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Item 1.01
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Entry into a Material Definitive Agreement.
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Note Satisfaction and Securities Purchase
Agreement
On January 16, 2018, LightPath Technologies,
Inc. (the “Company”) entered into a Note Satisfaction and Securities Purchase Agreement (the “Note Satisfaction
Agreement”) with Joseph Menaker and Mark Lifshotz (the “Noteholders”). Pursuant to that certain Stock Purchase
Agreement, dated August 3, 2016 (the “ISP Purchase Agreement”), by and among the Company, the Noteholders, and ISP
Optics Corporation, a New York corporation (“ISP”), the Company purchased from the Noteholders 100% of the issued and
outstanding shares of the capital stock of ISP. At the closing of the transactions contemplated by the ISP Purchase Agreement,
as partial consideration for the shares of ISP, the Company issued to the Noteholders that certain Unsecured Promissory Note, dated
as of December 21, 2016, in the original principal amount of $6,000,000 (the “Note”), which principal payment amount
was subsequently reduced to $5,704,439, as of March 21, 2017, by letter agreement between the Company and the Noteholders.
Pursuant to the Note Satisfaction Agreement,
the Company and the Noteholders agreed to satisfy the Note in full by (i) converting 39.5% of the outstanding principal amount
of the Note into shares of the Company’s Class A common Stock, $0.01 par value per share (the “Common Stock”),
and (ii) paying the remaining 60.5% of the outstanding principal amount of the Note, plus all accrued but unpaid interest, in cash
to the Noteholders. As of January 16, 2018, the outstanding principal amount of the Note was $5,707,183.06, and there was $20,883.22
in accrued but unpaid interest thereon (collectively, the “Note Satisfaction Amount”). Accordingly, the Company paid
approximately $3,453,582 plus all accrued but unpaid interest on the Note, in cash (the “Cash Payment”) and issued
967,208 shares of Common Stock (the “Shares”), which represents the balance of the Note Satisfaction Amount divided
by the Conversion Price (as defined below). The “Conversion Price” equaled $2.33, representing the average closing
bid price of the Common Stock, as reported by Bloomberg for the five (5) trading days preceding January 16, 2018. The Cash Payment
was paid using approximately $600,000 cash on hand and approximately $2.9 million in proceeds from an acquisition term loan (as
discussed below) from Avidbank (the “Lender”). As of January 16, 2018, the Note is deemed satisfied in full and terminated.
The Shares issued to the Noteholders are
exempt from the registration requirements of the Securities Act of 1933, as amended (the “Act”), pursuant to Section
4(a)(2) of the Act (in that the Shares were issued by the Company in a transaction not involving any public offering), and pursuant
to Rule 506 of Regulation D as promulgated by the Securities and Exchange Commission (the “SEC”) under the Act. The
Shares are restricted securities that have not been registered under the Act and may not be offered or sold absent registration
or applicable exemption from the registration requirements.
Registration Rights Agreement
In connection with the Note Satisfaction
Agreement, the Company and the Noteholders also entered into a Registration Rights Agreement dated January 16, 2018, pursuant to
which the Company agreed to file with the SEC by February 15, 2018, and to cause to be declared effective, a registration statement
to register the resale of the Shares issued to partially pay the Note Satisfaction Amount.
Second Amendment to Second Amended and
Restated Loan and Security Agreement
On January 16, 2018, the Company entered
into a Second Amendment to Second Amended and Restated Loan and Security Agreement (the “Second Amendment”) relating
to its previously disclosed acquisition term loan (the “Loan”) and working capital revolving line of credit (the “Revolving
Line”) pursuant to that certain Second Amended and Restated Loan and Security Agreement, dated December 21, 2016 (the “LSA”)
with the Lender. The description of the LSA, the Loan, and the Revolving Line set forth under Items 1.01, 2.01, and 2.03 in the
Company’s Current Report on Form 8-K dated December 21, 2016, and the description of the First Amendment to Second Amended
and Restated Loan and Security Agreement (the “First Amendment”) set forth under Items 1.01 and 2.03 in the Company’s
Current Report on Form 8-K dated December 20, 2017, are incorporated by reference herein.
Pursuant to the Second Amendment, the Lender
paid a single cash advance to the Company in an original principal amount of $7,294,000 (the “Term II Loan”). The proceeds
of the Term II Loan were used to repay all amounts owing with respect to the Loan, with the remainder used to repay the amounts
owing under the Note. As of January 16, 2018, the Loan is deemed satisfied in full and terminated. The Term II Loan is for a five-year
term. Pursuant to the Second Amendment, interest on the Term II Loan accrues starting on January 16, 2018 and both principal and
interest is due and payable in sixty (60) monthly installments beginning on the tenth day of the first month following the date
of the Second Amendment (or February 10, 2018), and continuing on the same day of each month thereafter for so long as the Term
II Loan is outstanding. The Term II 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) 0.75% of the Excess Prepayment Amount
if prepayment occurs on or prior to January 16, 2019, or (ii) 0.5% of the Excess Prepayment Amount if prepayment occurs after January
16, 2019 but on or before January 16, 2020, or (iii) 0.25% of the Excess Prepayment Amount if prepayment occurs after January 16,
2020 but on or prior to January 16, 2021, or (iv) 0.10% of the Excess Prepayment Amount if such prepayment occurs after January
16, 2021 but on or prior to January 16, 2022. For purposes of the Second Amendment, the “Excess Prepayment Amount”
equals the amount of the Term II Loan being prepaid in excess of $2,850,000.
The Second Amendment amends, among other
items, (1) the definition of “Adjusted EBITDA” to provide additional adjustments related to (i) stock-based compensation
expenses, (ii) non-cash expenses (income) related to the change of the fair value of warrant liabilities or the subordinated debt
owed under the Seller Note (as defined in the LSA), (iii) foreign currency translation loss, and (iv) one-time transaction expenses
in connection with the acquisition of ISP (not to exceed $50,000 for the trailing twelve month period ending in December 31, 2017)
and (2) the maturity date of the Revolving Line from March 21, 2018 to December 21, 2018.
The foregoing descriptions of the Note
Satisfaction Agreement, the Registration Rights Agreement, and the Second Amendment are summaries only, and are qualified in their
entirety by reference to the complete text of the Note Satisfaction Agreement, the Registration Rights Agreement, and the Second
Amendment attached hereto as Exhibits 10.1, 10.2, and 10.3.