Document:

EXHIBIT 10.38

 

November 6, 2013

 

Melissa A. Waterhouse

PO Box 769

Philmont, New York 12565

 

Dear Melissa,

 

It is our pleasure to formally offer you
the position of interim Chief Executive Officer/Chief Financial Officer of American Bio Medica Corporation (“ABMC”
or the “Company”), reporting directly to the ABMC Board of Directors. This agreement supersedes all other agreements
whether written or verbal and may not be amended except by a writing signed by you and the Board of Directors. Your position will
be primarily located at our New York corporate facility although overnight travel may be required from time to time. You will perform
all duties as are generally associated with the position of Chief Executive Officer/Chief Financial Officer, as directed by the
Board of Directors. Below, we have outlined the major terms and conditions applicable to your position.

 

Term

 

Your employment with ABMC will be for a
term of one year unless sooner terminated for cause, beginning on the date set forth above and automatically renewed for successive
one-year terms unless either side gives written notice of intent not to renew at least sixty (60) days prior to the end of any
one-year term. If AMBC terminates your employment for cause, this agreement shall be terminated and you will be entitled to no
severance and no further compensation or benefits from ABMC, other than payment of salary and benefits up to and including the
date of termination.

 

Compensation

 

Effective November 4, 2013, your base salary
will be $11,667 per month, which is equivalent to $140,000 on an annualized basis. You will be eligible for your first performance
review by the Board of Directors in November 2014.

 

All costs related to health insurance (including
but not limited to dental, eye, etc. and including family coverage if you so require) shall continue to be borne 100% by the Company.
Please notify Human Resources if you wish to receive this benefit.

 

You shall participate in any Management
Bonus Program that may be approved by the Board of Directors in the future.

 

Benefits

		·	20 vacation days

		·	Usual corporate holidays

		·	2 personal days

		·	401 (k)

 

    	 

    	 

    

 

Severance

 

In
the unlikely event that ABMC elects to terminate your employment for anything other than cause, you will receive severance pay
equal to twelve (12) months of your current base salary at the time of separation, with continuation of all health benefits during
the twelve-month period at ABMC’s expense. Cause shall be defined as (1) death, (2) commission of a felony (3) acts of dishonesty,
fraud or malfeasance in connection with your service on behalf of the Company, (4) gross dereliction of duty willful failure to
carry out any lawful directive of the Board of Directors, or material violations of Company policies which continue after Company
has provided you with written notice thereof and a period of thirty (30) days to cure such action or misconduct or (5) disability
of a period of more than six (6) months). The severance payment will be made under the current pay cycle, each pay period, during
the twelve (12) months, subject to all customary withholdings.

 

Additionally, you may resign your position
and elect to exercise this severance provision at your option under the following circumstances:

 

		(1)	If you are required to relocate by the Company or its Board of Directors more than 50 miles from
the Company’s Kinderhook facility as a condition of continued employment

		(2)	A substantial change in responsibilities normally assumed by Chief Executive Office/Chief Compliance
Officer at the direction of the Company or its Board of Directors (i.e. demotion)

		(3)	You are asked to commit or conceal the commitment of any illegal act by any officer or member of
the board of directors of the Company.

 

Change in Control

 

If there is a Change in Control (defined
below) of ABMC, you may elect to resign your position and to receive a lump sum severance payment equal to two (2) times your annual
base salary (“CIC Payment”). If you elect to resign, ABMC will pay you the CIC Payment within thirty (30) days after
you make your election, which election must be in writing and received by ABMC’s Board of Directors within ten (10) days
after a Change in Control. In the event you continue employment with ABMC or any successor to ABMC following a Change in Control
or fail to make an election within ten (10) days after a Change in Control, you will not be entitled to receive the CIC Payment.

 

Change in Control is defined as follows:

 

(i)           the approval by shareholders
of ABMC of a merger or consolidation of ABMC with any other corporation, other than a merger or consolidation which would result
in the voting securities of ABMC outstanding immediately prior thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power represented
by the voting securities of ABMC or such surviving entity outstanding immediately after such merger or consolidation; or

 

(ii)           the approval
by the shareholders of ABMC of a plan of complete liquidation of ABMC or an agreement for the sale or disposition by ABMC of all
or substantially all of ABMC’s assets.

