State,
the term has the meaning specified in Article 9. The term “Obligations”, as used herein, means all of the indebtedness, obligations
and liabilities of the Company to the Lender, individually or collectively, whether direct or indirect, joint or several, absolute or
contingent, due or to become due, now existing or hereafter arising under or in respect of (a) the Loan Agreement, (b) the Loan Documents,
or (c) other instruments or agreements executed and delivered pursuant to the Loan Agreement or in connection therewith or this Agreement.
The occurrence of an Event of Default under the Loan Agreement will constitute an Event of Default hereunder.

 

2.                 
GRANT OF SECURITY INTEREST. The Company hereby grants to the Lender, to secure the payment and performance in full of
all of the Obligations, a security interest in and pledges and assigns to the Lender the following properties, assets and rights of the
Company, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof (collectively the
“Collateral”): all personal and fixture property of every kind and nature including without limitation all goods (including
inventory, equipment and any accessions thereto), instruments (including promissory notes), motor vehicles, documents, accounts (including
health care insurance receivables), chattel paper (whether tangible or electronic), deposit accounts, letter-of-credit rights (whether
or not the letter of credit is evidenced by a writing), commercial tort claims, securities and all other investment property, supporting
obligations, any other contract rights or rights to the payment of money, insurance claims and proceeds, tort claims, and all general
intangibles (including all payment intangibles). The Lender acknowledges that the attachment of its security interest in any commercial
tort claim as original collateral is subject to the Company's compliance with Section 4.7.

 

 

 

 

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3.                 
AUTHORIZATION TO FILE FINANCING STATEMENTS. The Company hereby irrevocably authorizes the Lender at any time and from
time to time to file in any Uniform Commercial Code jurisdiction any initial financing statements and amendments thereto that (a) indicate
the Collateral (i) as all assets of the Company or words of similar effect, regardless of whether any particular asset comprised in the
Collateral falls within the scope of Article 9 of the Uniform Commercial Code of the State or such jurisdiction, or (ii) as being
of an equal or lesser scope or with greater detail, and (b) contain any other information required by Article 9 of the Uniform Commercial
Code of the State for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether the Company
is an organization, the type of organization and any organization identification number issued to the Company and, (ii) in the case of
a financing statement filed as a fixture filing or indicating Collateral as as-extracted collateral or timber to be cut, a sufficient
description of real property to which the Collateral relates. The Company agrees to furnish any such information to the Lender promptly
upon request. The Company also ratifies its authorization for the Lender to have filed in any Uniform Commercial Code jurisdiction any
initial financing statements or amendments thereto if filed prior to the date hereof.

 

4.                 
OTHER ACTIONS. Further to insure the attachment, perfection and first priority of, and the ability of the Lender to
enforce, the Lender's security interest in the Collateral, the Company agrees, in each case at the Company's own expense, to take the
following actions with respect to the following Collateral:

 

4.1.           
PROMISSORY NOTES AND TANGIBLE CHATTEL PAPER. If the Company shall at any time hold or acquire any promissory notes or tangible
chattel paper, the Company shall forthwith endorse, assign and deliver the same to the Lender, accompanied by such instruments of transfer
or assignment duly executed in blank as the Lender may from time to time specify.

 

4.2.           
DEPOSIT ACCOUNTS. For each deposit account that the Company at any time opens or maintains, the Company shall, at the Lender's
request and option, pursuant to an agreement in form and substance satisfactory to the Lender, either (a) cause the depositary bank to
agree to comply at any time with instructions from the Lender to such depositary bank directing the disposition of funds from time to
time credited to such deposit account, without further consent of the Company, or (b) arrange for the Lender to become the customer of
the depositary bank with respect to the deposit account, with the Company, following the occurrence of an Event of Default, being permitted,
only with the consent of the Lender, to exercise rights to withdraw funds from such deposit account. The provisions of this paragraph
shall not apply to (i) any deposit account for which the Company, the depositary bank and the Lender have entered into a cash collateral
agreement specially negotiated among the Company, the depositary bank and the Lender for the specific purpose set forth therein, (ii)
deposit accounts for which the Lender is the depositary and (iii) deposit accounts specially and exclusively used for payroll, payroll
taxes and other employee wage and benefit payments to or for the benefit of the Company's employees.

