Document:

SECOND AMENDMENT TO AMENDED AND RESTATED

REVOLVING CREDIT AND TERM LOAN AGREEMENT

 

 

 

This SECOND AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT(this “Second Amendment”) dated as of March 30, 2012 made by and among
CYALUME TECHNOLOGIES, INC., a Delaware corporation (the “Borrower”), CYALUME TECHNOLOGIES HOLDINGS, INC., a Delaware
corporation (the “Holding Company”), COMBAT TRAINING SOLUTIONS, INC., a Colorado corporation (“CTS”), CYALUME
REALTY, INC., a Delaware corporation (“Realty”), CYALUME SPECIALTY PRODUCTS, INC., a Delaware corporation (“Specialty”),
and TD BANK, N.A., as Administrative Agent and as the Lender (the “Agent”).

 

Background

 

The Borrower, the Holding Company, the lenders
party thereto and the Agent entered into an that certain Amended and Restated Revolving Credit and Term Loan Agreement dated as
of July 29, 2010 which was amended by that certain First Amendment to Amended and Restated Revolving Credit and Term Loan
Agreement and Limited Consent and Joinder dated as of January 20, 2012 (as further amended, modified or supplemented to the date
hereof, the “Original Credit Agreement”).

 

NOW, THEREFORE, in consideration of the
promises and the agreements, provisions and covenants herein contained, the Borrower, the Holding Company, CTS, Realty and Specialty
and the Agent and Lender hereby agree as follows:

 

1.                 
Amendment. Subject to the terms and conditions herein contained and in reliance on the representations and warranties
of the Borrower herein contained, effective upon satisfaction of the conditions precedent contained in section 2 below, the
Original Credit Agreement shall be amended as follows:

 

(A)Section 12.1 “Coverage Ratios”
contained in the Original Credit Agreement is hereby amended by deleting the terms and subsections therein contained and inserting
the following in lieu thereof:

 

Section 12.1Coverage
Ratios.

 

(a)               
Fixed Charge Ratio. As of the last day of the fiscal year ending December 31, 2011 and for each fiscal year thereafter,
the Fixed Charge Coverage Ratio for such fiscal year shall not be less than 1.10:1.00.

 

(b)              
Total Debt Service Coverage Ratio. As of the last day of the fiscal quarters ending on March 31, 2012 and on June
30, 2012, the Total Debt Service Coverage Ratio shall not be less than 1.00:1.00; and, as of the last day of the fiscal quarter
ending September 30, 2012 and for each fiscal quarter thereafter, the Total Debt Service Coverage Ratio shall not be less
than 1.20:1.00.

 

    	 

    	 

    
 

(B)Section 12.2 “Leverage Ratio”
contained in the Original Credit Agreement is hereby amended by deleting the terms and subsections therein contained and inserting
the following in lieu thereof:

 

Section 12.2Leverage
Ratio.

 

(a)At any time during the periods
set forth below, the Senior Leverage Ratio shall not be more than the ratio set forth below during such period:

 

	Period	 	 	Ratio	 
	 	 	 	 	 
	January 1, 2011, through and including December 31, 2011	 	 	2.50:1.00	 
	 	 	 	 	 
	March 31, 2012, through and including September 30, 2012	 	 	2.25:1.00	 
	 	 	 	 	 
	December 31, 2012, and each fiscal quarter thereafter	 	 	2.00:1.00	 

 

(b)At any time during the periods
set forth below, the Total Leverage Ratio shall not be more than the ratio set forth below during such period:

 

	Period	 	 	Ratio	 
	 	 	 	 	 
	January 1, 2011, through and including December 31, 2011	 	 	3.50:1.00	 
	 	 	 	 	 
	March 31, 2012, through and including September 30, 2012	 	 	3.75:1.00	 
	 	 	 	 	 
	December 31, 2012, and each fiscal quarter thereafter	 	 	3.00:1.00	 

 

(c)For purposes of calculating
the Senior Leverage Ratio and the Total Leverage Ratio in subsections 12.2(a) and 12.2(b), respectively, the following amounts
will be added to EBITDA for the following periods:

 