 

    	 

    	 

    

 

Restrictive
Covenants

 

Company Handbook/Compliance
Certification

 

You are aware that it is your responsibility
to read the ABMC Employee Handbook thoroughly and comply with the policies contained in the Handbook. You understand that the policies,
benefits and information contained in the Handbook are subject to change and that revisions to the Handbook may be made. Any such
changes will be communicated through official written notices and you hereby acknowledge that any such revisions may supercede,
modify or eliminate existing policies. Only a majority of the Executive Officers, or a majority of the Board of Directors may adopt
revisions to the policies contained in the Handbook. In no circumstance may a change to the employee handbook reduce the salary,
benefits or other conditions outlined in this employment agreement.

 

You agree that in addition to any covenants
included in this Employment Letter, you will sign a Compliance Certification simultaneously with the signing of this Employment
Letter. If a conflicting covenant exists between the Employment Letter and the Compliance Certification and/or the Company Handbook,
the Employment Letter shall be the ruling document.

 

Non-Solicitation

 

During the twelve (12) months immediately
following your termination from employment with ABMC for any reason, you agree that:

 

		(a)	You will not, directly or indirectly, solicit in any manner or capacity whatsoever, including by
way of illustration, but not limitation, call upon, mail or e-mail notices to, or make telephone calls to, any Customer (defined
below) or Customer Prospect (defined below) of ABMC, for the purpose of selling any Covered Services (defined below) or engaging
in any business which directly or indirectly competes with ABMC.

 

		(b)	You will not solicit, endeavor to entice away from ABMC, or otherwise interfere with the relationship
of ABMC with any person who is employed (or, but for any violation of this agreement, would have been employed) by or otherwise
engaged to perform services for ABMC, whether for your own account or for the account of any other person or entity.

 

		(c)	You will not, directly or indirectly, solicit in any manner or capacity whatsoever, including by
way of illustration, but not limitation, call upon, mail, or e-mail notices to, or make telephone call to, any supplier or vendor
of ABMC for the purpose of engaging in any business which directly or indirectly competes with ABMC.

 

			Confidentiality

 

You agree not to disclose any Confidential
Information (defined below) and you promise to take all reasonable precautions to prevent its unauthorized dissemination, both
at all times during your employment with ABMC and after termination of your employment for any reason. You agree to limit the disclosure
of any Confidential Information to only those employees and agents of ABMC who have a need to know the information and who have
similarly agreed to keep such information confidential. Upon termination of your employment or upon request, you will deliver to
ABMC all documents and electronic files containing Confidential Information and any personal property owned by ABMC.

 

You further agree not to use any Confidential
Information for your own benefit or for the benefit of anyone other than ABMC. You acknowledge that all Confidential Information
is and remains the property of ABMC and that no license or rights in the Confidential Information has been or is granted to you.

 

    	 

    	 

    

 

“Confidential Information" means
and includes all information not previously known by you prior to your employment with ABMC relating to marketing, advertising,
public relations, development, services, trade secrets, trade "know-how," business plans, Customer (as defined below)
and Customer Prospect (as defined below) lists, distributor lists, Customers and Customer Prospects information, distributor information,
financial data, personnel data, employee compensation and benefits information, new personnel acquisition plans, details of contracts,
pricing policies, operational methods, marketing plans or strategies, service development techniques or plans, business acquisition
or investment plans, or other confidential and proprietary information related to the business or affairs of ABMC and/or its Customers
or Customer Prospects.

 

The term "Customer"
means any person or entity for which ABMC performed any Covered Services during the one (1) year period immediately preceding the
termination of your employment with ABMC for any reason whatsoever.

 

"Customer Prospect"
means any person or entity to which ABMC made a new business presentation or proposal, whether formal or informal related to Covered
Services during the one (1) year period immediately preceding the termination of your employment with ABMC for any reason whatsoever.

 

“Covered Services”
means any services or products of whatever kind or character offered or provided by ABMC to any person or entity.

 

Enforcement

 

If any provision of the covenants in this
agreement shall be held invalid or unenforceable, the remainder nevertheless shall remain in full force and effect. If any provision
is held invalid or unenforceable with respect to particular circumstances, it nevertheless shall remain in full force and effect
in all other circumstances.

 

If, in connection with any action taken
by ABMC to enforce the provisions of the covenants of this agreement, a court shall hold that all or any portion of the restrictions
contained therein are unreasonable under the circumstances then existing so as to render such covenants invalid or unenforceable,
the parties agree that any court of competent jurisdiction may reform such unreasonable restrictions to the extent necessary to
make such restrictions reasonable under the circumstances then existing so as to render such restrictions both valid and enforceable.