 

4.3.           
INVESTMENT PROPERTY. If the Company shall at any time hold or acquire any certificated securities, the Company shall forthwith
endorse, assign and deliver the same to the Lender, accompanied by such instruments of transfer or assignment duly executed in blank as
the Lender may from time to time specify. If any securities now or hereafter acquired by the Company are uncertificated and are issued
to the Company or its nominee directly by the issuer thereof, the Company shall immediately notify the Lender thereof and, at the Lender's
request and option, pursuant to an agreement in form and substance satisfactory to the Lender, either (a) cause the issuer to agree to
comply with instructions from the Lender as to such securities, without further consent of the Company or such nominee, or (b) arrange
for the Lender to become the registered owner of the securities. If any securities, whether certificated or uncertificated, or other investment
property now or hereafter acquired by the Company are held by the Company or its nominee through a securities intermediary or commodity
intermediary, the Company shall immediately notify the Lender thereof and, at the Lender's request and option, pursuant to an agreement
in form and substance satisfactory to the Lender, either (i) cause such securities intermediary or (as the case may be) commodity intermediary
to agree to comply with entitlement orders or other instructions from the Lender to such securities intermediary as to such securities
or other investment property, or (as the case may be) to apply any value distributed on account of any commodity contract as directed
by the Lender to such commodity intermediary, in each case without further consent of the Company or such nominee, or (ii) in the case
of financial assets or other investment property held through a securities intermediary, arrange for the Lender to become the entitlement
holder with respect to such investment property, with the Company, following the occurrence of an Event of Default, being permitted, only
with the consent of the Lender, to exercise rights to withdraw or otherwise deal with such investment property. The provisions of this
paragraph shall not apply to any financial assets credited to a securities account for which the Lender is the securities intermediary.

 

 

 

 

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4.4.           
COLLATERAL IN THE POSSESSION OF A BAILEE. If any goods are at any time in the possession of a bailee, the Company shall promptly
notify the Lender thereof and, if requested by the Lender, shall promptly obtain an acknowledgement from the bailee, in form and substance
satisfactory to the Lender, that the bailee (i) holds such Collateral for the benefit of the Lender and (ii) shall, following the occurrence
of an Event of Default, act upon the instructions of the Lender, without the further consent of the Company.

 

4.5.           
ELECTRONIC CHATTEL PAPER AND TRANSFERABLE RECORDS. If the Company at any time holds or acquires an interest in any electronic
chattel paper or any “transferable record,” as that term is defined in Section 201 of the federal Electronic Signatures in
Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction,
the Company shall promptly notify the Lender thereof and, at the request of the Lender, shall take such action as the Lender may reasonably
request to vest in the Lender control, under Section 9-105 of the Uniform Commercial Code, of such electronic chattel paper or control
under Section 201 of the federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of
the Uniform Electronic Transactions Act, as in effect in such jurisdiction, of such transferable record.

 

4.6.           
LETTER-OF-CREDIT RIGHTS. If the Company is at any time a beneficiary under a letter of credit now or hereafter issued in favor
of the Company, the Company shall promptly notify the Lender thereof and, at the request and option of the Lender, the Company shall,
pursuant to an agreement in form and substance satisfactory to the Lender, either (i) arrange for the issuer and any confirmer of such
letter of credit to consent to an assignment to the Lender, following the occurrence of an Event of Default, of the proceeds of any drawing
under the letter of credit or (ii) arrange for the Lender to become, following the occurrence of an Event of Default, the transferee beneficiary
of the letter of credit, with the proceeds of any drawing under the letter of credit to be applied to the Obligations.

 

4.7.           
COMMERCIAL TORT CLAIMS. If the Company shall at any time hold or acquire a commercial tort claim, the Company shall immediately
notify the Lender in a writing signed by the Company of the details thereof and grant to the Lender in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory
to the Lender.

 

4.8.           
OTHER ACTIONS AS TO ANY AND ALL COLLATERAL. The Company further agrees to take any other action reasonably requested by the
Lender to ensure the attachment, perfection and first priority of, and the ability of the Lender to enforce, the Lender's security interest
in any and all of the Collateral including, without limitation, (a) executing, delivering and, where appropriate, filing financing statements
and amendments relating thereto under the Uniform Commercial Code, to the extent, if any, that the Company's signature thereon is required
therefore, (b) causing the Lender's name to be noted as secured party on any certificate of title for a titled good if such notation is
a condition to attachment, perfection or priority of, or ability of the Lender to enforce, the Lender's security interest in such Collateral,
(c) holding its books and records relating to the Collateral segregated from all the Company’s other books and records in a manner
satisfactory to the Lender, (d) delivering to the Lender from time to time promptly at its request, all invoices, original documents of
title, contracts, chattel paper, instruments and any other writings relating thereto, and other evidence of performance of contracts,
or evidence of shipment or delivery of the merchandise or of the rendering of services, (e) delivering to the Lender promptly at the Lender’s
request from time to time additional copies of any or all of such papers or writings and such other information with respect to any of
the Collateral and such schedules of inventory, schedules of accounts and such other writings as the Lender may in its sole discretion
deem to be necessary or effectual to evidence the Lender’s security interest in the Collateral, (f) complying with any provision
of any statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment,
perfection or priority of, or ability of the Lender to enforce, the Lender's security interest in such Collateral, (g) obtaining governmental
and other third party consents and approvals, including without limitation any consent of any licensor, lessor or other person obligated
on Collateral, (h) endeavoring to obtain waivers from mortgagees and landlords in form and substance satisfactory to the Lender and (i)
taking all actions required by any earlier versions of the Uniform Commercial Code or by other law, as applicable in any relevant Uniform
Commercial Code jurisdiction, or by other law as applicable in any foreign jurisdiction.

