Exhibit 10.4
Execution Version
STOCKHOLDERS AGREEMENT
among
IRVINE SENSORS CORPORATION
COSTA BRAVA PARTNERSHIP III L.P.
and
THE GRIFFIN FUND LP
Dated as of December 23, 2010

 

 

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TABLE OF CONTENTS

              Page  
 
       
1. EFFECTIVENESS
    1  
 
       
1.1. Closing
    1  
 
       
2. RIGHT OF PARTICIPATION
    1  
 
       
2.1. Right of Participation
    2  
2.1.1. Offer
    2  
2.1.2. Exercise
    2  
2.1.3. Certain Legal Requirements
    3  
2.1.4. Further Assurances
    3  
2.1.5. Expenses
    3  
2.1.6. Issuance Process
    4  
2.1.7. Closing
    4  
2.2. Excluded Transactions
    4  
 
       
3. REGISTRATION RIGHTS
    5  
 
       
3.1. Demand Registration Rights for Investors
    5  
3.1.1. General
    5  
3.1.2. Form
    6  
3.1.3. Payment of Expenses
    6  
3.1.4. Additional Procedures
    6  
3.2. Piggyback Registration Rights
    7  
3.2.1. Piggyback Registration
    7  
3.2.2. Payment of Expenses
    8  
3.2.3. Additional Procedures
    8  
3.2.4. Registration Statement Form
    8  
3.3. Certain Other Provisions
    8  
3.3.1. Underwriter’s Cutback
    8  
3.3.2. Other Actions
    10  
3.3.3. Selection of Underwriters and Counsel
    11  
3.3.4. Lock-Up
    11  

 

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TABLE OF CONTENTS
continued

              Page  
 
       
3.3.5. Other Agreements
    11  
3.3.6. Other Registration-Related Matters
    11  
3.4. Indemnification and Contribution
    12  
3.4.1. Indemnities of the Company
    12  
3.4.2. Indemnities to the Company
    14  
3.4.3. Contribution
    14  
3.4.4. Limitation on Liability of Holders of Registrable Securities
    15  
3.4.5. Indemnification Procedures
    15  
3.4.6. Non-Exclusivity
    15  
 
       
4. COVENANTS
    16  
 
       
4.1. Reporting Requirements; Access to Records
    16  
4.2. Integration
    16  
4.3. Securities Laws Disclosure; Publicity
    16  
4.4. Reservation of Common Stock
    17  
4.5. Relisting of Common Stock
    17  
4.6. Filings
    17  
4.7. Financings of the Company
    17  
4.8. Stockholders Meeting
    18  
4.9. Expenses for Board Meetings
    18  
4.11. Key Man Insurance
    18  
4.12. Information
    18  
4.13. Budget
    19  
4.14. Confidentiality
    19  
4.15. Other Business Opportunities
    20  
 
       
5. REMEDIES
    20  
 
       
5.1. Generally
    20  
5.2 1933 Act Legends
    20  
5.3. Stop Transfer Instruction
    20  
5.4. Termination of 1933 Act Legend
    21  

 

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TABLE OF CONTENTS
continued

              Page  
 
       
6. AMENDMENT, TERMINATION, ETC.
    21  
 
       
6.1. Oral Modifications
    21  
6.2. Written Modifications
    21  
6.3. Effect of Termination
    21  
 
       
7. DEFINITIONS
    21  
 
       
7.1. Certain Matters of Construction
    21  
7.2. Definitions
    21  
 
       
8. MISCELLANEOUS
    25  
 
       
8.1. Authority; Effect
    25  
8.2. Notices
    26  
8.3. Binding Effect, Etc.
    27  
8.4. Descriptive Headings
    27  
8.5. Counterparts
    27  
8.6. Severability
    27  
8.7. No Recourse
    28  
 
       
9. GOVERNING LAW
    28  
 
       
9.1. Governing Law
    28  
9.2. Consent to Jurisdiction
    28  
9.3. WAIVER OF JURY TRIAL
    29  
9.4. Exercise of Rights and Remedies
    29  

 

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IRVINE SENSORS CORPORATION
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (the “Agreement”) is made as of December 23, 2010 by
and among:

  (i)   Irvine Sensors Corporation, a Delaware corporation (the “Company”);

  (ii)   Costa Brava Partnership III L.P., a Delaware limited partnership
(“Costa Brava”)

  (iii)   The Griffin Fund LP, a Delaware limited liability partnership
(“Griffin”) (Griffin and Costa Brava are sometimes collectively referred to as
the “Investors”);

  (iv)   such other Persons who from time to time become party hereto by
executing a counterpart signature page hereof in the form of Exhibit A hereto or
such other form as may be designated by the Board of Directors (the “Other
Investors,” and together with the Investors, the “Stockholders”)

Capitalized terms used herein but not defined herein have the meanings set forth
in the Securities Purchase Agreement, among the Company and the Investors, dated
as of the date hereof (the “Purchase Agreement”).
RECITALS
WHEREAS, on the date hereof, the Investors and the Company entered into the
Purchase Agreement whereby the Investors purchased shares of Common Stock and
Notes, and committed to purchase Milestone Notes upon the fulfillment of certain
Milestone Conditions.
WHEREAS, the parties believe that it is in the best interests of the Company and
the Stockholders to set forth their agreements on certain matters.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
covenants and agreements of the parties hereto, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. EFFECTIVENESS.
1.1. Closing. This Agreement shall become effective upon consummation of the
Initial Closing as defined in the Purchase Agreement (the “Closing”).
2. RIGHT OF PARTICIPATION. The Company shall not issue or sell any shares of any
of its capital stock or any securities convertible into or exchangeable for any
shares of its capital stock, issue or grant any Options or Warrants for the
purchase of, or enter into any agreements providing for the issuance (contingent
or otherwise) of, any of its capital stock or any stock or securities
convertible into or exchangeable for any shares of its capital stock (each an
“Issuance” of “Subject Securities”) without first complying with this Section 2.

 

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2.1. Right of Participation.
2.1.1. Offer. Not fewer than fifteen days prior to the consummation of an
Issuance, a notice (the “Participation Notice”) shall be furnished by the
Company to each Investor. The Participation Notice shall include:
(a) (i) the amount and kind of Subject Securities to be included in the
Issuance, (ii) the number of Equivalent Shares represented by such Subject
Securities (if applicable), (iii) the percentage of the total number of
Equivalent Shares outstanding as of immediately prior to giving effect to such
Issuance which the number of Equivalent Shares held by such Investor constitutes
(the “Participation Portion”), (iv) the maximum and minimum price (including, if
applicable, the maximum and minimum Price Per Equivalent Share) per unit of the
Subject Securities; (v) the material terms and conditions of the Issuance; and
(vi) the anticipated date of the Issuance of the Subject Securities.
(b) An offer by the Company to issue, at the option of each Investor, to such
Investor, such portion of the Subject Securities to be included in the Issuance
as may be requested by such Investor (not in any event to exceed the Investor’s
Participation Portion of the total amount of Subject Securities to be included
in the Issuance), on the same economic terms and conditions, with respect to
each unit of Subject Securities issued to the Investor, as each of the other
prospective subscribers for the Issuance (the “Prospective Subscribers”) shall
be issued units of the Subject Securities.
2.1.2. Exercise.
2.1.2.1. General. Each Investor desiring to accept the offer contained in the
Participation Notice shall send a written commitment to the Company within ten
days after receipt of the Participation Notice specifying the amount of Subject
Securities (not in any event to exceed the Investor’s Participation Portion of
the total amount of Subject Securities to be included in the Issuance) which
such Investor desires to be issued (each a “Participating Investor”). Each
Investor who has not so accepted such offer shall be deemed to have waived all
of its rights with respect to the Issuance. The Company shall thereafter be free
to issue Subject Securities in the Issuance to any Participating Investor or
Prospective Subscriber, upon the same terms as set forth in the Participation
Notice, without any further obligation to such non-accepting Investor. If, prior
to consummation, the terms of such proposed Issuance shall change, it shall be
necessary for a separate Participation Notice to be furnished, and the terms and
provisions of this Section 2.1 separately complied with, in order to consummate
such Issuance pursuant to this Section 2.1 provided, however, that in the case
of such a separate Participation Notice, the applicable period to which
reference is made in the first sentence of this Section 2.1.2.1 shall be five
business days.