 

You acknowledge and agree that all of the
covenants contained in this agreement are necessary for the protection of ABMC's valuable and legitimate business interests and
are reasonable in scope and content. Accordingly, you acknowledge and agree that if you violate any of the provisions of this agreement
ABMC shall sustain irreparable harm and, therefore, in addition to the other remedies which ABMC may have under this agreement
or otherwise, ABMC will be entitled to specific performance, injunctive, and other equitable relief.

 

You agree to indemnify, save and hold harmless
ABMC from and against any and all claims, damages, losses, costs and expenses (including
reasonable attorneys' fees) incurred by ABMC in any action in which a court enforces the terms of the covenants of this agreement.

 

    	 

    	 

    

 

Other Employment Information

 

In making this offer of continued employment,
ABMC has relied on your representations that: (a) you are not currently a party to any contract of employment that might impede
your ability to accept this offer or to perform the services completed thereby; and (b) that you are not subject to any non-competition
arrangement or other restrictive covenants that might restrict your employment at ABMC as contemplated by this offer.

 

Exclusive Service

 

You will perform services exclusively for
ABMC and you will not perform services for any other persons or entities related to or conducting business with the Company for
personal profit during the term of this agreement without the written agreement of the Board of Directors.

 

Miscellaneous

 

This writing represents the entire agreement
with respect to your employment and any prior agreements or understandings, written or oral, are merged herein. This agreement
shall be governed by the laws of the State of New York. ABMC will not be deemed to have waived any provision of this agreement
except by a signed writing. This agreement may not be amended, except by a signed writing. Notices given pursuant to this Agreement
shall be in writing and delivered personally or by nationally recognized overnight courier in the case of ABMC to its Kinderhook
facility to the attention of the Compensation Committee Chairman of the Board of Directors and in your case to your home address
as set forth in ABMC’s personnel file.

 

Melissa, we are enthusiastic about your
appointment as Chief Executive Officer/Chief Financial Officer, and our expectation is that you will continue to make a tremendous
contribution to the long-term success of ABMC.

 

Sincerely,

 

	/S/ Jean Neff	 
	Jean Neff (Compensation Committee Chair)	 
	By order of the American Bio Medica Corporation Board of Directors
	 
	Accepted this 6th Day of November, 2013:	 
	 	 
	/S/ Melissa A. Waterhouse	 
	Melissa A. Waterhousea50749126ex10-1.htm

Exhibit 10.1

 

Execution Copy

 

 

	
CASE - 66636

Amendment Two

to the

Loan Agreement

between

Michigan Strategic Fund

and

Advanced Photonix, Inc.

This Amendment Two (the “Amendment”), dated November 6, 2013, is to the Loan Agreement between the Michigan Strategic Fund (the “MSF”) and Advanced Photonix, Inc. (the “Company”), dated September 15, 2005, as amended (the “Agreement”).

Pursuant to Section 9.11 of the Agreement, the Parties agree to amend the Agreement as follows:

 

	1.	 	Revised Exhibit D is deleted in its entirety and replaced with the attached Second Revised Exhibit D.
	 	 	 
	 	 	

The following document is incorporated by reference as binding obligations, terms and conditions of the Agreement:

 

Second Revised Exhibit D:  Third Amended and Restated Promissory Note

Except as specifically provided above, the Parties agree that all terms and conditions of the Agreement shall remain unchanged and in effect.

The signatories below warrant that they are empowered to enter into this Amendment.

 

 

	
COMPANY ACCEPTANCE:

	
Advanced Photonix, Inc.

	  	  
	  	  
	
Dated:  _____________

	
___________________________

	  	
Jeff Anderson

	  	
Chief Financial Officer

	  	  
	  	  
	
MSF ACCEPTANCE:

	
Michigan Strategic Fund

	  	  
	  	  
	
Dated:  _____________

	
___________________________

	  	
Karla K. Campbell

	  	
Fund Manager

 

  

1

  

 

Execution Copy

 

 

SECOND REVISED EXHIBIT D

FORM OF NOTE

THIRD AMENDED AND RESTATED PROMISSORY NOTE

(Line of Credit)