	 	Period	 	 	 	Amount	 
	 	 	 	 	 	 	 
	 	fiscal quarter ending December 31, 2011	 	 	$	600,000	 
	 	 	 	 	 	 	 
	 	fiscal quarter ending March 31, 2012	 	 	$	450,000	 
	 	 	 	 	 	 	 
	 	fiscal quarter ending June 30, 2012	 	 	$	300,000	 
	 	 	 	 	 	 	 
	 	fiscal quarter ending September 30, 2012	 	 	$	150,000	 
	 	 	 	 	 	 	 
	 	Thereafter	 	 	$	0	 

  

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(C)Section 12.3 “Capital Expenditures”
contained in the Original Credit Agreement is hereby amended by deleting the terms and subsections therein contained and inserting
the following in lieu thereof:

 

Section 12.3Capital
Expenditures. The Borrower will not make, nor permit any Subsidiary to make any Capital Expenditures in any fiscal year that exceed
$2,000,000 for any fiscal year.

 

(D)Section 12.4 “Current Ratio”
contained in the Original Credit Agreement is hereby amended by deleting the terms and subsections therein contained and inserting
the following in lieu thereof:

 

Section 12.4Current
Ratio. As of the last day of any fiscal quarter, the Holding Company and its Subsidiaries shall not permit the Current Ratio to
be less than 1.00:1.00.

 

(E)Section 12.5 “Minimum EBITDA”
contained in the Original Credit Agreement is hereby deleted.

 

2.                 
Conditions Precedent. The provisions of this Second Amendment shall be effective as of the date on which all of the
following conditions shall be satisfied:

 

(a)               
the Borrower shall have delivered to the Agent a fully executed counterpart of this Second Amendment;

 

(b)              
the Borrower shall have paid all costs and expenses owing to the Agent and its counsel on or before the date hereof;

 

(c)               
the Agent and the Lender shall have indicated its consent and agreement by executing this Second Amendment;

 

(d)              
the Borrower, the Holding Company, CTS, Specialty and Realty shall have delivered certified copies of the resolutions of
its Board of Directors approving the execution, delivery and performance of this Second Amendment and the actions contemplated
herein, in form and substance satisfactory to the Agent;

 

(e)               
after giving effect to this Second Amendment, no Default or Event of Default shall have occurred or be continuing;

 

(f)               
the Borrower shall have paid the Agent an amendment fee of Twenty Thousand Dollars ($20,000) to compensate the Agent and
the Lender for entering into this Second Amendment, which amount, when paid, is not subject to refund or rebate and will be fully
earned upon the Agent and the Lender executing this Second Amendment; and

 

(g)              
the Agent shall have received fully executed copies of the Second Amendment to Subordinated Loan Agreement dated March 30,
2012 among Borrower, Holding Company, CTS, Realty, Specialty, Granite Creek Partners Agent, LLC, Granite Creek Flexcap I, L.P.,
and Patriot Capital II, L.P., and all documents executed in connection therewith.

 

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3.                 
Miscellaneous.

 

(a)               
Ratification. The terms and provisions set forth in this Second Amendment shall modify and supersede all inconsistent
terms and provisions set forth in the Original Credit Agreement and except as expressly modified and superseded by this Second
Amendment, the terms and provisions of the Original Credit Agreement and the other Loan Documents are ratified and confirmed and
shall continue in full force and effect. The Borrower and the Agent agree that the Original Credit Agreement as amended hereby
and the other Loan Documents shall continue to be legal, valid, binding and enforceable in accordance with their respective terms.
For all matters arising prior to the effective date of this Second Amendment, the Original Credit Agreement (as unmodified by this
Second Amendment) shall control. The Borrower hereby acknowledges that, as of the date hereof, the security interests and liens
granted to the Agent under the Credit Agreement and the other Loan Documents are in full force and effect, are properly perfected
and are enforceable in accordance with the terms of the Credit Agreement and the other Loan Documents.