 

5.                 
RELATION TO OTHER SECURITY DOCUMENTS. The provisions of this Agreement supplement the provisions of any existing security
agreements, pledge agreements, assignments, motor vehicle security documents, real estate mortgages or deeds of trust granted by the Company
to the Lender and securing the payment and performance of any of the Obligations. Nothing contained in any such documents shall derogate
from any of the rights or remedies of the Lender hereunder.

 

 

 

 

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6.                 
REPRESENTATIONS AND WARRANTIES CONCERNING COMPANY'S LEGAL STATUS. The Company has previously delivered to the Lender
a certificate signed by the Company and entitled “Perfection Certificate” (the “Perfection Certificate”). The
Company represents and warrants to the Lender as follows: (a) the Company’s exact legal name is that indicated on the Perfection
Certificate and on the signature page hereof, (b) the Company is an organization of the type, and is organized in the jurisdiction, set
forth in the Perfection Certificate, (c) the Perfection Certificate accurately sets forth the Company’s organization identification
number or accurately states that the Company has none, (d) the Perfection Certificate accurately sets forth the Company’s place
of business or, if more than one, its chief executive office as well as the Company’s mailing address if different, and (e) all
other information set forth on the Perfection Certificate pertaining to the Company is accurate and complete in all material respects.

 

7.                 
COVENANTS CONCERNING COMPANY'S LEGAL STATUS. The Company covenants with the Lender as follows: (a) without providing
at least 30 days prior written notice to the Lender, the Company will not change its name, its place of business or, if more than one,
its chief executive office, or its mailing address or organizational identification number if it has one, (b) if the Company does not
have an organizational identification number and later obtains one, the Company shall forthwith notify the Lender of such organizational
identification number, and (c) the Company will not change its type of organization, jurisdiction of organization or other legal structure.

 

8.                 
REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL, ETC. The Company further represents and warrants to the Lender
as follows: (a) the Company is (and as to the Collateral acquired after the date hereof will be) the owner of the Collateral, free from
any adverse lien, security interest or other encumbrance, except for the security interest created by this Agreement and Permitted Liens,
(b) none of the Collateral constitutes, or is the proceeds of, “farm products” as defined in the Uniform Commercial Code of
the State, (c) none of the account debtors or other persons obligated on any of the Collateral is a governmental authority subject
to the Federal Assignment of Claims Act or like federal, state or local statute or rule in respect of such Collateral, (d) to its knowledge,
the Company holds no commercial tort claim except as indicated on the Perfection Certificate, (e) to its knowledge, the Company has at
all times operated its business in compliance with all applicable provisions of the federal Fair Labor Standards Act, as amended, and
with all applicable provisions of federal, state and local statutes and ordinances dealing with the control, shipment, storage or disposal
of hazardous materials or substances, and (f) all other information set forth on the Perfection Certificate pertaining to the Collateral
is accurate and complete in all material respects.

 

9.                 
COVENANTS CONCERNING COLLATERAL, ETC. The Company further covenants with the Lender as follows: (a) the Collateral,
to the extent not delivered to the Lender pursuant to Section 4, will be kept at those locations listed on the Perfection Certificate
and the Company will not (except for inventory sold in the ordinary course of business and obsolete equipment disposed of) remove the
Collateral from such location, without providing at least 30 days prior written notice to the Lender, (b) except for the security interest
herein granted and existing liens in favor of the Lender and Permitted Liens, the Company shall be the owner of the Collateral free from
any lien, security interest or other encumbrance, and the Company shall defend the same against all claims and demands of all persons
at any time claiming the same or any interests therein adverse to the Lender, (c) the Company shall not pledge, mortgage or create, or
suffer to exist a security interest in the Collateral in favor of any person other than the Lender, (d) the Company will keep the Collateral
in good order and repair, reasonable wear and tear excepted, and will not use the same in violation of law or any policy of insurance
thereon, (e) the Company will permit the Lender, or its designee, to inspect the Collateral at any reasonable time during normal
business hours upon reasonable advance notice, wherever located, (f) the Company will pay promptly when due all taxes, assessments,
governmental charges and levies upon the Collateral or incurred in connection with the use or operation of the Collateral or incurred
in connection with this Agreement, (g) the Company will continue to operate its business in compliance with all applicable provisions
of the federal Fair Labor Standards Act, as amended, and with all applicable provisions of federal, state and local statutes and ordinances
dealing with the control, shipment, storage or disposal of hazardous materials or substances, and (h) the Company will not sell or otherwise
dispose, or offer to sell or otherwise dispose, of the Collateral or any interest therein except for (i) sales of inventory in the ordinary
course of business, and (ii) sales consented to by the Lender and where the Lender receives all of the proceeds of such sales to be applied
to the Obligations as determined by the Lender at its sole discretion.

