Item 2.01 Completion of Acquisition
or Disposition of Assets.
On December 21, 2016, LightPath Technologies,
Inc. (the “Company”) completed its previously announced acquisition (the “Closing”) of all of the outstanding
shares of common stock of ISP Optics Corporation (“ISP”) pursuant to the Stock Purchase Agreement, dated as of August
3, 2016 (the “SPA”), by and among the Company, ISP, and Joseph Menaker and Mark Lifshotz (the “ISP Stockholders”).
ISP has one wholly-owned subsidiary, ISP Optics Latvia, SIA, a limited liability company formed under the laws of the Republic
of Latvia (“ISP Lativa”). The Company’s entry into the SPA was previously reported on a Current Report on Form
8-K dated August 3, 2016, as filed with the Security and Exchange Commission on August 8, 2016.
The purchase price paid by LightPath
was approximately $18,000,000, and was paid in a combination of cash (the “Cash Amount”) and a five-year promissory
note in the aggregate principal amount of $6 million in favor of the Sellers (the “Sellers Note”). The Cash Amount
was paid using the net proceeds the Company received as a result of its recent public offering of its Class A common stock and
the proceeds from an acquisition term loan (the “Loan”) from Avidbank (the “Lender”) in the aggregate principal
amount of $5 million.
Pursuant to the Sellers Note, during
the period commencing on December 21, 2016 (the “Issue Date”) and continuing until the fifteen month anniversary of
the Issue Date (the “Initial Period”), interest will accrue on only the principal amount of the Sellers Note in excess
of $2,700,000 at an interest rate equal to ten percent (10%) per annum. After the Initial Period, interest will accrue on the entire
unpaid principal amount of the Sellers Note from time to time outstanding, at an interest rate equal to ten percent (10%) per annum.
Interest is payable semi-annually in arrears. The term of the Sellers Note is five years, and any unpaid interest and principal,
together with any other amounts payable under the Sellers Note, is due and payable on the maturity date. The Company may prepay
the Sellers Note in whole or in part without penalty or premium. If the Company does not pay any amount payable when due, whether
at the maturity date, by acceleration, or otherwise, such overdue amount will bear interest at a rate equal to twelve (12%) per
annum from the date of such non-payment until the Company pays such amount in full.
In addition, upon the occurrence of a
payment default, or any other “event of default,” such as a bankruptcy event or a change of control of the Company,
the entire unpaid and outstanding principal balance of the Sellers Note, together with all accrued and unpaid interest and any
and all other amounts payable under the Sellers Note, will immediately be due and payable.
On December 21, 2016, the Company and
ISP also entered into the Second Amended and Restated Loan and Security Agreement (the “LSA”) with the Lender for the
Loan and a working capital revolving line of credit (the “Revolving Line”). The LSA amends and restates that certain
Loan and Security Agreement between the Company and the Lender dated September 30, 2013, as amended and restated pursuant to that
certain Amended and Restated Loan and Security Agreement dated as of December 23, 2014, and as further amended pursuant to that
certain First Amendment to Amended and Restated Loan and Security Agreement dated as of December 23, 2015.
The Loan is for a five-year term. Pursuant
to the LSA, interest on the Loan accrues starting on December 21, 2016 and is paid monthly for the first six months of the term
of the Loan. Thereafter, both principal and interest is due and payable in fifty-four (54) monthly installments. The Loan bears
interest at a per annum rate equal to two percent (2.0%) above the Prime Rate; provided, however, that at no time shall the applicable
rate be less than five and one-half percent (5.50%) per annum. Prepayment by the Company is permitted; however, the Company must
pay a prepayment fee in an amount equal to (i) 1% of the principal amount of the Loan if prepayment occurs on or prior to December
21, 2017, or (ii) 0.75% of the principal amount of the Loan if such prepayment occurs after December 21, 2017 but on or prior to
December 21, 2018, or (iii) 0.50% of the principal amount of the Loan if such prepayment occurs after December 21, 2018 but on
or prior to December 21, 2019, or (iv) 0.25% of the principal amount of the Loan if such prepayment occurs after December 21, 2019
but on or prior to December 21, 2020.
Pursuant to the LSA, the Lender will,
in its discretion, make loan advances under the Revolving Line to the Company up to a maximum aggregate principal amount outstanding
not to exceed the lesser of (i) One Million Dollars ($1,000,000) or (ii) eighty percent (80%) (the “Maximum Advance Rate”)
of the aggregate balance of the Company’s eligible accounts receivable, as determined by Lender in accordance with the LSA.
The Lender may, in its discretion, elect to not make a requested advance, determine that certain accounts are not eligible accounts,
change the Maximum Advance Rate or apply a lower advance rate to particular accounts and terminate the LSA.
Amounts borrowed under the Revolving
Line may be repaid and re-borrowed at any time prior to December 21, 2017, at which time all amounts shall be immediately due and
payable. The advances under the Revolving Line bear interest, on the outstanding daily balance, at a per annum rate equal to one
percent (1%) above the Prime Rate; provided, however, that at no time shall the applicable rate be less than four and one-half
percent (4.50%) per annum. Interest payments are due and payable on the last business day of each month. Payments received with
respect to accounts upon which advances are made will be applied to the amounts outstanding under the LSA.
The Company’s obligations under
the LSA are secured by a first priority security interest (subject to permitted liens) in cash, US inventory and accounts receivable.
In addition, the Company’s wholly-owned subsidiary, Geltech, Inc. (“Geltech”) has guaranteed the Company’s
obligations under the LSA.
The LSA contains customary covenants,
including, but not limited to: (i) limitations on the disposition of property; (ii) limitations on changing the Company’s
business or permitting a change in control; (iii) limitations on additional indebtedness or encumbrances; (iv) restrictions on
distributions; and (v) limitations on certain investments.
Late payments are subject to a late fee
equal to the lesser of five percent (5%) of the unpaid amount or the maximum amount permitted to be charged under applicable law.
Amounts outstanding during an event of default accrue interest at a rate of five percent (5%) above the interest rate applicable
immediately prior to the occurrence of the event of default. The LSA contains other customary provisions with respect to events
of default, expense reimbursement, and confidentiality.
The foregoing description of the Sellers
Note and LSA does not purport to be complete and is qualified in its entirety by reference to the Sellers Note, LSA, Guaranty,
and Joinder Agreement, copies of which are filed as Exhibit 10.1, Exhibit 10.2, Exhibit 10.3, and Exhibit 10.4, respectively, to
this Current Report on Form 8-K and are incorporated herein by reference.