	
Up to $1,200,000

	
Dated:  November 6, 2013

THIS THIRD AMENDED AND RESTATED PROMISSORY NOTE REPLACES AND AMENDS AND RESTATES IN ITS ENTIRETY THAT CERTAIN PROMISSORY NOTE (LINE OF CREDIT) EXECUTED BY BORROWER AND DELIVERED TO LENDER IN THE ORIGINAL PRINCIPAL AMOUNT OF UP TO ONE MILLION TWO HUNDRED THOUSAND DOLLARS ($1,200,000) DATED SEPTEMBER 15, 2005, AS AMENDED AND RESTATED ON JANUARY 26, 2009 AND JUNE 16, 2010 (THE “PRIOR NOTES”).  BY ACCEPTANCE OF THIS THIRD AMENDED AND RESTATED PROMISSORY NOTE, LENDER ACKNOWLEDGES AND AGREES THAT THE PRIOR NOTES SHALL CEASE TO EVIDENCE ANY OBLIGATIONS OF BORROWER TO LENDER.

FOR VALUE RECEIVED, Advanced Photonix, Inc. (the “Borrower”), promises to pay to the order of the Michigan Strategic Fund, a public body corporate and politic within the Department of Treasury of the State of Michigan (the “Lender” or “MSF”), at 300 North Washington Square, Lansing, Michigan or at such other place as Lender may designate in writing, the principal sum of One Million Two Hundred Thousand Dollars ($1,200,000) or such lesser sum as shall have been advanced by Lender to Borrower under this Note and as contemplated by that certain Loan Agreement between Borrower and Lender, dated September 15, 2005, as amended (the “Loan Agreement”), plus interest as hereinafter provided, all in lawful money of the United States of America, in accordance with the terms hereof.  Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Loan Agreement.

All disbursements made under this Third Amended and Restated Promissory Note (the “Note”) shall be charged to a loan account in Borrower’s name on Lender’s books, and Lender shall debit to such account the amount of each advance made to, and credit to such account the amount of each repayment made by Borrower.  From time to time and upon Borrower's request, Lender shall furnish Borrower a statement of Borrower’s loan account, which statement shall be deemed to be correct, accepted by, and binding upon Borrower, unless Lender receives a written statement of exceptions from Borrower within ten (10) calendar days after such statement has been furnished.

As of September 30, 2013, the Parties agree that the total outstanding balance due under this Note is Three Hundred Twenty Six Thousand Seven Hundred Forty Six Dollars ($326,746) (the “Outstanding Balance”).  Beginning September 1, 2013 the Outstanding Balance of this Note shall bear interest at a per annum rate of five percent (5.0%).  Interest shall be computed on the basis of the actual number of days elapsed.

 

  

D-1

  

 

Execution Copy

 

 

Commencing on October 1, 2013, and continuing on the first business day of each of the following twelve (12) calendar months, Borrower shall pay Lender interest only payments. On November 1, 2014 Borrower shall make a final payment to Lender which shall reflect all remaining outstanding indebtedness (the “Final Payment”).  If Borrower fails to make the Final Payment, beginning November 2, 2014 the then outstanding principal balance of this Note shall bear interest at a default per annum rate of fifteen percent (15%) until any unpaid portion of the remaining outstanding indebtedness, including all additional accrued interest, late fees and penalties, as applicable, is paid in full.

In the event that any payment under this Note is not received by Lender within ten days of the date when due, a late charge of five (5%) percent of the amount of such shall be due and payable.  Borrower agrees that the late charge is a reasonable estimate of the administrative costs which Lender will incur in processing the delinquency.  Lender’s acceptance of a late payment and/or of the late payment charge will not waive any default under this Note.

The Borrower shall have the right to prepay accrued interest and principal in whole or in part at any time without payment of any prepayment fee or penalty.  Prepayments are to be applied first to accrued interest and then to principal.

Upon the occurrence of a Trigger Event (as defined in the Debt Conversion Agreement)  or an Event of Default (as defined in the Loan Agreement), the entire Indebtedness, shall become immediately due and payable at the election of Lender without notice, demand or presentment.  All costs and expenses of collection, including, without limitation, reasonable attorney’s fees and expenses, shall be added to and become part of the total Indebtedness evidenced by this Note.