 

 

 

 

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10.             
INSURANCE.

 

10.1.       
MAINTENANCE OF INSURANCE. The Company will maintain with financially sound and reputable insurers insurance with respect to
its properties and business against such casualties and contingencies as shall be in accordance with general practices of businesses engaged
in similar activities in similar geographic areas. Such insurance shall be in such minimum amounts that the Company will not be deemed
a coinsurer under applicable insurance laws, regulations and policies and otherwise shall be in such amounts, contain such terms, be in
such forms and be for such periods as may be reasonably satisfactory to the Lender. In addition, all such insurance shall be payable to
the Lender as loss payee. Without limiting the foregoing, the Company will (i) keep all of its physical property insured with casualty
or physical hazard insurance on an “all risks” basis, with broad form flood and earthquake coverages and electronic data processing
coverage, with a full replacement cost endorsement and an “agreed amount” clause in an amount equal to 100 percent of the
full replacement cost of such property, (ii) maintain all such workers' compensation or similar insurance as may be required by law, and
(iii) maintain, in amounts equal to those generally maintained by businesses engaged in similar activities in similar geographic areas,
general public liability insurance against claims of bodily injury, death or property damage occurring, on, in or about the properties
of the Company; business interruption insurance; and product liability insurance.

 

10.2.       
INSURANCE PROCEEDS. The proceeds of any casualty insurance in respect of any casualty loss of any of the Collateral shall,
subject to the rights, if any, of other parties with a prior interest in the property covered thereby (i) so long as no Event of Default
has occurred and to the extent that the amount of such proceeds is less than $10,000, be disbursed to the Company for direct application
by the Company solely to the repair or replacement of the Company's property so damaged or destroyed, and (ii) in all other circumstances,
be held by the Lender as cash collateral for the Obligations and/or applied to the Obligations. The Lender may, at its sole option, disburse
from time to time all or any part of such proceeds so held as cash collateral, upon such terms and conditions as the Lender may reasonably
prescribe, for direct application by the Company solely to the repair or replacement of the Company's property so damaged or destroyed,
or the Lender may apply all or any part of such proceeds to the Obligations.

 

10.3.       
NOTICE OF CANCELLATION, ETC. All policies of insurance shall provide for at least thirty (30) days prior written cancellation
notice to the Lender, except ten (10) days for non-payment of premium. In the event of failure by the Company to provide and maintain
insurance as herein provided, the Lender may, at its option, provide such insurance and charge the amount thereof to the Company. The
Company shall furnish the Lender with certificates of insurance and policies evidencing compliance with the foregoing insurance provision.

 

11.             
COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.

 

11.1.       
EXPENSES INCURRED BY LENDER. In its discretion, the Lender may discharge taxes and other encumbrances at any time levied or
placed on any of the Collateral following the Company’s failure to discharge such taxes or other encumbrances, make repairs thereto,
maintain the Collateral and pay any necessary filing fees or, if the Company fails to do so, insurance premiums. The Company agrees to
reimburse the Lender on demand for any and all expenditures so made. The Lender shall have no obligation to the Company to make any such
expenditures, nor shall the making thereof relieve the Company of any default.

 

11.2.       
LENDER'S OBLIGATIONS AND DUTIES. Anything herein to the contrary notwithstanding, the Company shall remain liable under each
contract or agreement comprised in the Collateral to be observed or performed by the Company thereunder. The Lender shall not have any
obligation or liability under any such contract or agreement by reason of or arising out of this Agreement or the receipt by the Lender
of any payment relating to any of the Collateral, nor shall the Lender be obligated in any manner to perform any of the obligations of
the Company under or pursuant to any such contract or agreement, to make inquiry as to the nature or sufficiency of any payment received
by the Lender in respect of the Collateral or as to the sufficiency of any performance by any party under any such contract or agreement,
to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been
assigned to the Lender or to which the Lender may be entitled at any time or times. The Lender's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession, under the Uniform Commercial Code of the State or otherwise,
shall be to deal with such Collateral in the same manner as the Lender deals with similar property for its own account.