 

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2.1.2.2. Irrevocable Acceptance. The acceptance of each Participating Investor
shall be irrevocable except as provided herein, and each such Participating
Investor shall be bound and obligated to acquire in the Issuance on the same
terms and conditions, with respect to each unit of Subject Securities issued, as
the other Prospective Subscribers, such amount of Subject Securities as such
Participating Investor shall have specified in such Participating Investor’s
written commitment.
2.1.2.3. Time Limitation. If at the end of the 180th day following the date of
the effectiveness of the Participation Notice the Company has not completed the
Issuance, each Participating Investor shall be released from its obligations
under the written commitment, the Participation Notice shall be null and void,
and it shall be necessary for a separate Participation Notice to be furnished,
and the terms and provisions of this Section 2.1 separately complied with, in
order to consummate such Issuance pursuant to this Section 2.1.
2.1.3. Certain Legal Requirements. In the event that the participation in the
Issuance by a holder of Shares as a Participating Investor would require under
applicable law the registration or qualification of any Subject Securities or
any other securities contemplated to be issued in such Issuance or of any Person
as a broker or dealer or agent with respect to such securities, such Investor
shall not have the right to participate in the Issuance. Without limiting the
generality of the foregoing, it is understood and agreed that the Company shall
not be under any obligation to effect a registration of such securities under
the Securities Act or similar state statutes.
2.1.4. Further Assurances. Each Participating Investor shall take or cause to be
taken all such reasonable actions as may be necessary or reasonably desirable in
order expeditiously to consummate each Issuance pursuant to this Section 2.1 and
any related transactions, including executing, acknowledging and delivering
consents, assignments, waivers and other documents or instruments; filing
applications, reports, returns, filings and other documents or instruments with
governmental authorities; and otherwise cooperating with the Company and the
other Prospective Subscribers. Without limiting the generality of the foregoing,
each such Participating Investor agrees to execute and deliver such subscription
and other agreements specified by the Company to which the other Prospective
Subscribers will be party.
2.1.5. Expenses. All reasonable costs and expenses incurred by the Investors in
connection with any proposed Issuance of Subject Securities (whether or not
consummated), including all attorney’s fees and charges, all accounting fees and
charges and all finders, brokerage or investment banking fees, charges or
commissions, shall be paid by the Company. The reasonable fees and expenses of a
single legal counsel representing the Investors in connection with such proposed
Issuance of Subject Securities (whether or not consummated) shall be paid by the
Company.

 

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2.1.6. Issuance Process. The Company shall, in its sole discretion, decide
whether or not to pursue, consummate, postpone or abandon any proposed Issuance
of Subject Securities. The Company shall not have any liability to any Investor
arising from, relating to or in connection with the pursuit, consummation,
postponement, abandonment or terms and conditions of any proposed Issuance of
Subject Securities except to the extent the Company shall have failed to comply
with the provisions of this Section 2. The rights of each Participating Investor
under this Section 2 are subject to any similar existing rights held by any
other Persons.
2.1.7. Closing. The closing of an Issuance pursuant to Section 2.1 shall take
place at such time and place as the Company shall specify by notice to each
Participating Investor. At the Closing of any Issuance under this Section 2.1.7,
each Participating Investor shall be delivered the notes, certificates or other
instruments evidencing the Subject Securities to be issued to such Participating
Investor registered in the name of such Participating Investor or his designated
nominee, free and clear of any liens or encumbrances (other than restrictions
under applicable securities laws), with any transfer tax stamps affixed, against
delivery by such Participating Investor of the applicable consideration.
2.2. Excluded Transactions. Notwithstanding the foregoing, the preceding
provisions of this Section 2 shall not apply to:
(a) Any Issuance of shares of Common Stock or Options to purchase Common Stock
to officers, employees, directors or consultants of the Company or its
subsidiaries, in connection with the recipient’s employment, consulting or
similar arrangements with the Company or any of its subsidiaries; provided,
however, that such Issuance is pursuant to an employee incentive plan of the
Company or has otherwise been approved by the Board of Directors;
(b) Any Issuance of shares of Common Stock, Options or other Convertible
Securities in connection with any business combination or acquisition
transaction by the Company or any of its subsidiaries; provided, however, that
such Issuance has been approved by the Board of Directors;
(c) Any Issuance of shares of Common Stock upon the exercise, exchange or
conversion of any Options or other Convertible Securities outstanding on the
date hereof;
(d) Any Issuance of Common Stock pursuant to any Public Offering;
(e) Any Issuance of Common Stock to strategic partners, lenders, equipment
lessors or other similar sources; provided, however, that such Issuance has been
approved by the Board of Directors; and
(f) The Issuance of Common Stock and Notes at the Initial Closing and the
Issuance of Milestone Notes at the Milestone Closing pursuant to the Purchase
Agreement (and the Issuance of Common Stock upon conversion of such Notes and
Milestone Notes.)

 

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3. REGISTRATION RIGHTS. The Company will perform and comply, and cause each of
its subsidiaries to perform and comply, with such of the following provisions as
are applicable to it. Each Investor will perform and comply with such of the
following provisions as are applicable to each Investor.
3.1. Demand Registration Rights for Investors.
3.1.1. General. One or more Investors holding Shares representing at least 25%
of the total amount of Shares then outstanding (the “Initiating Investors”), by
notice to the Company specifying the intended method or methods of disposition,
may request that the Company effect the registration under the Securities Act
for a Public Offering (including by means of a shelf registration pursuant to
Rule 415 under the Securities Act if so requested by the Initiating Investors
and the Company is so eligible) of all or a specified part of the Registrable
Securities held by such Initiating Investors (for purposes of this Agreement
“Registrable Investor Securities” shall mean Registrable Securities held by the
Investors) unless limited to a lesser amount pursuant to SEC rules and
regulations. The Company will then use its best efforts to (i) effect the
registration under the Securities Act of the Registrable Securities which the
Company has been requested to register by such Initiating Investors (and is
permitted to register pursuant to SEC rules and regulations) together with all
other Registrable Securities which the Company has been requested to register
(and is permitted to register pursuant to SEC rules and regulations) pursuant to
Section 3.2 or by other holders of Registrable Investor Securities by notice
delivered to the Company within 20 days after the Company has given the notice
required by Section 3.2.1 (which request shall specify the intended method of
disposition of such Registrable Securities), all to the extent requisite to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities which the Company has been so requested
to register (and is permitted to register pursuant to SEC rules and regulations,
and (ii) if requested by the Initiating Investors, obtain acceleration of the
effective date of the registration statement relating to such registration;
provided, however, that the Company shall not be obligated to take any action to
effect any such registration pursuant to this Section 3.1.1:
(a) Within 180 days immediately following the effective date of any registration
statement pertaining to an underwritten public offering of securities of the
Company for its own account (other than a Rule 145 Transaction, or a
registration relating solely to employee benefit plans);
(b) On any form other than Form S-3 (or any successor form) if the Company has
previously effected three or more registrations of Registrable Securities under
this Section 3.1.1 on any form other than Form S-3 (or any successor form);
provided, however, that no registrations of Registrable Securities which shall
not have become and remained effective for at least 90 days or such longer
period as specified in such request (or such shorter period in which all
Registrable Securities included in such registration were sold thereunder) in
accordance with the provisions of this Section 3 shall be included in the
calculation of numbers of registrations contemplated by this clause (b).

 

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3.1.2. Form. Except as otherwise provided above, each registration requested
pursuant to Section 3.1.1 shall be effected by the filing of a registration
statement on Form S-1 (or any other form which includes substantially the same
information as would be required to be included in a registration statement on
such form as currently constituted), unless the use of a different form has been
agreed to in writing by holders of at least a majority of the Registrable
Investor Securities to be included in the proposed registration statement in
question (the “Majority Registration Investors”); provided that if any
registration requested pursuant to this Section 3.1 is proposed to be effected
on Form S-3 (or any successor or similar short-form registration statement) and
is in connection with an underwritten offering, and if the managing underwriter
shall advise the Company in writing that, in its opinion, it is of material
importance to the success of such proposed offering to include in such
registration statement information not required to be included pursuant to such
form, then the Company will supplement such registration statement as reasonably
requested by such managing underwriter; provided, further, that in such event
such registration shall be deemed not to be pursuant to Form S-3 for purposes of
Section 3.1.1(b).
3.1.3. Payment of Expenses. The Company shall pay all reasonable expenses of any
Investor incurred in connection with each registration of Registrable Securities
requested pursuant to this Section 3.1, other than underwriting discount and
commission, if any, and applicable transfer taxes, if any; provided, however,
that the Company shall only be required to pay the reasonable attorneys’ fees
and expenses of a single legal counsel to all the Investors incurred in
connection with each registration of Registerable Securities requested pursuant
to this Section 3.1.
3.1.4. Additional Procedures. In the case of a registration pursuant to
Section 3.1 hereof, whenever the Majority Registration Investors shall request
that such registration shall be effected pursuant to an underwritten offering,
the Company shall include such information in the written notices to holders of
Registrable Securities referred to in Section 3.2. In such event, the right of
any holder of Registrable Securities to have securities owned by such holder
included in such registration pursuant to Section 3.1 shall be conditioned upon
such holder’s participation in such underwriting and the inclusion of such
holder’s Registrable Securities in the underwriting (unless otherwise mutually
agreed upon by the Majority Registration Investors and such holder). If
requested by such underwriters, the Company together with the holders of
Registrable Securities proposing to distribute their securities through such
underwriting will enter into an underwriting agreement with such underwriters
for such offering containing such representations and warranties by the Company
and such holders and such other terms and provisions as are customarily
contained in underwriting agreements with respect to secondary distributions,
including customary indemnity and contribution provisions (subject, in each
case, to the limitations on such liabilities set forth in this Agreement).