Upon the occurrence of a Trigger Event (as defined in the Debt Conversion Agreement dated May 12, 2010), Lender may at its sole option and discretion declare the entire indebtedness, plus a premium equal to seven percent (7%) of the then-outstanding principal balance of this Note, immediately due and payable.  Lender shall give Borrower written notice of this declaration of acceleration by sending a statement to Borrower stating the declaration and setting out the amount owed as of the date of the notice.  Interest shall continue to accrue at the rate set out herein until Borrower pays the indebtedness and such premium, in full.

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

 

  

D-2

  

 

Execution Copy

 

 

Notwithstanding anything herein to the contrary, in no event shall Borrower be required to pay a rate of interest in excess of the Maximum Rate.  The term “Maximum Rate” shall mean the maximum non-usurious rate of interest that Lender is allowed to contract for, charge, take, reserve or receive under the applicable laws of any applicable state or of the United States of America (whichever from time to time permits the highest rate for the use, forbearance or detention of money) after taking into account, to the extent required by applicable law, any and all relevant payments or charges hereunder, or under any other document or instrument executed and delivered in connection therewith and the Indebtedness.

In the event Lender ever receives, as interest, any amount in excess of the Maximum Rate, such amount as would be excessive interest shall be deemed a partial prepayment of principal, and, if the principal hereof is paid in full, any remaining excess shall be returned to Borrower.  In determining whether or not the interest paid or payable, under any specified contingency, exceeds the Maximum Rate, Borrower and Lender shall, to the maximum extent permitted by law, (a) characterize any non-principal payment as an expense, fee, or premium rather than as interest; (b) exclude voluntary prepayments and the effects thereof; and (c) amortize, prorate, allocate and spread the total amount of interest through the entire contemplated term of such indebtedness until payment is made in full of the principal (including the period of any extension or renewal thereof) so that the interest on account of such indebtedness shall not exceed the Maximum Rate.

This Note shall be binding upon Borrower and its permitted successors and assigns, and the benefits hereof shall inure to Lender and its successors and assigns.  This Note has been executed in the State of Michigan, and all rights and obligations hereunder shall be governed by the laws of the State of Michigan.

BORROWER:

ADVANCED PHOTONIX, INC.

___________________________

Jeff Anderson

Chief Financial Officer

 

  

D-3

  

 

Execution Copy

 

 

THIRD AMENDED AND RESTATED PROMISSORY NOTE

(Line of Credit)

	
Up to $1,200,000

	
Dated:  November 6, 2013

THIS THIRD AMENDED AND RESTATED PROMISSORY NOTE REPLACES AND AMENDS AND RESTATES IN ITS ENTIRETY THAT CERTAIN PROMISSORY NOTE (LINE OF CREDIT) EXECUTED BY BORROWER AND DELIVERED TO LENDER IN THE ORIGINAL PRINCIPAL AMOUNT OF UP TO ONE MILLION TWO HUNDRED THOUSAND DOLLARS ($1,200,000) DATED SEPTEMBER 15, 2005, AS AMENDED AND RESTATED ON JANUARY 26, 2009 AND JUNE 16, 2010 (THE “PRIOR NOTES”).  BY ACCEPTANCE OF THIS THIRD AMENDED AND RESTATED PROMISSORY NOTE, LENDER ACKNOWLEDGES AND AGREES THAT THE PRIOR NOTES SHALL CEASE TO EVIDENCE ANY OBLIGATIONS OF BORROWER TO LENDER.

FOR VALUE RECEIVED, Advanced Photonix, Inc. (the “Borrower”), promises to pay to the order of the Michigan Strategic Fund, a public body corporate and politic within the Department of Treasury of the State of Michigan (the “Lender” or “MSF”), at 300 North Washington Square, Lansing, Michigan or at such other place as Lender may designate in writing, the principal sum of One Million Two Hundred Thousand Dollars ($1,200,000) or such lesser sum as shall have been advanced by Lender to Borrower under this Note and as contemplated by that certain Loan Agreement between Borrower and Lender, dated September 15, 2005, as amended (the “Loan Agreement”), plus interest as hereinafter provided, all in lawful money of the United States of America, in accordance with the terms hereof.  Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Loan Agreement.

All disbursements made under this Third Amended and Restated Promissory Note (the “Note”) shall be charged to a loan account in Borrower’s name on Lender’s books, and Lender shall debit to such account the amount of each advance made to, and credit to such account the amount of each repayment made by Borrower.  From time to time and upon Borrower's request, Lender shall furnish Borrower a statement of Borrower’s loan account, which statement shall be deemed to be correct, accepted by, and binding upon Borrower, unless Lender receives a written statement of exceptions from Borrower within ten (10) calendar days after such statement has been furnished.

As of September 30, 2013, the Parties agree that the total outstanding balance due under this Note is Three Hundred Twenty Six Thousand Seven Hundred Forty Six Dollars ($326,746) (the “Outstanding Balance”).  Beginning September 1, 2013 the Outstanding Balance of this Note shall bear interest at a per annum rate of five percent (5.0%).  Interest shall be computed on the basis of the actual number of days elapsed.

Commencing on October 1, 2013, and continuing on the first business day of each of the following twelve (12) calendar months, Borrower shall pay Lender interest only payments. On November 1, 2014 Borrower shall make a final payment to Lender which shall reflect all remaining outstanding indebtedness (the “Final Payment”).  If Borrower fails to make the Final Payment, beginning November 2, 2014 the then outstanding principal balance of this Note shall bear interest at a default per annum rate of fifteen percent (15%) until any unpaid portion of the remaining outstanding indebtedness, including all additional accrued interest, late fees and penalties, as applicable, is paid in full.

 

  

D-4

  

 

Execution Copy

 

In the event that any payment under this Note is not received by Lender within ten days of the date when due, a late charge of five (5%) percent of the amount of such shall be due and payable.  Borrower agrees that the late charge is a reasonable estimate of the administrative costs which Lender will incur in processing the delinquency.  Lender’s acceptance of a late payment and/or of the late payment charge will not waive any default under this Note.

The Borrower shall have the right to prepay accrued interest and principal in whole or in part at any time without payment of any prepayment fee or penalty.  Prepayments are to be applied first to accrued interest and then to principal.

Upon the occurrence of a Trigger Event (as defined in the Debt Conversion Agreement)  or an Event of Default (as defined in the Loan Agreement), the entire Indebtedness, shall become immediately due and payable at the election of Lender without notice, demand or presentment.  All costs and expenses of collection, including, without limitation, reasonable attorney’s fees and expenses, shall be added to and become part of the total Indebtedness evidenced by this Note.

Upon the occurrence of a Trigger Event (as defined in the Debt Conversion Agreement dated May 12, 2010), Lender may at its sole option and discretion declare the entire indebtedness, plus a premium equal to seven percent (7%) of the then-outstanding principal balance of this Note, immediately due and payable.  Lender shall give Borrower written notice of this declaration of acceleration by sending a statement to Borrower stating the declaration and setting out the amount owed as of the date of the notice.  Interest shall continue to accrue at the rate set out herein until Borrower pays the indebtedness and such premium, in full.

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

Notwithstanding anything herein to the contrary, in no event shall Borrower be required to pay a rate of interest in excess of the Maximum Rate.  The term “Maximum Rate” shall mean the maximum non-usurious rate of interest that Lender is allowed to contract for, charge, take, reserve or receive under the applicable laws of any applicable state or of the United States of America (whichever from time to time permits the highest rate for the use, forbearance or detention of money) after taking into account, to the extent required by applicable law, any and all relevant payments or charges hereunder, or under any other document or instrument executed and delivered in connection therewith and the Indebtedness.

 

  

D-5

  

 

Execution Copy

 

In the event Lender ever receives, as interest, any amount in excess of the Maximum Rate, such amount as would be excessive interest shall be deemed a partial prepayment of principal, and, if the principal hereof is paid in full, any remaining excess shall be returned to Borrower.  In determining whether or not the interest paid or payable, under any specified contingency, exceeds the Maximum Rate, Borrower and Lender shall, to the maximum extent permitted by law, (a) characterize any non-principal payment as an expense, fee, or premium rather than as interest; (b) exclude voluntary prepayments and the effects thereof; and (c) amortize, prorate, allocate and spread the total amount of interest through the entire contemplated term of such indebtedness until payment is made in full of the principal (including the period of any extension or renewal thereof) so that the interest on account of such indebtedness shall not exceed the Maximum Rate.

This Note shall be binding upon Borrower and its permitted successors and assigns, and the benefits hereof shall inure to Lender and its successors and assigns.  This Note has been executed in the State of Michigan, and all rights and obligations hereunder shall be governed by the laws of the State of Michigan.

BORROWER:

ADVANCED PHOTONIX, INC.

___________________________

Jeff Anderson

Chief Financial Officer

 

 

D-6

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