 

(b)              
Representations and Warranties. The Borrower hereby represents and warrants to the Agent that the representations
and warranties set forth in the Loan Documents are true and correct in all material respects on and as of the date hereof, with
the same effect as though made on and as of such date except with respect to any representations and warranties limited by their
terms to a specific date. The Borrower further represents and warrants to the Agent that the execution, delivery and performance
by the Borrower of this Second Amendment (i) are within the Borrower’s power and authority; (ii) have been duly
authorized by all necessary corporate and shareholder action; (iii) are not in contravention of any provision of the Borrower’s
certificate or articles of incorporation or bylaws or other organizational documents; (iv) do not violate any law or regulation,
or any order or decree of any Governmental Authority in any material respect; (v) do not conflict with or result in the breach
or termination of, constitute a default under or accelerate any performance required by, any indenture, mortgage, deed of trust,
lease, agreement or other instrument to which the Borrower is a party or by which the Borrower or any of its property is bound;
(vi) do not result in the creation or imposition of any Lien upon any of the property of the Borrower other than in favor
of Agent; (vii) do not require the consent or approval of any Governmental Authority. All representations and warranties made
in this Second Amendment shall survive the execution and delivery of this Second Amendment, and no investigation by the Agent shall
affect the representations and warranties or the right of the Agent to rely upon them.

 

(c)               
Release. In addition, to induce the Agent and Lender to agree to the terms of this Second Amendment, the Borrower
represents and warrants that as of the date of its execution of this Second Amendment there are no claims or offsets against or
rights of recoupment with respect to or defenses or counterclaims to its obligations under the Loan Documents and in accordance
therewith it:

 

(i)                
Waives any and all such claims, offsets, rights of recoupment, defenses or counterclaims, arising prior to the date of its
execution of this Second Amendment and

 

(ii)              
Releases and discharges the Agent and its officers, directors, employees, agents and affiliates (collectively the “released
parties”) from any and all liabilities, claims, causes of action, in law or equity, which the Borrower or any Guarantor may
have against any released party arising prior to the date hereof in connection with the Loan Documents or the transactions contemplated
thereby.

 

    	-4-

    	 

    
 

(d)              
Reference to Agreement. Each of the Loan Documents, including the Original Credit Agreement and any and all
other agreements, documents, or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to
the terms of the Original Credit Agreement as amended hereby, are hereby amended so that any reference in such Loan Documents to
the Original Credit Agreement shall mean a reference to the Original Credit Agreement as amended hereby.

 

(e)               
Expenses of the Agent. As provided in the Original Credit Agreement, the Borrower agrees to pay all reasonable
costs and expenses incurred by the Agent in connection with the preparation, negotiation, and execution of this Second Amendment,
including without limitation, the reasonable costs and fees of the Agent’s legal counsel.

 

(f)               
Severability. Any provision of this Second Amendment held by a court of competent jurisdiction to be invalid
or unenforceable shall not impair or invalidate the remainder of this Second Amendment and the effect thereof shall be confined
to the provision so held to be invalid or unenforceable.

 

(g)              
Applicable Law. This Amendment shall be governed by and construed in accordance with the laws of The Commonwealth
of Massachusetts and the applicable laws of the United States of America.

 

(h)              
Successors and Assigns. This Second Amendment is binding upon and shall inure to the benefit of the Agent,
the Holding Company and the Borrower, and their respective successors and assigns, except the Borrower may not assign or transfer
any of its rights or obligations hereunder without the prior written consent of the Agent.

 

(i)                
Counterparts. This Second Amendment may be executed in one or more counterparts and on facsimile counterparts,
each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and
the same agreement.

 

(j)                
Effect of Waiver. No consent or waiver, express or implied, by the Agent to or for any breach of or deviation
from any covenant, condition or duty by the Borrower shall be deemed a consent or waiver to or of any other breach of the same
or any other covenant, condition or duty.

 

(k)              
Headings. The headings, captions, and arrangements used in this Amendment are for convenience only and shall
not affect the interpretation of this Amendment.

 

(l)                
Entire Agreement. This Second Amendment embodies the entire agreement among the parties hereto with respect
to the subject matter thereof, and supersedes any and all prior representations and understandings, whether written or oral, relating
to this Amendment. There are no oral agreements among the parties hereto with respect to the subject matter hereof.

 

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[The remainder of this page is intentionally
left blank.]

 

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

 

	 	BORROWER	 
	 	 	 
	 	
        CYALUME TECHNOLOGIES, INC.