 

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3.2. Piggyback Registration Rights.
3.2.1. Piggyback Registration.
3.2.1.1. General. Each time the Company proposes to register any shares of
Common Stock under the Securities Act on a form which would permit registration
of Registrable Securities for sale to the public, for its own account and/or for
the account of an Investor (pursuant to Section 3.1 or otherwise) for sale in a
Public Offering, the Company will give notice to all holders of Registrable
Securities of its intention to do so. Any such holder may, by written response
delivered to the Company within 20 days after the effectiveness of such notice,
request that all or a specified part of the Registrable Securities held by such
holder be included in such registration. The Company thereupon will use its
reasonable efforts to cause to be included in such registration under the
Securities Act all shares of Registrable Securities which the Company has been
so requested to register by such holders (and is permitted to register pursuant
to SEC rules and regulations), to the extent required to permit the disposition
(in accordance with the methods to be used by the Company or, pursuant to
Section 3.1, other holders of shares of Common Stock in such Public Offering) of
the Registrable Securities to be so registered; provided that (i) if, at any
time after giving written notice of its intention to register any securities,
the Company shall determine for any reason not to proceed with the proposed
registration of the securities to be sold by it, the Company may, at its
election, give written notice of such determination to each holder of
Registrable Securities requesting to be included in the Company’s registration
and, thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay the reasonable expenses of a single legal counsel pursuant to
Section 3.2.2), and (ii) if such registration involves an underwritten offering,
all holders requesting to be included in the Company’s registration must sell
their Registrable Securities to the underwriters selected by the Company on the
same terms and conditions as apply to the Company (with such differences as may
be customary or appropriate in combined primary and secondary offerings) or, in
the case of a registration initiated pursuant to Section 3.1.1, the Initiating
Investors. No registration of Registrable Securities effected under this
Section 3.2 shall relieve the Company of any of its obligations to effect
registrations of Registrable Securities pursuant to Section 3.1 hereof.
3.2.1.2. Excluded Transactions. The Company shall not be obligated to effect any
registration of Registrable Securities under this Section 3.2 incidental to the
registration of any of its securities in connection with:
(a) Any Public Offering relating to employee benefit plans or dividend
reinvestment plans; or
(b) Any Public Offering relating to the acquisition or merger after the date
hereof by the Company or any of its subsidiaries of or with any other
businesses.

 

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3.2.2. Payment of Expenses. The Company shall pay all reasonable expenses of a
single legal counsel representing any and all holders of Registrable Securities
requesting registration under Section 3.2 incurred in connection with each
registration of Registrable Securities requested pursuant to this Section 3.2.
3.2.3. Additional Procedures. Holders of Registrable Securities participating in
any Public Offering pursuant to this Section 3.2 shall take all such actions and
execute all such documents and instruments that are reasonably requested by the
Company to effect the sale of their Registrable Securities in such Public
Offering, including being parties to the underwriting agreement entered into by
the Company and any other selling shareholders in connection therewith and being
liable in respect of the representations and warranties and the other agreements
(including customary selling stockholder representations, warranties,
indemnifications and “lock-up” agreements) for the benefit of the underwriters;
provided, however, that (a) with respect to individual representations,
warranties, indemnities and agreements of sellers of Registrable Securities in
such Public Offering, the aggregate amount of such liability shall not exceed
such holder’s net proceeds from such offering and (b) to the extent selling
stockholders give further representations, warranties and indemnities, then with
respect to all other representations, warranties and indemnities of sellers of
shares in such Public Offering, the aggregate amount of such liability shall not
exceed the lesser of (i) such holder’s pro rata portion of any such liability,
in accordance with such holder’s portion of the total number of Registrable
Securities included in the offering or (ii) such holder’s net proceeds from such
offering.
3.2.4. Registration Statement Form. The Company shall select the registration
statement form for any registration pursuant to this Section 3.2 (other than a
registration that is also pursuant to Section 3.1); provided that if any
registration requested pursuant to this Section 3.2 is proposed to be effected
on Form S-3 (or any successor form) and is in connection with an underwritten
offering, and if the managing underwriter shall advise the Company in writing
that, in its opinion, it is of material importance to the success of such
proposed offering to include in such registration statement information not
required to be included pursuant to such form, then the Company will supplement
such registration statement as reasonably requested by such managing
underwriter.
3.3. Certain Other Provisions.
3.3.1. Underwriter’s Cutback.
3.3.1.1. In connection with any registration of shares, the underwriter may
determine that marketing factors (including an adverse effect on the per share
offering price) require a limitation of the number of shares to be underwritten.
Notwithstanding any contrary provision of this Section 3 and subject to the
terms of this Section 3.3.1, the underwriter may limit the number of shares
which would otherwise be included in such registration by excluding any or all
Registrable Securities from such registration (it being understood that, if the
registration in question involves a registration for sale of

 

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securities for the Company’s own account, the number of shares which the Company
seeks to have registered in such registration shall not be subject to exclusion,
in whole or in part, under this Section 3.3.1). Upon receipt of notice from the
underwriter of the need to reduce the number of shares to be included in the
registration, the Company shall advise all holders of the Company’s securities
that would otherwise be registered and underwritten pursuant hereto, and the
number of shares of such securities, including Registrable Securities, that may
be included in the registration shall be allocated in the following manner,
unless the underwriter shall determine that marketing factors require a
different allocation: shares, other than Registrable Securities, requested to be
included in such registration by shareholders shall be excluded; and, if a
limitation on the number of shares is still required, the number of Registrable
Securities that may be included in such registration shall be allocated among
the holders thereof in proportion, as nearly as practicable, as follows:
(a) There shall be first allocated to each such holder requesting that its
Registrable Securities be registered in such registration a number of such
shares to be included in such registration equal to the lesser of (A) the number
of such shares of Registrable Securities requested to be registered by such
holder, and (B) a number of such shares equal to such holder’s Pro Rata Portion;
(b) The balance, if any, not allocated pursuant to clause (a) above shall be
allocated to those holders requesting that their Registrable Securities be
registered in such registration which requested to register a number of such
shares in excess of such holder’s Pro Rata Portion pro rata to each such holder
based upon the number of Registrable Securities held by such holder; and
(c) The balance, if any, not allocated pursuant to clause (b) above shall be
allocated to shares, other than Registrable Securities, requested to be included
in such registration by other stockholders.
For purposes of any underwriter cutback, all Common Stock held by any holder of
Registrable Securities shall also include any Common Stock held by the partners,
retired partners, shareholders or Affiliates of such holder, or the estates and
family members of any such holder or such partners and retired partners, any
trusts for the benefit of any of the foregoing Persons and, at the election of
such holder or such partners, retired partners, trusts or Affiliates, any
Charitable Organization to which any of the foregoing shall have contributed
Common Stock prior to the execution of the underwriting agreement in connection
with such underwritten offering, and such holder and other Persons shall be
deemed to be a single selling holder, and any pro rata reduction with respect to
such selling holder shall be based upon the aggregate amount of Common Stock
owned by all entities and individuals included in such selling holder, as
defined in this sentence. No securities

 