 

 

 

 

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12.             
SECURITIES AND DEPOSITS. The Lender may at any time, following the occurrence of, and during the continuance of an Event
of Default, at its option, transfer to itself or any nominee any securities constituting Collateral, receive any income thereon and hold
such income as additional Collateral or apply it to the Obligations. After the occurrence of and during the continuance of an Event of
Default, the Lender may demand, sue for, collect, or make any settlement or compromise which it deems desirable with respect to the Collateral.
Regardless of the adequacy of Collateral or any other security for the Obligations, any deposits or other sums at any time credited by
or due from the Lender to the Company may at any time be applied to or set off against any of the Obligations.

 

13.             
NOTIFICATION TO ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON COLLATERAL. The Company shall, after the occurrence of
and during the continuance of an Event of Default, at the request of the Lender, notify account debtors and other persons obligated on
any of the Collateral of the security interest of the Lender in any account, chattel paper, general intangible, instrument or other Collateral
and that payment thereof is to be made directly to the Lender or to any financial institution designated by the Lender as the Lender's
agent therefor, and the Lender may itself, without notice to or demand upon the Company, so notify account debtors and other persons obligated
on Collateral. After the making of such a request or the giving of any such notification, the Company shall hold any proceeds of collection
of accounts, chattel paper, general intangibles, instruments and other Collateral received by the Company as trustee for the Lender without
commingling the same with other funds of the Company and shall turn the same over to the Lender in the identical form received, together
with any necessary endorsements or assignments. The Lender shall apply the proceeds of collection of accounts, chattel paper, general
intangibles, instruments and other Collateral received by the Lender to the Obligations.

 

14.             
POWER OF ATTORNEY.

 

14.1.       
APPOINTMENT AND POWERS OF LENDER. During the continuance of an Event of Default, the Company hereby irrevocably constitutes
and appoints the Lender and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of the Company or in the Lender's own name, for the purpose of carrying out
the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments that may be necessary
or desirable to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives said attorneys
the power and right, on behalf of the Company, without notice to or assent by the Company, to do the following: (a) upon the occurrence
of an Event of Default, generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral
in such manner as is consistent with the Uniform Commercial Code of the State and as fully and completely as though the Lender were the
absolute owner thereof for all purposes, and to do at the Company's expense, at any time, or from time to time, all acts and things which
the Lender deems necessary or advisable to protect, preserve or realize upon the Collateral and the Lender's security interest therein,
in order to effect the intent of this Agreement, all as fully and effectively as the Company might do, including, without limitation,
(i) to receive, open and dispose of all mail addressed to the Company and to take therefrom any remittances or proceeds of Collateral
in which the Lender has a security interest, (ii) to notify Post Office authorities to change the address for delivery of mail addressed
to the Company to such address as the Lender shall designate, (iii) to file and prosecute registration and transfer applications with
the appropriate federal or local agencies or authorities with respect to trademarks, copyrights and patentable inventions and processes,
(iv) upon written notice to the Company, to exercise voting rights with respect to voting securities, which rights may be exercised, if
the Lender so elects, with a view to causing the liquidation in a commercially reasonable manner of assets of the issuer of any such securities
and (v) to execute, deliver and record, in connection with any sale or other disposition of any Collateral, endorsements, assignments
or other instruments of conveyance or transfer with respect to such Collateral; and (b) to the extent that the Company's authorization
given in Section 3 is not sufficient, to file such financing statements and/or motor vehicle security documents with respect hereto,
with or without the Company's signature, or a photocopy of this Agreement in substitution for a financing statement, as the Lender may
deem appropriate and to execute in the Company's name such financing statements, continuation statements and motor vehicle security documents
and amendments thereto which may require the Company's signature.

 

14.2.       
RATIFICATION BY COMPANY. To the extent permitted by law, the Company hereby ratifies all that said attorneys shall lawfully
do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable.

 

 

 

 

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14.3.       
NO DUTY ON LENDER. The powers conferred on the Lender hereunder are solely to protect its interests in the Collateral and shall
not impose any duty upon it to exercise any such powers. The Lender shall be accountable only for the amounts that it actually receives
as a result of the exercise of such powers and neither it nor any of its officers, directors, employees or agents shall be responsible
to the Company for any act or failure to act, except for the Lender's own gross negligence or willful misconduct.

 

15.             
REMEDIES. Upon the occurrence of and during the continuance of an Event of Default, the Lender may, without notice to
or demand upon the Company, declare this Agreement to be in default, and the Lender shall thereafter have in any jurisdiction in which
enforcement hereof is sought, in addition to all other rights and remedies, the rights and remedies of a secured party under the Uniform
Commercial Code of the State or of any jurisdiction in which Collateral is located, including, without limitation, the right to take possession
of the Collateral, and for that purpose the Lender may, so far as the Company can give authority therefore enter upon any premises on
which the Collateral may be situated and remove the same therefrom. The Lender may in its discretion require the Company to assemble all
or any part of the Collateral at such location or locations within the jurisdictions of the Company's principal office(s) or at such other
locations as the Lender may reasonably designate. Unless the Collateral is perishable or threatens to decline speedily in value or is
of a type customarily sold on a recognized market, the Lender shall give to the Company at least 10 business days prior written notice
of the time and place of any public sale of Collateral or of the time after which any private sale or any other intended disposition is
to be made. The Company hereby acknowledges that 10 Business Days prior written notice of such sale or sales shall be reasonable notice.

 

16.             
STANDARDS FOR EXERCISING REMEDIES. To the extent that applicable law imposes duties on the Lender to exercise remedies
in a commercially reasonable manner, the Company acknowledges and agrees that it is not commercially unreasonable for the Lender (a) to
fail to incur expenses reasonably deemed significant by the Lender to prepare Collateral for disposition or otherwise to complete raw
material or work in process into finished goods or other finished products for disposition, (b) to fail to obtain third-party consents
for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party
consents for the collection or disposition of Collateral to be collected or disposed of, (c) to fail to exercise reasonable collection
remedies against account debtors or other persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims
against Collateral, (d) to exercise reasonable collection remedies against account debtors and other persons obligated on Collateral directly
or through the use of collection agencies and other collection specialists, (e) to advertise dispositions of Collateral through publications
or media of general circulation, whether or not the Collateral is of a specialized nature, (f) to contact other persons, whether or not
in the same business as the Company, for expressions of interest in acquiring all or any portion of the Collateral, (g) to hire one or
more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (h)
to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or
that have the reasonable capability of doing so, or that match buyers and sellers of assets, (i) to dispose of assets in wholesale rather
than retail markets, (j) to disclaim disposition warranties, (k) to purchase insurance or credit enhancements to insure the Lender against
risks of loss, collection or disposition of Collateral or to provide to the Lender a guaranteed return from the collection or disposition
of Collateral, or (1) to the extent deemed appropriate by the Lender, to obtain the services of brokers, investment lenders, consultants
and other professionals to assist the Lender in the collection or disposition of any of the Collateral. The Company acknowledges that
the purpose of this Section 16 is to provide non-exhaustive indications of what actions or omissions by the Lender would not be commercially
unreasonable in the Lender's exercise of remedies against the Collateral and that other actions or omissions by the Lender shall not be
deemed commercially unreasonable solely on account of not being indicated in this Section 16. Without limitation upon the foregoing,
nothing contained in this Section 16 shall be construed to grant any rights to the Company or to impose any duties on the Lender
that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section 16.

 

17.             
NO WAIVER BY LENDER, ETC. The Lender shall not be deemed to have waived any of its rights upon or under the Obligations
or the Collateral unless such waiver shall be in writing and signed by the Lender. No delay or omission on the part of the Lender in exercising
any right shall operate as a waiver of such right or any other right. A waiver on any one occasion shall not be construed as a bar to
or waiver of any right on any future occasion. All rights and remedies of the Lender with respect to the Obligations or the Collateral,
whether evidenced hereby or by any other instrument or papers, shall be cumulative and may be exercised singularly, alternatively, successively
or concurrently at such time or at such times as the Lender deems expedient.

 

 

 

 

    	 	7	 

     

    

 

18.             
SURETYSHIP WAIVERS BY COMPANY. The Company waives demand, notice, protest, notice of acceptance of this Agreement, notice
of loans made, credit extended, Collateral received or delivered or other action taken in reliance hereon and all other demands and notices
of any description. With respect to both the Obligations and the Collateral, the Company assents to any extension or postponement of the
time of payment or any other indulgence, to any substitution, exchange or release of or failure to perfect any security interest in any
Collateral, to the addition or release of any party or person primarily or secondarily liable, to the acceptance of partial payment thereon
and the settlement, compromising or adjusting of any thereof, all in such manner and at such time or times as the Lender may deem advisable.
The Lender shall have no duty as to the collection or protection of the Collateral or any income thereon, nor as to the preservation of
rights against prior parties, nor as to the preservation of any rights pertaining thereto beyond the safe custody thereof as set forth
in Section 11.2. The Company further waives any and all other suretyship defenses.