        
	 
	 	 	 
		
        By:
	
        /s/ Michael Bielonko
	 
	 	 	 	 
	 	
        Name:
	Michael Bielonko	 
	 	 	 	 
	 	
        Title:
	Chief Financial Officer	 

 

 

	 	GUARANTORS	 
	 	 	 
	 	
        COMBAT TRAINING SOLUTIONS, INC. 
	 
	 	 	 
		
        By:
	
        /s/ Michael Bielonko
	 
	 	 	 	 
	 	
        Name:
	Michael Bielonko	 
	 	 	 	 
	 	
        Title:
	Chief Financial Officer	 

 

	 	
        CYALUME SPECIALTY PRODUCTS,
INC.

        
	 
	 	 	 
	 	
        By:
	
        /s/ Michael Bielonko
	 
	 	 	 	 
	 	
         Name:
	Michael Bielonko	 
	 	 	 	 
	 	
         Title:
	Chief Financial Officer	 

  

    	 

    	 

    
  

	 	
        CYALUME REALTY, INC.

        
	 
	 	 	 
	 	
        By:
	
        /s/ Michael Bielonko
	 
	 	 	 	 
	 	
        Name:
	Michael Bielonko	 
	 	 	 	 
	 	
        Title:
	Chief Financial Officer	 

  

 

	 	HOLDING COMPANY	 
	 	 	 
	 	
        CYALUME TECHNOLOGIES HOLDINGS,
INC.

        
	 
	 	 	 
	 	
        By:
	
        /s/ Michael Bielonko
	 
	 	 	 	 
	 	
        Name:
	Michael Bielonko	 
	 	 	 	 
	 	
        Title:
	Chief Financial Officer	 

 

 

	 	AGENT	 
	 	 	 
	 	
        TD BANK, N.A. 
	 
	 	 	 
	 	
        By:
	
        /s/ Gregory Spurr
	 
	 	 	 	 
	 	
        Name:
	Gregory Spurr	 
	 	 	 	 
	 	
        Title:
	Senior Vice PresidentOFFICE SPACE LEASE
AGREEMENT

 

This Commercial Lease Agreement (“Lease”) is made
and effective  March 1, 2012 , by and between Russ Hedrick dba Hedrick Group LLC  (“Landlord”)
and _Sigma Labs, Inc.  (“Tenant”).

 

Landlord is the owner of land and improvements commonly known
and numbered as _223 East Palace Avenue, Santa Fe, New Mexico 87501 -The Hedrick Building  (the “Building”):

 

Landlord makes available for lease a portion of the Building
designated as _Suite B  (the “Leased Premises”).

 

Landlord desires to lease the Leased Premises to Tenant, and
Tenant desires to lease the Leased Premises from Landlord for the term, at the rental and upon the covenants, conditions and provisions
herein set forth.

 

THEREFORE, in consideration of the mutual promises herein, contained
and other good and valuable consideration, it is agreed:

 

1. Term.

 

A. Landlord hereby leases the Leased Premises to Tenant, and
Tenant hereby leases the same from Landlord, for an “Initial Term” beginning _March 1, 2012_ and ending
_February 28, 2013

 

B. Tenant may renew the Lease for one extended term of _N/A_.
Tenant shall exercise such renewal option, if at all, by giving written notice to Landlord not less than ninety (90) days prior
to the expiration of the Initial Term. The renewal term shall be at the rental set forth below and otherwise upon the same covenants,
conditions and provisions as provided in this Lease.

 

2. Rental.

 

A. Tenant shall pay to Landlord during the Initial Term rental
of_$8,500.00 _ per year, payable in lump sum at time of lease signing. Tenant shall also pay to Landlord a “Security
Deposit” in the amount of  0.00  [Security Deposit].

 

B. The rental for any renewal lease term, if created as permitted
under this Lease, shall be negotiated by January 30, 2013.

 

3. Use

 

Allowed use is strictly for traditional office activity as required
by Landlord's Insurance. Tenant shall not use the Leased Premises for the purposes of storing, manufacturing or selling any explosives,
flammables or other inherently dangerous substance, chemical, thing or device.

 

4. Sublease and Assignment.

 

Tenant shall not sublease all or any part of the Leased Premises,
or assign this Lease in whole or in part without Landlord’s consent.