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excluded from the underwriting by reason of the underwriter’s marketing
limitation shall be included in such registration. Upon delivery of a written
request that Registrable Securities be included in the underwriting pursuant to
Section 3.1.1 or 3.2.1.1, the holder thereof may not thereafter elect to
withdraw therefrom without the written consent the Company; provided that, if
the managing underwriter of any underwritten offering shall advise the holders
participating in a registration pursuant to Section 3.1 that the Registrable
Securities covered by the registration statement cannot be sold in such offering
within a price range acceptable to the Initiating Investors, then the Initiating
Investors shall have the right to notify the Company that they have determined
that the registration statement be abandoned or withdrawn, in which event the
Company shall abandon or withdraw such registration statement.
3.3.1.2. Notwithstanding Section 3.3.1.1, if the registration was initiated by
the Initiating Investors, the Registrable Securities that may be included in the
registration shall be allocated in the following manner: (1) first, to the
Investors, and if limitation is still required, the number of Registrable
Securities requested to be included by each Investor shall be allocated among
the Investors requesting to include Registrable Securities pro rata based on the
Registrable Securities held by each such holder of Registrable Securities,
(2) second to all other holders of Registrable Securities requesting to include
Registrable Securities in such registration statement based on the pro rata
percentage of Registrable Securities held by such Stockholders and (3) third, to
the Company.
3.3.2. Other Actions. If and in each case when the Company is required to use
its best efforts to effect a registration of any Registrable Securities as
provided in this Section 3, the Company shall take appropriate and customary
actions in furtherance thereof, including: (a) promptly filing with the
Commission a registration statement and using reasonable efforts to cause such
registration statement to become effective, (b) preparing and filing with the
Commission such amendments and supplements to such registration statements and
the prospectus used in connection therewith as may be required to comply with
the Securities Act and to keep such registration statement effective for a
period not to exceed 90 days from the date of effectiveness or such earlier time
as the Registrable Securities covered by such registration statement shall have
been disposed of in accordance with the intended method of distribution therefor
or the expiration of the time when a prospectus relating to such registration is
required to be delivered under the Securities Act, (c) use its best efforts to
register or qualify such Registrable Securities under the state securities or
“blue sky” laws of such jurisdictions as the sellers shall reasonably request;
provided, however, that the Company shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified or to subject itself to taxation in
respect of doing business in any jurisdiction in which it would not otherwise be
so subject; and (d) otherwise cooperate reasonably with, and take such customary
actions as may reasonably be requested by the holders of Registrable Securities
in connection with, such registration.

 

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3.3.3. Selection of Underwriters and Counsel. The underwriters and legal counsel
to be retained in connection with any Public Offering shall be selected by the
Board of Directors or, in the case of an offering following a request therefor
under Section 3.1, the Initiating Investors.
3.3.4. Lock-Up. Without the prior written consent of the underwriters managing
any Public Offering, for a period beginning seven days immediately preceding and
ending on the 90th day following the effective date of the registration
statement used in connection with such offering, no holder of Shares (whether or
not a selling shareholder pursuant to such registration statement) shall
(a) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise Transfer, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for such Common Stock or (b) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of Common Stock, whether any such transaction
described in clause (a) or (b) above is to be settled by delivery of such Common
Stock or such other securities, in cash or otherwise; provided, however, that
the foregoing restrictions shall not apply to (i) transactions relating to
shares of Common Stock or other securities acquired in open market transactions,
or (ii) Transfers to Permitted Transferees of such holder in accordance with the
terms of this Agreement.
3.3.5. Other Agreements. The Company covenants and agrees that, so long as any
Person holds any Registrable Securities in respect of which any registration
rights provided for in Section 3.1 of this Agreement remain in effect, the
Company will not, directly or indirectly, grant to any Person or agree to or
otherwise become obligated in respect of (i) rights of registration in the
nature or substantially in the nature of those set forth in Section 3.1 of this
Agreement that would have priority over the Registrable Securities with respect
to the inclusion of such securities in any registration or (ii) demand
registration rights exercisable prior to such time as the Investors can first
exercise their rights under Section 3.1.
3.3.6. Other Registration-Related Matters.
(a) The Company may require any holder that is registering Registrable
Securities pursuant to Section 3.1 or 3.2 to furnish to the Company in writing
such information regarding such Person and its Affiliates and pertinent to the
disclosure requirements relating to the registration and the distribution of the
Registrable Securities which are included in such Public Offering as the Company
may from time to time reasonably request in writing.

 

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(b) Each holder of Registrable Securities agrees that, upon receipt of any
notice from the Company that the prospectus included in the registration
statement pertaining to the sale of such holder’s Registrable Securities, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
such holder will forthwith discontinue disposition of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until its receipt of copies of the amended or supplemented prospectus from the
Company. If so directed by the Company, each holder of Registrable Securities
will, subject to applicable law, deliver to the Company or destroy all copies,
other than permanent file copies then in their possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice. In the event the Company gives any such notice, the period for which the
Company will be required to keep the registration statement effective will be
extended by the number of days during the period from and including the date of
the giving of such notice to and including the date when each seller of
Registrable Securities covered by such registration statement has received the
copies of the supplemented or amended prospectus.
(c) Each holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or of any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the registration statement for offering or
sale in any jurisdiction, or of the institution or threatening of any
proceedings for any of such purposes, such holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until the lifting of such stop order, other
order or suspension or the termination of such proceedings and, if so directed
by the Company, each holder of Registrable Securities will, subject to
applicable law, deliver to the Company or destroy all copies, other than
permanent file copies then in its possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice. In the
event the Company gives any such notice, the period for which the Company will
be required to keep the registration statement effective will be extended by the
number of days during the period from and including the date of the giving of
such notice to and including the date when such stop order, other order or
suspension is lifted or such proceedings are terminated.
3.4. Indemnification and Contribution.
3.4.1. Indemnities of the Company. In the event of any registration of any
Registrable Securities or other debt or equity securities of the Company or any
of its subsidiaries under the Securities Act pursuant to this Section 3 or
otherwise, and in connection with any registration statement or any other
disclosure document produced by or on behalf of the Company or any of its
subsidiaries including reports required and other documents filed under the
Exchange Act, and other documents pursuant to

 

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which any debt or equity securities of the Company or any of its subsidiaries
are sold (whether or not for the account of the Company or its subsidiaries),
the Company will, and hereby does, and will cause each of its subsidiaries,
jointly and severally, to indemnify and hold harmless each holder of Registrable
Securities, any Person who is or might be deemed to be a controlling Person of
the Company or any of its subsidiaries within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, their respective direct and
indirect general and limited partners, advisory board members, directors,
officers, trustees, managers, members and shareholders, and each other Person,
if any, who controls any such holder or any controlling Person within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(each such Person being referred to herein as a “Covered Person”), against any
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof), joint or several, to which such Covered Person may be or become
subject under the Securities Act, the Exchange Act, any other securities or
other law of any jurisdiction, the common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained or incorporated by reference in
any registration statement under the Securities Act, any preliminary prospectus
or final prospectus included therein, or any related summary prospectus, or any
amendment or supplement thereto, or any document incorporated by reference
therein, or any other such disclosure document (including reports and other
documents filed under the Exchange Act and any document incorporated by
reference therein) or other document or report, (ii) any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or (iii) any violation
or alleged violation by the Company or any of its subsidiaries of any federal,
state, foreign or common law rule or regulation applicable to the Company or any
of its subsidiaries and relating to action or inaction in connection with any
such registration, disclosure document or other document or report, and will
reimburse such Covered Person for any legal or any other expenses incurred by it
in connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding; provided, however, that neither the Company nor
any of its subsidiaries shall be liable to any Covered Person in any such case
to the extent that any such loss, claim, damage, liability, action or proceeding
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement, incorporated document or other such disclosure document or other
document or report, in reliance upon and in conformity with written information
furnished to the Company or to any of its subsidiaries through an instrument
duly executed by such Covered Person specifically stating that it is for use in
the preparation thereof. The indemnities of the Company and of its subsidiaries
contained in this Section 3.4.1 shall remain in full force and effect regardless
of any investigation made by or on behalf of such Covered Person and shall
survive any transfer of securities and any termination of this Agreement.

 

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3.4.2. Indemnities to the Company. Subject to Section 3.4.4, the Company and any
of its subsidiaries may require, as a condition to including any securities in
any registration statement filed pursuant to this Section 3, that the Company
and any of its subsidiaries shall have received an undertaking satisfactory to
it from the prospective seller of such securities, to indemnify and hold
harmless the Company and any of its subsidiaries, each director of the Company
or any of its subsidiaries, each officer of the Company or any of its
subsidiaries who shall sign such registration statement and each other Person
(other than such seller), if any, who controls the Company and any of its
subsidiaries within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act and each other prospective seller of such
securities and prospective underwriter with respect to any statement in or
omission from such registration statement, any preliminary prospectus, final
prospectus or summary prospectus included therein, or any amendment or
supplement thereto, or any other disclosure document (including reports and
other documents filed under the Exchange Act or any document incorporated
therein) or other document or report, if such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company or any of its subsidiaries through an instrument executed by such seller
specifically stating that it is for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement, incorporated document or other document or report. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company, any of its subsidiaries or any such
director, officer or controlling Person and shall survive any transfer of
securities and any termination of this Agreement.
3.4.3. Contribution. If the indemnification provided for in Sections 3.4.1 or
4.4.2 hereof is unavailable to a party that would have been entitled to
indemnification pursuant to the foregoing provisions of this Section 3.4 for
reasons other than described in the proviso to Section 3.4.1 (an “Indemnitee”)
in respect of any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to therein, then each party that would
have been an indemnifying party thereunder shall, subject to Section 3.4.4 and
in lieu of indemnifying such Indemnitee, contribute to the amount paid or
payable by such Indemnitee as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative fault of such indemnifying party on the
one hand and such Indemnitee on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof). The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by such indemnifying party or
such Indemnitee and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties agree that it would not be just or equitable if contribution
pursuant to this Section 3.4.3 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the preceding sentence. The amount paid or payable
by a contributing party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 3.4.3 shall include any reasonable legal or other expenses
reasonably incurred by such Indemnitee in connection with investigating or
defending any such action or claim. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.