 

19.             
MARSHALLING. The Lender shall not be required to marshal any present or future collateral security (including but not
limited to this Agreement and the Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to such
collateral security or other assurances of payment in any particular order, and all of its rights hereunder and in respect of such collateral
security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or arising. To the
extent that it lawfully may, the Company hereby agrees that it will not invoke any law relating to the marshalling of collateral which
might cause delay in or impede the enforcement of the Lender's rights under this Agreement or under any other instrument creating or evidencing
any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof
is otherwise assured, and, to the extent that it lawfully may, the Company hereby irrevocably waives the benefits of all such laws.

 

20.             
PROCEEDS OF DISPOSITIONS; EXPENSES. The Company shall pay to the Lender on demand amounts equal to any and all expenses,
including, without limitation, reasonable attorneys' fees and disbursements, incurred or paid by the Lender in protecting, preserving
or enforcing the Lender's rights under or in respect of any of the Obligations or any of the Collateral. After deducting all of said expenses,
the residue of any proceeds of collection or sale of the Obligations or Collateral shall, to the extent actually received in cash, be
applied to the payment of the Obligations in such order or preference as the Lender may determine proper allowance and provision being
made for any Obligations not then due. Upon the final payment and satisfaction in full of all of the Obligations and after making any
payments required by the Uniform Commercial Code of the State, any excess shall be returned to the Company, and the Company shall remain
liable for any deficiency in the payment of the Obligations.

 

21.             
OVERDUE AMOUNTS. Until paid, all amounts due and payable by the Company hereunder shall be a debt secured by the Collateral
and shall bear, whether before or after judgment, interest at the rate of interest for overdue principal set forth in the Note.

 

22.             
REPLACEMENT DOCUMENTS. Upon receipt of an affidavit of an officer of the Lender as to the loss, theft, destruction or
mutilation of any 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 such Agreement or other security document, the Company will issue, in lieu thereof, a replacement
note or other security document in the same principal amount thereof and otherwise of like tenor.

 

23.             
RIGHT OF SET OFF. The Company hereby grants to the Lender a lien, security interest and a right of setoff as security
for all liabilities and obligations to the Lender, 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, or affiliated with, 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 liability or obligation of the Company even though unmatured and regardless of the
adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE THE LENDER TO EXERCISE ITS RIGHTS OR REMEDIES
WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOANS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS
OR OTHER PROPERTY OF THE COMPANY, 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 Company waives, to the fullest extent that it lawfully can, (a) any right it might have to require the Lender to pursue
any particular remedy before proceeding against it and (b) any right to the benefit of, or to direct the application of the proceeds of
any collateral until the Obligations are paid in full.

 

 

 

 

    	 	8	 

     

    

 

24.             
GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE. The Company agrees that any suit for the enforcement of this Agreement
may be brought in the courts of the State or any federal court sitting therein and consents to the nonexclusive jurisdiction of such court
and to service of process in any such suit being made upon the Company by mail at the address specified in page 1 hereof. The Company
hereby waives any objection that it may now or hereafter have to the venue of any such suit or any such court or that such suit is brought
in an inconvenient court.

 

25.             
WAIVER OF JURY TRIAL. The Company and the Lender mutually hereby knowingly, voluntarily and intentionally waive the
right to a trial by jury in respect of any claim based on this Agreement, arising out of, under or in connection with this Agreement or
any other documents contemplated to be executed in connection herewith or any course of conduct, course of dealing, statements (whether
verbal or written) or actions of any party. This waiver constitutes a material inducement for the Lender to accept this Agreement and
make the Loan.

 

26.             
MISCELLANEOUS. The headings of each section of this Agreement are for convenience only and shall not define or limit
the provisions thereof. This Agreement and all rights and obligations hereunder shall be binding upon the Company and its respective successors
and assigns, and shall inure to the benefit of the Lender and its successors and assigns. If any term of this Agreement shall be held
to be invalid, illegal or unenforceable, the validity of all other terms hereof shall in no way be affected thereby, and this Agreement
shall be construed and be enforceable as if such invalid, illegal or unenforceable term had not been included herein. The Company acknowledges
receipt of a copy of this Agreement.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    	 	9	 

     

    

 

IN WITNESS WHEREOF, intending to be legally bound,
the Company has caused this Agreement to be duly executed as an instrument under seal as of the date first above written.

 

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

 

	Accepted:	 	 	 
	 	 	 	 	 
	MAIN STREET BANK 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	By:	 	 	 	 
	 	Its Duly Authorized Officer	 	 	 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Security Agreement (All Assets)]

 

    	 	10	 

     

    

 

PERFECTION CERTIFICATE

 

(U.C.C. Financing Statements)

 

[Attached]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    	 	11Exhibit 10.8

 

October 4, 2021

 

Lighthouse Imaging, LLC

2 Portland Fish Pier, Suite 214

Portland, ME 04101

 

Ladies and Gentlemen:

 

This letter agreement (the “Letter Agreement”)
reflects certain understandings and arrangements between Precision Optics Corporation, Inc. (the “Company”), Lighthouse
Imaging, LLC (the “Target”), and Anania & Associates Investment Company, LLC (the “Majority Member”)
in connection with the Company’s acquisition of substantially all of the assets, properties and contractual rights of the Target
(the “Business”) and the Company’s issuance of the Issued Shares at Closing. This Letter Agreement supplements the terms
and conditions of that certain Asset Purchase Agreement dated October 4, 2021 by and between the Company, the Target, and the Majority
Member (the “Purchase Agreement”). Other than as set forth in this Letter Agreement, the terms and conditions set forth in
the Purchase Agreement shall control. All capitalized terms used but not defined in this Letter Agreement will have the meanings attributed
to such terms in the Purchase Agreement.

 

In connection with the foregoing, the parties
to this Letter Agreement hereby agree as follows:

 

1.                 
Lighthouse Director. The Company shall elect one (1) individual designated by the Target (the “Lighthouse Director”)
to the board of directors of the Company (the “Board”) immediately following Closing of the Purchase Agreement. The
Company shall support the reelection of the Lighthouse Director such that the Lighthouse Director shall serve on the Board for a minimum
period of three (3) years from the Closing (the “Minimum Service Period”); provided, however, the foregoing shall not apply
in the event of any violation by the Lighthouse Director of: (i) any applicable Laws, (ii) the bylaws or other corporate governance documents
of the Company, or (iii) the employee handbooks, guidelines and other documents governing employee conduct. The Company shall remove the
Lighthouse Director if requested by the Target. During the Minimum Service Period, the Company shall elect a replacement as directed by
the Target to fill any vacancy created by the removal or resignation of the Lighthouse Director.

 

2.                 
Operations Committee. Shortly after the Closing and during the Minimum Service Period, the Company shall establish an Operations
Committee of the Board for purposes of reviewing and advising the Board regarding the post-Closing operations of the Business (the “Post-Close
Business”) regarding financial performance, operational topics and other related topics. The Operations Committee shall meet regularly
(not less than once per quarter) with the management of the Post-Close Business and shall report as requested to the Board. During the
Minimum Service Period, the Lighthouse Director shall have the option to serve on the Operations Committee.

 

3.                 
Amendment. This Letter Agreement may be amended, modified, or supplemented only by written agreement of the parties hereto.

 

4.                 
Governing Law. This Letter Agreement shall be governed, construed, administered and regulated in all respects under the
laws of the Commonwealth of Massachusetts, without regard to the provisions, policies or principles thereof relating to choice or conflict
of laws.

 

5.                 
Successors; Assignment. This Letter Agreement shall inure to the benefit of and be binding upon the parties hereto and their
respective legal representatives, heirs, successors and assigns. Notwithstanding the foregoing, neither party may assign, delegate, or
otherwise transfer any of its rights or obligations under this letter agreement without the consent of the other party hereto.

 

 

 

 

    	 	1	 

     

    

 

6.                 
Third-Party Rights. Nothing in this letter agreement shall be deemed to create any right in any Person not a party hereto
(other than the permitted successors and assigns of a party hereto), and this Letter Agreement shall not be construed in any respect to
be a contract in whole or in part for the benefit of any third party (except as aforesaid).

 

7.                 
Counterparts; Conflicts. This Letter Agreement may be executed in counterparts, each one of which shall be deemed an original
and all of which together shall constitute one and the same agreement. In the event of any conflict between the provisions of this Letter
Agreement, on the one hand, and the provisions of the Purchase Agreement, on the other hand, the provisions of this Letter Agreement shall
control.

 

If the terms of this letter agreement are acceptable to you, please
signify by signing and dating this letter agreement below.

 

Sincerely,

 

	 	 	Precision Optics Corporation, Inc.
	 	 	 	 	 
	 	 	By:	/s/ Joseph N. Forkey
	 	 	Name:	Joseph N. Forkey
	 	 	Title:	CEO

 

Acknowledged and agreed upon as of the date first above written:

 

	 	 	Lighthouse Imaging, LLC
	 	 	 	 	 
	 	 	By:	/s/ Peter V. Anania
	 	 	Name:	Peter V. Anania
	 	 	Title:	President

 

	 	 	Anania & Associates Investment Company, LLC
	 	 	 	 	 
	 	 	By:	/s/ Peter V. Anania
	 	 	Name:	Peter V. Anania
	 	 	Title:	President

 

 

 

 

 

 

 

 

 

 

    	 	2

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