 

5. Repairs.

 

During the Lease term, Tenant shall make, at Tenant’s
expense, all necessary repairs to the Leased Premises. Repairs shall include such items as routine repairs of floors, walls, ceilings,
and other parts of the Leased Premises damaged or worn through normal occupancy, except for major mechanical systems or the roof,
subject to the obligations of the parties otherwise set forth in this Lease.

    	 

    	 

    

 

 

6. Alterations and Improvements.

 

Any alteration or improvements to the Leased Premises shall
require Landlord's consent and shall be negotiated between Landlord and Tenant.

 

7. Property Taxes.

 

Landlord shall pay, prior to delinquency, all general real estate
taxes and installments of special assessments coming due during the Lease term on the Leased Premises, and all personal property
taxes with respect to Landlord’s personal property, if any, on the Leased Premises. Tenant shall be responsible for paying
all personal property taxes with respect to Tenant’s personal property at the Leased Premises.

 

8. Insurance.

 

A. If the Leased Premises or any other party of the Building
is damaged by fire or other casualty resulting from any act or negligence of Tenant or any of Tenant’s agents, employees
or invitees, rent shall not be diminished or a bated while such damages are under repair, and Tenant shall be responsible for the
costs of repair not covered by insurance.

 

B. Landlord shall maintain fire and extended coverage insurance
on the Building and the Leased Premises in such amounts as Landlord shall deem appropriate. Tenant shall be responsible, at its
expense, for fire and extended coverage insurance on all of its personal property, including removable trade fixtures, located
in the Leased Premises.

 

C. Tenant and Landlord shall, each at its own expense, maintain
a policy or policies of comprehensive general liability insurance with respect to the respective activities of each in the Building
with the premiums thereon fully paid on or before due date, issued by and binding upon some insurance company approved by Landlord,
such insurance to afford minimum protection of not less than $1,000,000 combined single limit coverage of bodily injury, property
damage or combination thereof. Landlord shall be listed as an additional insured on Tenant’s policy or policies of comprehensive
general liability insurance, and Tenant shall provide Landlord with current Certificates of Insurance evidencing Tenant’s
compliance with this Paragraph. Tenant shall obtain the agreement of Tenant’s insurers to notify Landlord that a policy is
due to expire at least (10) days prior to such expiration. Landlord shall not be required to maintain insurance against thefts
within the Leased Premises or the Building.

 

9. Utilities.

 

Landlord shall pay all charges for water, sewer, gas, and electricity,
Tenant shall pay for all other services. Tenant acknowledges that the Leased Premises are designed to provide standard office use
electrical facilities and standard office lighting. Tenant shall not use any equipment or devices that utilize excessive electrical
energy or which may, in Landlord’s reasonable opinion, overload the wiring or interfere with electrical services to other
tenants.

 

10. Signs.

 

Tenant shall not place any sign on the Building without Landlord's
consent. Landlord shall pay for a sign in the Tenant's name in front of the Tenant's assigned Parking Space.

 

11. Entry.

 

Landlord shall have the right to enter upon the Leased Premises
at reasonable hours to inspect the same, provided Landlord shall not thereby unreasonably interfere with Tenant’s business
on the Leased Premises.

 

12. Parking.

 

    	 

    	 

    

During the term of this Lease, Tenant shall have one exclusively
assigned parking space (fourth space from back entry of Suite A). Building parking assignments are strictly enforced, and cooperation
with other Tenants is required. Any use of the assigned parking space by clients, associates and friends and family of the Tenant
shall be closely monitored by the Tenant.

 

13. Building Rules.

 

Tenant will comply with the rules of the Building adopted and
altered by Landlord from time to time and will cause all of its agents, employees, invitees and visitors to do so; all changes
to such rules will be sent by Landlord to Tenant in writing. There shall be no whining.