 

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3.4.4. Limitation on Liability of Holders of Registrable Securities. The
liability of each holder of Registrable Securities in respect of any
indemnification or contribution obligation of such holder arising under this
Section 3.4 shall not in any event exceed an amount equal to the net proceeds to
such holder (after deduction of all underwriters’ discounts and commissions)
from the relevant disposition of the Registrable Securities.
3.4.5. Indemnification Procedures. Promptly after receipt by an Indemnitee of
written notice of the commencement of any action or proceeding with respect to
which a claim for indemnification may be made pursuant to this Section 3.4, such
Indemnitee will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action or proceeding; provided that the failure of the Indemnitee to give
notice as provided herein shall not relieve the indemnifying party of its
obligations under this Section 3.4, except to the extent that the indemnifying
party is materially prejudiced by such failure to give notice. In case any such
action or proceeding is brought against an Indemnitee, the indemnifying party
will be entitled to participate in and to assume the defense thereof (at its
expense), jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
Indemnitee, and after notice from the indemnifying party to such Indemnitee of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such Indemnitee for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation and shall have no liability for any settlement
made by the Indemnitee without the consent of the indemnifying party, such
consent not to be unreasonably withheld. Notwithstanding the foregoing, if an
Indemnitee reasonably objects to such assumption of defense on the grounds that
a conflict of interest between such Indemnitee and the indemnifying parties may
exist in respect of such action or proceeding or the indemnifying party does not
assume the defense of any such action or proceeding within a reasonable time
after notice of commencement, or does not vigorously defend, the Indemnitee
shall have the right to assume or continue its own defense and the indemnifying
party shall, subject to Section 3.4.4, be liable for any reasonable expenses
therefor, but in no event will bear the expenses for more than one firm of
counsel for all Indemnitees in each jurisdiction who shall be approved by the
Board of Directors in the disposition in respect of which such indemnification
is sought. No indemnifying party will settle any action or proceeding or consent
to the entry of any judgment without the prior written consent of the
Indemnitee, unless such settlement or judgment (i) includes as an unconditional
term thereof the giving by the claimant or plaintiff of a release to such
Indemnitee from all liability in respect of such action or proceeding and
(ii) does not involve the imposition of equitable remedies or the imposition of
any obligations on such Indemnitee and does not otherwise adversely affect such
Indemnitee, other than as a result of the imposition of financial obligations
for which such Indemnitee will be indemnified hereunder.
3.4.6. Non-Exclusivity. The obligations of the parties under this Section 3.4
will be in addition to any liability, without duplication, which any party may
otherwise have to any other party.

 

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4. COVENANTS.
4.1. Reporting Requirements; Access to Records. As long as an Investor holds
Common Stock representing at least five percent (5%) of the issued and
outstanding shares of Common Stock on a fully diluted basis, and the Company
remains subject to the requirements of the Exchange Act, the Company covenants
to timely file (or obtain extensions in respect thereof and file within the
applicable grace period) with the Commission all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. The Company
further agrees to make available to an Investor as long as such Investor holds
Common Stock representing at least five percent (5%) of the issued and
outstanding shares of Common Stock on a fully diluted basis, (i) such
information as the Company is required to file or furnish to the Commission,
within the time periods required by applicable law and regulations for filing or
furnishing such information with the Commission, (ii) such information as it
furnishes to its other stockholders as a class, and (iii) reasonable access
during normal business hours, upon reasonable advance notice, to all of the
books, records and properties of the Company and its Subsidiaries, if any, and
to all officers and employees of the Company and its Subsidiaries (which access
shall be given to such Investor’s respective officers, employees, advisors,
counsel and other authorized representatives); provided, in all cases, that such
Investor signs a non-disclosure agreement satisfactory to the Company prior to
receiving such information or access and provided further that no such
information or access is required to be given if it would (a) cause a waiver
under the attorney-client privilege or attorney work product doctrines,
(b) breach any government security clearances or (c) cause disclosure of any
trade secrets or similar confidential proprietary information of the Company.
4.2. Integration. The Company shall not sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Common Stock in a manner that would require the registration under the
Securities Act of the sale of the Common Stock to the Purchasers or that would
be integrated with the offer or sale of the Common Stock for purposes of the
rules and regulations of any Trading Market on which any securities of the
Company are listed or designated such that it would require stockholder approval
prior to the closing of such other transaction unless stockholder approval is
obtained before the closing of such subsequent transaction.
4.3. Securities Laws Disclosure; Publicity. The Company shall, no later than the
fourth business day following the date of the Initial Closing and the Milestone
Closing, file with the Commission a Current Report on Form 8-K, disclosing the
material terms of the transactions contemplated by the Purchase Agreement and,
at the Initial Closing, file the Transaction Documents as exhibits thereto. The
Company and the Investors shall consult with each other in issuing any other
press releases with respect to the

 

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transactions contemplated thereby, and neither the Company nor each Investor
shall issue any such press release or otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
any Investor or without the prior consent of the Investors with respect to any
press release of the Company, which consent shall not unreasonably be withheld
or delayed, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication.
4.4. Reservation of Common Stock. Immediately upon stockholder approval of the
Amendment to the Certificate of Incorporation contemplated by Section 6.2(a) of
the Purchase Agreement, the Company shall reserve and the Company shall continue
to reserve and keep available at all times, free of preemptive rights, a
sufficient number of shares of Common Stock for the purpose of enabling the
Company to issue shares of Common Stock upon conversion of the Notes sold in the
Initial Closing. As of the Milestone Closing Date, the Company shall have
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue shares of Common Stock upon
conversion of the Milestone Notes sold in the Milestone Closing.
4.5. Relisting of Common Stock. At the request of the Purchasers, the Company
hereby agrees to use commercially reasonable efforts to relist its Common Stock
on a Trading Market other than the OTC Bulletin Board provided that the Company
then meets the listing standards required by such Trading Market. The Company
will take all commercially reasonable action necessary to regain the listing and
trading of its Common Stock on a Trading Market other than the OTC Bulletin
Board and, once the Common Stock has been relisted, will comply in all material
respects with the Company’s reporting, filing and other obligations under the
bylaws or rules of such Trading Market.
4.6. Filings. The Company shall make all filings with the Commission and its
Trading Markets on which any securities of the Company are listed or designated
as required by the transactions contemplated by the Purchase Agreement. If at
any time an Investor determines that a filing under the Hart Scott-Rodino
Antitrust Improvements Act of 1976, as amended, is desirable or necessary and
makes such a request of the Company, the Company will cooperate in making such
filing and will pay for any and all filing fees and out-of-pocket expenses
incurred by such Investor in connection with any such filing.
4.7. Financings of the Company. Subject to existing rights held by other
parties, each Investor may participate in any financings completed on a private
placement basis by the Company on a pro rata basis with their investment at the
Initial Closing for the first three years following the Initial Closing (the
“Right of Participation in Financings”). During such period, the Investors shall
have the right to purchase up to 80% of any subsequent financings on a pro rata
basis with their initial investment at the Initial Closing. Bank loans and
Excluded Securities are excluded from the Right of Participation in Financings.

 

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4.8. Stockholders Meeting. As promptly as possible after the Initial Closing,
the Company shall take, in accordance with applicable law and the Charter
Documents, all action necessary to: (i) convene a meeting of the Company’s
stockholders to consider and vote upon the adoption of the Amendment to the
Certificate of Incorporation and the approval of the 2010 Omnibus Incentive
Plan; and (ii) obtain the approval of holders of a majority of the outstanding
shares entitled to vote on such matter at the stockholders’ meeting, duly called
and held for such purpose.
4.9. Expenses for Board Meetings. The Company shall reimburse the Costa Brava
Directors and the Griffin Directors for costs and expenses for attending board
meetings.
4.10. Key Man Insurance. The Company shall obtain key man life insurance in the
amount of $2,000,000 for John Carson, on terms reasonably acceptable to the
Investors, and shall maintain such insurance at all times.
4.11. Information. The Company will deliver to each Investor, as long as the
Investor owns at least twenty percent (20%) of the issued and outstanding shares
of Common Stock on a fully diluted basis, the following:
(a) Monthly Reports. As soon as available and in any event within 30 days after
the end of each fiscal month of the Company, a consolidated balance sheet of the
Company as at the end of such period and the related consolidated statements of
operation and cash flows for such period and for the portion of the Company’s
fiscal year ended on the last day of such month, in each case setting forth in
comparative form the corresponding figures for the same period and portion of
the next preceding fiscal year and of the current Budget, all in reasonable
detail and certified by the Company’s chief executive officer or chief financial
officer to have been prepared in accordance with generally accepted accounting
principles, except for the omission of footnotes and subject to year-end and
audit adjustments.
(b) Annual Reports. As soon as available and in any event within 90 days after
the end of each fiscal year of the Company, consolidated and consolidating
balance sheets of the Company as at the end of such year and the related
consolidated and consolidating statements of income, stockholders’ equity and
cash flows for such year, in each case setting forth in comparative form the
corresponding figures for the next preceding fiscal year and of the current
Budget, all in reasonable detail and accompanied by the report on such
consolidated financial statements of an independent registered public accountant
selected by the Board of Directors.
(c) Audit Reports. As promptly as practicable and in any event within five days
after receipt thereof, copies of all reports (including, without limitation,
audit reports and so-called management letters) or written comments submitted to
the Company by independent certified public accountants or other management
consultants in connection with each annual, interim or special audit in respect
of the financial statements or the accounts or the financial or accounting
systems or controls of the Company made by any such accountants or other
management consultants.

 

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4.12. Budget. At least 30 days prior to the beginning of each fiscal year of the
Company, the Company will prepare and submit to the Board of Directors for
approval a reasonably detailed budget and operating plan with accompanying
financial projections, including monthly and annual balance sheet projections,
covenant compliance calculations for all outstanding and projected indebtedness,
cash flow projections, profit and loss projections for the Company, and capital
expenditure projections, by general category, all in reasonable detail
(collectively, as so approved, the “Budget”).
4.13. Confidentiality. Each Stockholder agrees that it will keep confidential
and will not disclose, divulge or use for any purpose, other than to monitor its
investment in the Company and its subsidiaries, any confidential information
obtained from the Company, unless such confidential information (a) is known or
becomes known to the public in general (other than as a result of a breach of
this Section 4.14 by such Stockholder or its Affiliates), (b) is or has been
independently developed or conceived by such Stockholder without use of the
Company’s confidential information or (c) is or has been made known or disclosed
to such Stockholder by a third party (other than an Affiliate of such
Stockholder) without a breach of any obligation of confidentiality such third
party may have to the Company that is known to such Stockholder; provided,
however, that a Stockholder may disclose confidential information (v) to its
attorneys, accountants, consultants, and other professionals to the extent
necessary to obtain their services in connection with monitoring its investment
in the Company provided that such Stockholder informs such person that such
information is confidential and directs such person to maintain the
confidentiality of such information, (w) to any prospective purchaser of any
Shares from such Stockholder as long as such prospective purchaser agrees to be
bound by the provisions of this Section 4.14 as if a Stockholder, (x) to any
Affiliate, partner, member or related investment fund of such Stockholder and
their respective directors, employees and consultants, in each case in the
ordinary course of business provided that such Stockholder informs such person
that such information is confidential and directs such person to maintain the
confidentiality of such information, (y) as may be reasonably determined by such
Stockholder to be necessary in connection with such Stockholder’s enforcement of
its rights in connection with this Agreement or its investment in the Company
and its subsidiaries provided that such Stockholder informs such person that
such information is confidential and directs such person to maintain the
confidentiality of such information or (z) as may otherwise be required by law
or legal, judicial or regulatory process, provided that such Stockholder takes
reasonable steps to minimize the extent of any required disclosure described in
this clause (z); and provided, further, however, that the acts and omissions of
any Person to whom such Stockholder may disclose confidential information
pursuant to clauses (v) through (x) of the preceding proviso shall be
attributable to such Stockholder for purposes of determining such Stockholder’s
compliance with this Section 4.14. Each of the parties hereto acknowledge that
the Investors or any of their Affiliates may review the business plans and
related proprietary information of many enterprises, including enterprises which
may have products or services which compete directly or indirectly with those of
the Company, and may trade in the securities of such enterprises. Nothing in
this Section 4.14 shall preclude or in any way restrict the Investors or their
Affiliates from investing or participating in any particular enterprise, or
trading in the securities thereof, whether or not such enterprise has products
or services that compete with those of the Company.

 

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4.14. Other Business Opportunities. To the fullest extent permitted by law, the
doctrine of corporate opportunity and any analogous doctrine shall not apply to
any Investor, any member of the Board of Directors, any officer of the Company
or any other Indemnitee in each case who is not a full-time employee of the
Company or any of its operating subsidiaries. The Company renounces any interest
or expectancy of the Company in, or in being offered an opportunity to
participate in, business opportunities that are from time to time presented to
any Investor, any member of the Board of Directors, any officer of the Company
or any other Indemnitee in each case who is not a full-time employee of the
Company or any of its operating subsidiaries. Each Investor, member of the Board
of Directors, officer of the Company or other Indemnitee in each case who is not
a full-time employee of the Company or any of its operating subsidiaries who
acquires knowledge of a potential transaction, agreement, arrangement or other
matter that may be an opportunity for the Company shall not (i) have any duty to
communicate or offer such opportunity to the Company and (ii) shall not be
liable to the Company or any of its subsidiaries or to the shareholders of the
Company or any of its subsidiaries because such Investor, member of the Board of
Directors, officer of the Company or other Indemnitee in each case who is not a
full-time employee of the Company or any of its operating subsidiaries pursues
or acquires for, or directs such opportunity to, itself or another Person or
does not communicate such opportunity or information to the Company.
5. REMEDIES.
5.1. Generally. The Company and each Stockholder shall have all remedies
available at law, in equity or otherwise in the event of any breach or violation
of this Agreement or any default hereunder by the Company or any Stockholder.
The parties acknowledge and agree that in the event of any breach of this
Agreement, in addition to any other remedies which may be available, each of the
parties hereto shall be entitled to specific performance of the obligations of
the other parties hereto and, in addition, to such other equitable remedies
(including preliminary or temporary relief) as may be appropriate in the
circumstances.
5.2. 1933 Act Legends. Each certificate representing Shares shall have the
following legend endorsed conspicuously thereupon:
“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A OF SUCH ACT.”
5.3. Stop Transfer Instruction. The Company will instruct any transfer agent not
to register the Transfer of any Shares until the conditions specified in the
foregoing legend is satisfied.

 

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5.4. Termination of 1933 Act Legend. The requirement imposed by Section 5.2
hereof shall cease and terminate as to any particular Shares (a) when, in the
opinion of counsel reasonably acceptable to the Company, such legend is no
longer required in order to assure compliance by the Company with the Securities
Act or (b) when such Shares have been effectively registered under the
Securities Act or transferred pursuant to Rule 144. Wherever (x) such
requirement shall cease and terminate as to any Shares or (y) such Shares shall
be transferable under paragraph (b)(1) of Rule 144, the holder thereof shall be
entitled to receive from the Company, without expense, new certificates not
bearing the legend set forth in Section 5.2 hereof.
6. AMENDMENT, TERMINATION, ETC.
6.1. Oral Modifications. This Agreement may not be orally amended, modified,
extended or terminated, nor shall any oral waiver of any of its terms be
effective.
6.2. Written Modifications. This Agreement may be amended, modified, extended or
terminated, and the provisions hereof may be waived, only by an agreement in
writing signed by the parties to this agreement.
6.3. Effect of Termination. No termination under this Agreement shall relieve
any Person of liability for breach prior to termination.
7. DEFINITIONS. For purposes of this Agreement:
7.1. Certain Matters of Construction. In addition to the definitions referred to
or set forth below in this Section 7:
(a) The words “hereof”, “herein”, “hereunder” and words of similar import shall
refer to this Agreement as a whole and not to any particular section or
provision of this Agreement, and reference to a particular section of this
Agreement shall include all subsections thereof;
(b) The word “including” shall mean including, without limitation;
(c) Definitions shall be equally applicable to both nouns and verbs and the
singular and plural forms of the terms defined; and
(d) The masculine, feminine and neuter genders shall each include the other.
7.2. Definitions. The following terms shall have the following meanings:
“Affiliate” shall mean, with respect to any specified Person, any other Person
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person (for the
purposes of this definition, “control” (including, with correlative meanings,
the terms “controlling,” “controlled by” and “under common control with”), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise).