 

14. Damage and Destruction.

 

Subject to Section 8 A. above, if the Leased Premises or any
part thereof or any appurtenance thereto is so damaged by fire, casualty or structural defects that the same cannot be used for
Tenant’s purposes, then Tenant shall have the right within ninety (90) days following damage to elect by notice to Landlord
to terminate this Lease as of the date of such damage. In the event of minor damage to any part of the Leased Premises, and if
such damage does not render the Leased Premises unusable for Tenant’s purposes, Landlord shall promptly repair such damage
at the cost of the Landlord. In making the repairs called for in this paragraph, Landlord shall not be liable for any delays resulting
from strikes, governmental restrictions, inability to obtain necessary materials or labor or other matters which are beyond the
reasonable control of Landlord. Tenant shall be relieved from paying rent and other charges during any portion of the Lease term
that the Leased Premises are inoperable or unfit for occupancy, or use, in whole or in part, for Tenant’s purposes. Rentals
and other charges paid in advance for any such periods shall be credited on the next ensuing payments, if any, but if no further
payments are to be made, any such advance payments shall be refunded to Tenant. The provisions of this paragraph extend not only
to the matters aforesaid, but also to any occurrence which is beyond Tenant’s reasonable control and which renders the Leased
Premises, or any appurtenance thereto, inoperable or unfit for occupancy or use, in whole or in part, for Tenant’s purposes.

 

15. Default.

 

If default shall at any time be made by Tenant in the payment
of rent when due to Landlord as herein provided, and if said default shall continue for fifteen (15) days after written notice
thereof shall have been given to Tenant by Landlord, or if default shall be made in any of the other covenants or conditions to
be kept, observed and performed by Tenant, and such default shall continue for thirty (30) days after notice thereof in writing
to Tenant by Landlord without correction thereof then having been commenced and thereafter diligently prosecuted, Landlord may
declare the term of this Lease ended and terminated by giving Tenant written notice of such intention, and if possession of the
Leased Premises is not surrendered, Landlord may reenter said premises. Landlord shall have, in addition to the remedy above provided,
any other right or remedy available to Landlord on account of any Tenant default, either in law or equity. Landlord shall use reasonable
efforts to mitigate its damages.

 

16. Quiet Possession.

 

Landlord shall provide Tenant with Quiet Possession in accordance
with the laws New Mexico.

 

17. Condemnation.

 

If any legally, constituted authority condemns the Building
or such part thereof which shall make the Leased Premises unsuitable for leasing, this Lease shall cease when the public authority
takes possession, and Landlord and Ten ant shall account for rental as of that date. Such termination shall be without prejudice
to the rights of either party to recover compensation from the condemning authority for any loss or damage caused by the condemnation.
Neither party shall have any rights in or to any award made to the other by the condemning authority.

 

18. Subordination.

 

    	 

    	 

    

Tenant accepts this Lease subject and subordinate to any mortgage,
deed of trust or other lien presently existing or hereafter arising upon the Leased Premises, or upon the Building and to any renewals,
refinancing and extensions thereof, but Tenant agrees that any such mortgagee shall have the right at any time to subordinate such
mortgage, deed of trust or other lien to this Lease on such terms and subject to such conditions as such mortgagee may deem appropriate
in its discretion. Landlord is hereby irrevocably vested with full power and authority to subordinate this Lease to any mortgage,
deed of trust or other lien now existing or hereafter placed upon the Leased Premises of the Building, and Tenant agrees upon demand
to execute such further instruments subordinating this Lease or attorning to the holder of any such liens as Landlord may request.
In the event that Tenant should fail to execute any instrument of subordination herein require d to be executed by Tenant promptly
as requested, Tenant hereby irrevocably constitutes Landlord as its attorney-in-fact to execute such instrument in Tenant’s
name, place and stead, it being agreed that such power is one coupled with an interest. Tenant agrees that it will from time to
time upon request by Landlord execute and deliver to such persons as Landlord shall request a statement in recordable form certifying
that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force
and effect as so modified), stating the dates to which rent and other charges payable under this Lease have been paid, stating
that Landlord is not in default hereunder (or if Tenant alleges a default stating the nature of such alleged default) and further
stating such other matters as Landlord shall reasonably require.

 

19. Security Deposit.

 

The Security Deposit shall be held by Landlord without liability
for interest and as security for the performance by Tenant of Tenant’s covenants and obligations under this Lease, it being
expressly understood that the Security Deposit shall not be considered an advance payment of rental or a measure of Landlord’s
damages in case of default by Tenant. Unless otherwise provided by mandatory non-waivable law or regulation, Landlord may commingle
the Security Deposit with Landlord’s other funds. Landlord may, from time to time, without prejudice to any other remedy,
use the Security Deposit to the extent necessary to make good any arrearages of rent or to satisfy any other covenant or obligation
of Tenant hereunder. Following any such application of the Security Deposit, Tenant shall pay to Landlord on demand the amount
so applied in order to restore the Security Deposit to its original amount. If Tenant is not in default at the termination of this
Lease, the balance of the Security Deposit remaining after any such application shall be returned by Landlord to Tenant. If Landlord
transfers its interest in the Premises during the term of this Lease, Landlord may assign the Security Deposit to the transferee
and thereafter shall have no further liability for the return of such Security Deposit.

 

20. Notice.

 

Any notice required or permitted under this Lease shall be deemed
sufficiently given or served if sent by United States certified mail, return receipt requested, addressed as follows:

 

If to Landlord to:

 

Russ Hedrick, Hedrick Group LLC

[Landlord]

P.O Box 2185

Santa Fe, New Mexico 87504-2185 

[Landlord’s Address]

 

If to Tenant to:

 

Mark Cola

[Tenant]

Sigma Labs, Inc.

3900 Paseo Del Sol

Santa Fe, NM 87507

[Tenant’s Address]

 

Landlord and Tenant shall each have the right from time to time
to change the place notice is to be given under this paragraph by written notice thereof to the other party.

 

21. Brokers.

 

    	 

    	 

    

Tenant represents that Tenant was not shown the Premises by
any real estate broker or agent and that Tenant has not otherwise engaged in, any activity which could form the basis for a claim
for real estate commission, brokerage fee, finder’s fee or other similar charge, in connection with this Lease.

 

22. Waiver.

 

No waiver of any default of Landlord or Tenant hereunder shall
be implied from any omission to take any action on account of such default if such default persists or is repeated, and no express
waiver shall affect any default other than the default specified in the express waiver and that only for the time and to the extent
therein stated. One or more waivers by Landlord or Tenant shall not be construed as a waiver of a subsequent breach of the same
covenant, term or condition.

 

23. Memorandum of Lease.

 

The parties hereto contemplate that this Lease should not and
shall not be filed for record, but in lieu thereof, at the request of either party, Landlord and Tenant shall execute a Memorandum
of Lease to be recorded for the purpose of giving record notice of the appropriate provisions of this Lease.

 

24. Headings.

 

The headings used in this Lease are for convenience of the parties
only and shall not be considered in interpreting the meaning of any provision of this Lease.

 

25. Successors.

 

The provisions of this Lease shall extend to and be binding
upon Landlord and Tenant and their respective legal representatives, successors and assigns.

 

26. Consent.

 

Landlord shall not unreasonably withhold or delay its consent
with respect to any matter for which Landlord’s consent is required or desirable under this Lease.

 

27. Performance.

 

If there is a default with respect to any of Landlord’s
covenants, warranties or representations under this Lease, and if the default continues more than fifteen (15) days after notice
in writing from Tenant to Landlord specifying the default, Tenant may, at its option and without affecting any other remedy hereunder,
cure such default and deduct the cost thereof from the next accruing installment or installments of rent payable hereunder until
Tenant shall have been fully reimbursed for such expenditures, together with interest thereon at a rate equal to the lesser of
twelve percent (12%) per annum or the then highest lawful rate. If this Lease terminates prior to Tenant’s receiving full
reimbursement, Landlord shall pay the unreimbursed balance plus accrued interest to Tenant on demand.

 

28. Compliance with Law.

 

Tenant shall comply with all laws, orders, ordinances and other
public requirements now or hereafter pertaining to Tenant’s use of the Leased Premises. Landlord shall comply with all laws,
orders, ordinances and other public requirements now or hereafter affecting the Leased Premises.

 

29. Final Agreement.

 

This Agreement terminates and supersedes all prior understandings
or agreements on the subject matter hereof. This Agreement may be modified only by a further writing that is duly executed by both
parties.

 

30. Governing Law.

 

    	 

    	 

    

This Agreement shall be governed, construed and interpreted
by, through and under the Laws of the State of New Mexico.

 

IN WITNESS WHEREOF, the parties have executed this Lease as
of the day and year first above written.

 

 

 

/s/ Russ Hedrick_______________

Russ Hedrick, Landlord

 

 

 

/s/ Mark Cola_________________

Mark Cola

President

Sigma Labs, Inc.

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