 

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“Agreement” shall have the meaning set forth in the Preamble.
“Approved Stock Plan” means any employee benefit plan, contract or arrangement
which has been approved by the Board of Directors, pursuant to which the
Company’s securities may be issued to any employee, consultant, officer or
director for services provided to the Company.
“Board of Directors” shall mean the Board of Directors of the Company.
“Budget” shall have the meaning set forth in Section 4.3
“business day” shall mean any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by law to be closed in the City of New
York.
“Charitable Organization” shall mean a charitable organization as described by
Section 501(c)(3) of the Internal Revenue Code of 1986, as in effect from time
to time.
“Closing” shall have the meaning set forth in Section 1.1.
“Commission” shall mean the Securities and Exchange Commission.
“Common Stock” shall mean the common stock of the Company (and any shares of
capital stock of the Company issued or issuable with respect to such common
stock by way of a stock dividend or distribution payable thereon or stock split,
reverse stock split, recapitalization, reclassification, reorganization,
exchange, subdivision or combination thereof).
“Company” shall have the meaning set forth in the Preamble.
“Convertible Securities” shall mean any evidence of indebtedness, shares of
stock (other than Common Stock) or other securities (other than Options and
Warrants) which are directly or indirectly convertible into or exchangeable or
exercisable for shares of Common Stock.
“Costa Brava” shall have the meaning set forth in the Preamble.
“Covered Person” shall have the meaning set forth in Section 3.4.1.
“Equivalent Shares” shall mean, at any date of determination, (a) as to any
outstanding shares of Common Stock, such number of shares of Common Stock and
(b) as to any outstanding Options, Warrants or Convertible Securities which
constitute Shares, the maximum number of shares of Common Stock for which or
into which such Options, Warrants or Convertible Securities may at the time be
exercised, converted or exchanged (or which will become exercisable, convertible
or exchangeable on or prior to, or by reason of, the transaction or circumstance
in connection with which the number of Equivalent Shares is to be determined);
but excluding any shares of restricted stock that are not then vested or will
not become vested on or prior to, or by reason of, the transaction or
circumstance in connection with which the number of Equivalent Shares is to be
determined.

 

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“Exchange Act” shall mean the Securities Exchange Act of 1934, as in effect from
time to time.
“Excluded Securities” means any Company Common Stock or other securities or debt
obligations issued or issuable: (i) in connection with any Approved Stock Plan;
(ii) upon conversion of the Notes or Milestone Notes; (iii) pursuant to a bona
fide firm commitment underwritten public offering with an institution that
regularly underwrites as a principal part of its business public offerings on a
firm commitment basis which generates gross proceeds to the Company in excess of
$15,000,000 (other than an “at-the-market offering” as defined in Rule 415(a)(4)
under the 1933 Act and “equity lines”); (iv) in connection with corporate
partnering or licensing transactions or in connection with a strategic merger,
acquisition, consolidation or purchase of substantially all of the securities or
assets of a corporation or other entity, on terms approved by the Board of
Directors and the primary purpose of which is not to raise equity capital;
(v) upon exercise or conversion of any options, warrants or convertible
securities of the Company which are outstanding on the day immediately preceding
the date herewith, provided that the terms of such options, warrants or
convertible securities are not amended, modified or changed on or after the date
herewith to decrease the price, increase the number of shares issuable
thereunder or extend the term of such options or convertible securities; and
(vi) in the Bridge Closings.
“Griffin” shall have the meaning set forth in the Preamble.
“Indemnitee” shall have the meaning set forth in Section 3.4.3.
“Initiating Investors” shall have the meaning set forth in Section 3.1.1.
“Investors” shall have the meaning set forth in the Preamble.
“Issuance” shall have the meaning set forth in Section 2.
“Majority Registration Investors” shall have the meaning set forth in
Section 3.1.2.
“No Recourse Persons” shall have the meaning set forth in Section 8.7.
“Options” shall mean any options to subscribe for, purchase or otherwise
directly acquire Common Stock.
“Other Investors” shall have the meaning set forth in the Preamble.
“Participating Investor” shall have the meaning set forth in Section 2.1.2.1.
“Participation Notice” shall have the meaning set forth in Section 2.1.1.

 

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“Participation Portion” shall have the meaning set forth in Section 2.1.1.
“Person” shall mean any individual, partnership, corporation, company,
association, trust, joint venture, limited liability company, unincorporated
organization, entity or division, or any government, governmental department or
agency or political subdivision thereof.
“Price Per Equivalent Share” shall mean the Board’s good faith determination of
the price per Equivalent Share of any Convertible Securities or Options which
are the subject of an Issuance pursuant to Section 2 hereof.
“Pro Rata Portion” shall mean, with respect to each holder of Registrable
Securities requesting that such shares be registered in such registration
statement pursuant to Sections 3.1.1 and 3.2.1, a number of such shares equal to
the aggregate number of shares of Common Stock to be registered in such
registration (excluding any shares to be registered for the account of the
Company) multiplied by a fraction, the numerator of which is the aggregate
number of Registrable Securities held by such holder, and the denominator of
which is the aggregate number of Registrable Securities held by all holders
requesting that their Registrable Securities be registered in such registration.
“Prospective Subscriber” shall have the meaning set forth in Section 2.1.1.
“Public Offering” shall mean a public offering and sale of Common Stock for cash
pursuant to an effective registration statement under the Securities Act.
“Purchase Agreement” shall have the meaning set forth in the Preamble.
“Registrable Investor Securities” shall have the meaning set forth in
Section 3.1.1.
“Registrable Securities” shall mean (a) all shares of Common Stock, (b) all
shares of Common Stock issuable upon exercise, conversion or exchange of any
Option, Warrant or Convertible Security and (c) all shares of Common Stock
directly or indirectly issued or issuable with respect to the securities
referred to in clauses (a) or (b) above by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization, in each case constituting Shares. As to
any particular Registrable Securities, such shares shall cease to be Registrable
Securities when (w) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, (x) such securities shall have been Transferred pursuant to Rule 144,
(y) subject to the provisions of Section 5.2 hereof, such securities shall have
been otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of them shall not require registration of them under the
Securities Act and such securities may be distributed without volume limitation
or other restrictions on transfer under Rule 144 (including without application
of paragraphs (c), (e) (f) and (h) of Rule 144) or (z) such securities shall
have ceased to be outstanding.
“Right of Participation in Financings” shall have the meaning set forth in
Section 2.1.8.

 

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“Rule 144” shall mean Rule 144 under the Securities Act (or any successor
provision).
“Rule 145 Transaction” shall mean a registration on Form S-4 pursuant to
Rule 145 of the Securities Act (or any successor Form or provision, as
applicable).
“Securities Act” shall mean the Securities Act of 1933, as in effect from time
to time.
“Shares” shall mean (a) all shares of Common Stock, including all shares of
Common Stock issued upon the exercise, conversion or exchange of any Options,
Warrants or Convertible Securities and (b) all Options, Warrants and Convertible
Securities (treating such Options, Warrants and Convertible Securities as a
number of Shares equal to the number of Equivalent Shares represented by such
Options, Warrants and Convertible Securities for all purposes of this Agreement
except as otherwise specifically set forth herein).
“Stockholders” shall have the meaning set forth in the Preamble.
“Subject Securities” shall have the meaning set forth in Section 2.
“Subsidiary” shall mean any corporation, association trust, limited liability
company, partnership, joint venture or other business association or entity
(i) at least 50% of the outstanding voting securities of which are at the time
owned or controlled directly or indirectly by the Company or (ii) with respect
to which the Company possesses, directly or indirectly, the power to direct or
cause the direction of the affairs or management of such Person.
“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the American
Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, the New York Stock Exchange or the OTC Bulletin Board.
“Transfer” shall mean any sale, pledge, assignment, encumbrance or other
transfer or disposition of any Shares to any other Person, whether directly,
indirectly, voluntarily, involuntarily, by operation of law, pursuant to
judicial process or otherwise, and “Transferred”, “Transferee”,
“Transferability”, and “Transferor” shall each have a correlative meaning.
“Warrants” shall mean any warrants to subscribe for, purchase or otherwise
directly acquire Common Stock.
8. MISCELLANEOUS.
8.1. Authority; Effect. Each party hereto represents and warrants to and agrees
with each other party that (a) the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized on behalf of such party and do not violate any agreement or other
instrument applicable to such party or by which its assets are bound and
(b) this Agreement constitutes a legal, valid and binding obligation of such
party, enforceable against such party in accordance with its terms, except to
the extent that the enforcement of the rights and remedies created hereby is
subject to (i) bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting the rights and remedies of creditors generally
and (ii) general principles of equity. This Agreement does not, and shall not be
construed to, give rise to the creation of a partnership among any of the
parties hereto, or to constitute any of such parties members of a joint venture
or other association.

 

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8.2. Notices. Any notices and other communications required or permitted in this
Agreement shall be effective if in writing and (a) delivered personally or
(b) sent (i) by nationally-known, reputable overnight carrier, (ii) by
registered or certified mail, postage prepaid, or (iii) by facsimile, in each
case, addressed as follows:
If to Costa Brava:
Costa Brava Partnership III L.P.
222 Berkeley Street, 17th floor
Boston, MA 02116
Attention: Seth Hamot
Facsimile No.: (617) 267-6785
with a copy to:
Ropes & Gray LLP
One International Place
Boston, MA 02110
Attention: Jeffrey Katz
Facsimile No.: (617) 235-0617
If to Griffin:
The Griffin Fund LP
c/o Griffin Partners, LLC
447 Battery Street, Suite 230
San Francisco, CA 94111
Attention: Chet White
Fax: (415) 986-2214
If to the Company:
Irvine Sensors Corporation
3001 Red hill Avenue
Building 4, Suite 108
Costa Mesa, CA 92626
Attention: John J. Stuart, Jr.
Facsimile No.: (714) 444-8773
with a copy to:
Dorsey & Whitney LLP
38 Technology Drive, Suite 100
Irvine, CA 92618
Attention: Ellen Bancroft, Esq.
Facsimile No: (949) 932-3601

 

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Unless otherwise specified herein, such notices or other communications shall be
deemed effective (a) on the date received, if personally delivered, (b) one
business day after the date sent by nationally-known, reputable overnight
carrier, (c) three business days after the date of deposit with the U.S. Postal
Service, if sent by registered or certified mail, and (d) when receipt is
acknowledged, in the case of facsimile. Each of the parties hereto shall be
entitled to specify a different address by giving notice as aforesaid to each of
the other parties hereto.
8.3. Binding Effect, Etc. Except for restrictions on Transfer of Shares set
forth in other agreements, plans or other documents, this Agreement constitutes
the entire agreement of the parties with respect to its subject matter,
supersedes all prior or contemporaneous oral or written agreements or
discussions with respect to such subject matter, and shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
representatives, successors and assigns. Except as otherwise expressly provided
herein, no Stockholder party hereto may assign any of its respective rights or
delegate any of its respective obligations under this Agreement without the
prior written consent of the other parties hereto, and any attempted assignment
or delegation in violation of the foregoing shall be null and void.
8.4. Descriptive Headings. The descriptive headings of this Agreement are for
convenience of reference only, are not to be considered a part hereof and shall
not be construed to define or limit any of the terms or provisions hereof.
8.5. Counterparts. This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one instrument. A facsimile or other electronic signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original.
8.6. Severability. In the event that any provision hereof would, under
applicable law, be invalid or unenforceable in any respect, such provision shall
be construed by modifying or limiting it so as to be valid and enforceable to
the maximum extent compatible with, and possible under, applicable law and the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the fullest extent possible. The provisions hereof are severable, and
in the event any provision hereof should be held invalid or unenforceable in any
respect, it shall not invalidate, render unenforceable or otherwise affect any
other provision hereof.

 

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8.7. No Recourse. Notwithstanding anything that may be expressed or implied in
this Agreement, the Company and each Investor covenant, agree and acknowledge
that no recourse under this Agreement or any documents or instruments delivered
in connection with this Agreement shall be had against any former, current or
future, direct or indirect director, officer, employee, agent or Affiliate of an
Investor, any former, current or future, direct or indirect holder of any equity
interests or securities of an Investor (whether such holder is a limited or
general partner, member, stockholder or otherwise), any former, current or
future assignee of an Investor or any former, current or future director,
officer, employee, agent, general or limited partner, manager, member,
stockholder, Affiliate, controlling person, representative or assignee of any of
the foregoing (collectively, the “No Recourse Persons”), as such, whether by the
enforcement of any assessment or by any legal or equitable proceeding, or by
virtue of any statute, regulation or other applicable law, it being expressly
agreed and acknowledged that no personal liability whatsoever shall attach to,
be imposed on or otherwise be incurred by any No Recourse Person for any
obligation of any Investor under this Agreement or any documents or instruments
delivered in connection with this Agreement for any claim based on, in respect
of or by reason of such obligations or their creation.
9. GOVERNING LAW.
9.1. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic substantive laws of the State of New York without
giving effect to any choice or conflict of laws provision or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction.
9.2. Consent to Jurisdiction. Each party to this Agreement, by its execution
hereof, (a) hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the State of New York for the purpose of any
action, claim, cause of action or suit (in contract, tort or otherwise),
inquiry, proceeding or investigation arising out of or based upon this Agreement
or relating to the subject matter hereof, (b) hereby waives to the extent not
prohibited by applicable law, and agrees not to assert, and agrees not to allow
any of its subsidiaries to assert, by way of motion, as a defense or otherwise,
in any such action, any claim that it is not subject personally to the
jurisdiction of the above-named courts, that its property is exempt or immune
from attachment or execution, that any such proceeding brought in one of the
above-named courts is improper, or that this Agreement or the subject matter
hereof or thereof may not be enforced in or by such court and (c) hereby agrees
not to commence or maintain any action, claim, cause of action or suit (in
contract, tort or otherwise), inquiry, proceeding or investigation arising out
of or based upon this Agreement or relating to the subject matter hereof or
thereof other than before one of the above-named courts nor to make any motion
or take any other action seeking or intending to cause the transfer or removal
of any such action, claim, cause of action or suit (in contract, tort or
otherwise), inquiry, proceeding or investigation to any court other than one of
the above-named courts whether on the grounds of inconvenient forum or
otherwise. Notwithstanding the foregoing, to the extent that any party hereto is
or becomes a party in any litigation in connection with which it may assert
indemnification rights set forth in this agreement, the court in which such
litigation is being heard shall be deemed to be included in clause (a) above.
Each party hereto hereby consents to service of process in any such proceeding
in any manner permitted by Delaware law, and agrees that service of process by
registered or certified mail, return receipt requested, at its address specified
pursuant to Section 8.2 hereof is reasonably calculated to give actual notice.
Notwithstanding the foregoing in this Section 9.2, a party may commence any
action in a court other than the above-named courts solely for the purpose of
enforcing an order or judgment issued by one of the above-named courts.

 

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9.3. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH
CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT IT WILL NOT
ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY
IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT
(IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING
OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY,
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. EACH PARTY HERETO
ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES HERETO THAT THIS
SECTION 9.3 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THEY ARE RELYING AND
WILL RELY IN ENTERING INTO THIS AGREEMENT. ANY PARTY HERETO MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION 9.3 WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
9.4. Exercise of Rights and Remedies. No delay of or omission in the exercise of
any right, power or remedy accruing to any party as a result of any breach or
default by any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of any similar breach or default occurring later; nor
shall any such delay, omission nor waiver of any single breach or default be
deemed a waiver of any other breach or default occurring before or after that
waiver.
[Signature Pages Follow.]

 

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IN WITNESS WHEREOF, each of the undersigned has duly executed this Agreement (or
caused this Agreement to be executed on its behalf by its officer or
representative thereunto duly authorized) as of the date first above written.

          THE COMPANY:   IRVINE SENSORS CORPORATION
      By:   /s/ John C. Carson       Name:   John C. Carson       Title:  
President & CEO  

Stockholders Agreement

 

 

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          THE INVESTORS:   COSTA BRAVA PARTNERSHIP III L.P.
      By:   Roark, Rearden & Hamot, LLC,         its General Partner           
By:   /s/ Seth W. Hamot       Name:   Seth W. Hamot        Title:   President   
    THE GRIFFIN FUND LP
      By:   Griffin Partners, LLC,         its General Partner            By:  
/s/ Chester White       Name:   Chester White       Title:   Managing Partner  

Stockholders Agreement

 

 

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EXHIBIT A
Counterpart Signature Page
The undersigned hereby agrees to join, become a party to and be bound by, as a
“Stockholder” and a holder of “Registrable Securities”, the Stockholders
Agreement of Irvine Sensors Corporation (the “Company”), entered into as of
December 23, 2010, by and among: (i) the Company; (ii) Costa Brava Partnership
III L.P; and (iii) The Griffin Fund LP, and (iv) certain other holders of the
Company’s outstanding securities, as the same may be in effect from time to
time.

                Name of Stockholder    
 
       
By:
       
 
 
 
(if applicable)    
 
       
By:
       
 
 
 
Name:    
 
  Title:    

Dated:                      ___, 20__
Address for notices: