THE TRANSFER OF THIS SECURITY IS SUBJECT TO RESTRICTIONS CONTAINED HEREIN. THIS
SECURITY HAS BEEN ISSUED IN RELIANCE UPON THE REPRESENTATION OF THIS SECURITY
HOLDER THAT IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARDS THE RESALE OR OTHER DISTRIBUTION THEREOF. THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY
TO COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.”
 
COMMON STOCK PURCHASE WARRANT

 
ISC8 INC.
 
THIS IS TO CERTIFY THAT J.P. Turner Partners, L.P., or registered assigns (the
“Holder”), is entitled, during the Exercise Period (as hereinafter defined), to
purchase from ISC8 Inc., a Delaware corporation (the “Company”), the Warrant
Stock (as hereinafter defined), in whole or in part, at a purchase price of
$0.09 per share, all on and subject to the terms and conditions hereinafter set
forth. This Warrant is part of an offering (the “Offering”) of senior unsecured
convertible notes and common stock, par value $0.01 per share, by the Company
and J.P. Turner & Company, LLC, as placement agent, in accordance with the terms
and conditions set forth in the Company’s Confidential Private Placement
Memorandum, dated April 1, 2013 and as amended or supplemented from time to time
(the “PPM”). Capitalized terms used without definition in this Warrant shall
have the respective meanings ascribed to them in the PPM.
 
1.           Definitions.  As used in this Warrant, the following terms have the
respective meanings set forth below:
 
“Additional Shares of Common Stock” means all shares of Common Stock issued (or,
pursuant to Section 4(c) below, deemed to be issued) by the Company after the
Closing Date, other than (1) the following shares of Common Stock and (2) shares
of Common Stock deemed issued pursuant to the following Options and Convertible
Securities (clauses (1) and (2), collectively, “Exempted Securities”):
 
(i)           shares of Common Stock, Options or Convertible Securities issued
by reason of a dividend, stock split, split-up or other distribution on shares
of Common Stock that is covered by Section 4(a), 4(e) or 4(g);
 
(ii)           any Convertible Securities or Options issued in connection with
the Offering;
 
(iii)           shares of Common Stock or Options issued to employees or
directors of, or consultants or advisors to, the Company or any of its
subsidiaries pursuant to a plan, agreement or arrangement approved by the Board
of Directors of the Company;
 
(iv)           shares of Common Stock or Convertible Securities actually issued
upon the exercise of Options or shares of Common Stock actually issued upon the
conversion or exchange of Convertible Securities, in each case provided such
issuance is pursuant to the terms of such Option or Convertible Security; or
 
(v)           shares of Common Stock, Options or Convertible Securities issued
in connection with bona fide acquisitions of other operating entities or
businesses, the terms of which are approved by the Board of Directors of the
Company.

 
 

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“Affiliate” means any person or entity that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a person or entity, as such terms are used in and construed under Rule 144
under the Securities Act. With respect to a Holder of Warrants, any investment
fund or managed account that is managed on a discretionary basis by the same
investment manager as such Holder will be deemed to be an Affiliate of such
Holder.
 
“Appraised Value” means, in respect of any share of Common Stock on any date
herein specified, the fair saleable value of such share of Common Stock
(determined with giving effect to the discount for (i) a minority interest or
(ii) any lack of liquidity of the Common Stock or to the fact that the Company
may have no class of equity registered under the Exchange Act) as of the last
day of the most recent fiscal month ending prior to such date specified, based
on the value of the Company on a fully-diluted basis, as determined by a
nationally recognized investment banking firm selected by the Company’s Board of
Directors and having no prior relationship with the Company or by such other
financial advisory firm mutually acceptable to the Company and J.P. Turner &
Company, LLC .
 
“Business Day” means any day except Saturday, Sunday and any day which shall be
a legal holiday or a day on which banking institutions in the State of New York
generally are authorized or required by law or other government actions to
close.
 
“Change of Control” means the (i) acquisition by an individual or legal entity
or group (as set forth in Section 13(d) of the Exchange Act) of more than
one-half of the voting rights in the Company; or (ii) sale, conveyance, or other
disposition of all or substantially all of the assets, property or business of
the Company or the merger into or consolidation with any other corporation
(other than a wholly owned subsidiary corporation) or effectuation of any
transaction or series of related transactions where holders of the Company’s
voting securities prior to such transaction or series of transactions fail to
continue to hold at least 50% of the voting power of the Company (or, if other
than the Company, the successor or acquiring entity) immediately following such
transaction.
 
“Closing Date” means April 24, 2013.
 
“Commission” means the Securities and Exchange Commission or any other federal
agency then administering the Securities Act and other federal securities laws.
 
“Common Stock” means (except where the context otherwise indicates) the Common
Stock, $0.01 par value per share, of the Company as constituted on the Closing
Date, and any capital stock into which such Common Stock may thereafter be
changed or converted, and shall also include (i) capital stock of the Company of
any other class (regardless of how denominated) issued to the holders of shares
of Common Stock upon any reclassification thereof which is also not preferred as
to dividends or assets on liquidation over any other class of stock of the
Company and which is not subject to redemption and (ii) shares of common stock
of any successor or acquiring corporation received by or distributed to the
holders of Common Stock of the Company in the circumstances contemplated by
Section 4.
 
“Convertible Securities” means any evidences of indebtedness, shares or other
securities directly or indirectly convertible into or exchangeable or
exercisable for Common Stock, but excluding Options.
 
“Current Market Price” means, in respect of any share of Common Stock on any
date herein specified,
 
(1)           if there shall not then be a public market for the Common Stock,
then the Appraised Value per share of Common Stock at such date, or

 
 

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(2)           if there shall then be a public market for the Common Stock, the
average of the daily market prices for the five (5) consecutive trading days
immediately before such date. The daily market price for each such trading day
shall be (i) the average of the closing bid and ask prices on such day on the
OTC Bulletin Board or principal stock exchange (including Nasdaq) on which such
Common Stock is then listed or admitted to trading, or quoted, as applicable,
(ii) if no sale takes place on such day on the OTC Bulletin Board or any such
exchange, the average of the last reported closing bid and ask prices on such
day as officially quoted on the OTC Bulletin Board or any such exchange
(including Nasdaq), (iii) if the Common Stock is not then listed or admitted to
trading on the OTC Bulletin Board or any stock exchange, the average of the last
reported closing bid and ask prices on such day in the over-the-counter market,
as furnished by any recognized firm engaged in the business of reporting such
prices, or (v) if there is no such firm, as furnished by any member of FINRA
selected mutually by the holder of this Warrant and the Company or, if they
cannot agree upon such selection, as selected by two such members of FINRA, one
of which shall be selected by the holder of this Warrant and one of which shall
be selected by the Company.
 
“Current Warrant Price” means, in respect of a share of Common Stock at any date
herein specified, the price at which a share of Common Stock may be purchased
pursuant to this Warrant on such date. Unless and until the Current Warrant
Price is adjusted pursuant to the terms herein, the initial Current Warrant
Price shall be $0.09 per share of Common Stock.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
 
“Exercise Period” means the period during which this Warrant is exercisable
pursuant to Section 2.
 
“Expiration Date” means April 24, 2018, subject to modification as provided
herein.
 
“FINRA” means the Financial Industry Regulatory Authority, Inc., or any
successor corporation thereto.
 
“Options” means rights, options or warrants to subscribe for, purchase or
otherwise acquire Common Stock or Convertible Securities.
 
“Other Property” has the meaning set forth in Section 4.
 
“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, incorporated organization, association, corporation, limited liability
company, institution, public benefit corporation, entity or government (whether
federal, state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department thereof).
 
“Securities Act” means the Securities Act of 1933, as amended, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
 
“Trading Day” or “trading day” means any day on which the primary market on
which shares of Common Stock are listed is open for trading.
 
“Transfer” or “transfer” means any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
 
“Warrants” means this Warrant and all warrants issued upon transfer, division or
combination of, or in substitution for, any thereof. All Warrants shall at all
times be identical as to terms and conditions and date, except as to the number
of shares of Common Stock for which they may be exercised.
 
“Warrant Price” means an amount equal to (i) the number of shares of Common
Stock being purchased upon exercise of this Warrant pursuant to Section 2(a),
multiplied by (ii) the Current Warrant Price.
 
“Warrant Stock” means up to _____ shares of Common Stock to be purchased upon
the exercise hereof, subject to adjustment as provided herein.

 
 

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2.           Exercise of Warrant.
 
(a)           Manner of Exercise.  From and after the first Business Day
following that date which is six (6) months after the Closing Date, and until
5:00 P.M., New York time, on the Expiration Date (the “Exercise Period”), the
Holder may exercise this Warrant, on any Business Day, for all or any part of
the number of shares of Warrant Stock purchasable hereunder, subject to the
terms and conditions of this Warrant.
 
In order to exercise this Warrant, in whole or in part, the Holder shall either
exercise the Conversion Right set forth in Section 2(c) below or deliver to the
Company at its principal executive office or at the office or agency designated
by the Company as provided herein, (i) a written notice of Holder’s election to
exercise this Warrant, which notice shall specify the number of shares of
Warrant Stock to be purchased, (ii) payment of the Warrant Price as provided
herein, and (iii) this Warrant. Such notice shall be irrevocable and
substantially in the form of the subscription form appearing at the end of this
Warrant as Exhibit A, duly executed by the Holder or its agent or attorney. Upon
receipt thereof, the Company shall, as promptly as reasonably practicable,
execute or cause to be executed and deliver or cause to be delivered to the
Holder a certificate or certificates representing the aggregate number of full
shares of Warrant Stock issuable upon such exercise, together with cash in lieu
of any fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be, to the extent possible, in such denomination
or denominations as the Holder shall reasonably request in the notice and shall
be registered in the name of the Holder or if permitted pursuant to the terms of
this Warrant such other name as shall be designated in the notice. This Warrant
shall be deemed to have been exercised and such certificate or certificates
shall be deemed to have been issued, and the Holder or any other Person so
designated to be named therein shall be deemed to have become a Holder of record
of such shares for all purposes, as of the date when the notice, together with
the payment of the Warrant Price and this Warrant, is received by the Company as
described above. If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or certificates representing
Warrant Stock, deliver to the Holder a new Warrant evidencing the rights of the
Holder to purchase the unpurchased shares of Common Stock called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant, or at the request of the Holder, appropriate notation may be made on
this Warrant and the same returned to the Holder.
 
Payment of the Warrant Price may be made at the option of the Holder by: (i)
certified or official bank check payable to the order of the Company, or (ii)
wire transfer of immediately available funds to the account of the Company; or
(iii) in accordance with Section 2(c) below. All shares of Common Stock issuable
upon the exercise of this Warrant pursuant to the terms hereof shall be validly
issued and, upon payment of the Warrant Price, shall be fully paid and
nonassessable and not subject to any preemptive rights.
 
(b)           Fractional Shares.  The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay an amount in cash equal to
the Current Market Price per share of Common Stock on the date of exercise
multiplied by such fraction.
 
(c)           Cashless Exercise.  At any time during the Exercise Period, the
Holder shall have the right to convert this Warrant (the “Conversion Right”)
into Warrant Stock as provided in this Section 2(c). Upon exercise of the
Conversion Right with respect to shares of Warrant Stock (the “Converted Warrant
Shares”), the Company shall deliver to the Holder (without payment by the Holder
of any exercise price or any cash or other consideration) that number of shares
of Warrant Stock computed using the following formula:
 
X = Y (A - B)
 
A
 
Where:                 X =           the number of shares of Warrant Stock to be
delivered to the Holder;
 
Y =           the number of Converted Warrant Shares;
 
A =           the Current Market Price; and
 
B =           the Current Warrant Price (as adjusted on the Conversion Date).

 
 

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No fractional shares shall be issuable upon exercise of the Conversion Right,
and if the number of shares to be issued (determined in accordance with the
foregoing formula) is other than a whole number, the Company shall pay to the
Holder with respect to such fractional shares an amount in cash determined in
accordance with Section 2(b).
 
The Conversion Right may be exercised by the Holder by the surrender of the
Warrant at the principal executive office of the Company together with a written
statement specifying that the Holder thereby intends to exercise the Conversion
Right and indicating the total number of shares under the Warrant that the
Holder is exercising through the Conversion Right. Such conversion shall be
effective upon receipt by the Company of the Warrant together with the aforesaid
written statement, or on such later date as is specified therein (the
“Conversion Date”). Certificates for the shares issuable upon exercise of the
Conversion Right shall be delivered to the Holder promptly following the
Conversion Date and, if applicable, a new warrant evidencing the balance of the
shares remaining subject to the Warrant shall also be delivered to the Holder.
 
3.           Transfer, Division and Combination.
 
(a)           Transfer.  Subject to compliance with any applicable securities
laws and the conditions set forth in Section 3(c) hereof, this Warrant and all
rights hereunder are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company or its designated agent, together
with a written assignment of this Warrant, in form and substance reasonably
satisfactory to the Company, duly executed by the Holder or its agent or
attorney and funds sufficient to pay any transfer taxes payable upon the making
of such transfer. Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be exercised by a
new holder for the purchase of Warrant Shares without having a new Warrant
issued.
 
(b)           Warrant Register.  The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.
 
(c)           Transfer Restrictions.  If, at the time of the surrender of this
Warrant in connection with any transfer of this Warrant, the transfer of this
Warrant shall not be registered pursuant to an effective registration statement
under the Securities Act and under applicable state securities or blue sky laws,
the Company may require, as a condition of allowing such transfer (i) that the
Holder or transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that such transfer may be made without registration under the Securities
Act and under applicable state securities or blue sky laws, (ii) that the holder
or transferee execute and deliver to the Company an investment letter
substantially in form of Exhibit B attached hereto and (iii) that the transferee
be an “accredited investor” as defined in Rule 501(a) promulgated under the
Securities Act; provided, however, that the Holder may transfer at any time all
or a portion of this Warrant to any broker or employee employed by or affiliated
with the Holder in accordance with Section 3(a).
 
(d)           Restrictive Legends.  Each certificate for Warrant Stock initially
issued upon the exercise of this Warrant, and each certificate for Warrant Stock
issued to any subsequent transferee of any such certificate, unless, in each
case, such Warrant Stock is eligible for resale without registration pursuant to
Rule 144 or an effective registration statement under the Securities Act, shall
bear the following legend:

 
 

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“THE TRANSFER OF THIS SECURITY IS SUBJECT TO RESTRICTIONS CONTAINED HEREIN. THIS
SECURITY HAS BEEN ISSUED IN RELIANCE UPON THE REPRESENTATION OF THE SECURITY
HOLDER THAT IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARDS THE RESALE OR OTHER DISTRIBUTION THEREOF. THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY
TO COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.”
 
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Shares upon which it is
stamped or issue to such holder by electronic delivery at the applicable balance
account at DTC, if (i) such Shares are sold or transferred pursuant to Rule 144
(assuming the transferor is not an Affiliate of the Company), (ii) such Shares
are eligible for sale under Rule 144 free from any volume or other restrictions,
or (iii) if such legend is not required under applicable requirements of the
Securities Act (including controlling judicial interpretations and
pronouncements issued by the Commission).
 
(e)           Division and Combination; Expenses; Books.  This Warrant may be
divided or combined with other Warrants upon presentation hereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance with
Section 3(a) as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice. The Company shall prepare, issue and deliver at Holder’s
expense the new Warrant or Warrants under this Section 3.
 
4.           Adjustments.  The number of shares of Common Stock for which this
Warrant is exercisable, and the price at which such shares may be purchased upon
exercise of this Warrant, shall be subject to adjustment from time to time as
set forth in this Section 4.
 
(a)           Stock Dividends, Subdivisions and Combinations.  If at any time
while this Warrant is outstanding the Company shall:
 
(i)           declare a dividend or make a distribution on its outstanding
shares of Common Stock in shares of Common Stock;
 
(ii)           subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock; or
 
(iii)           combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, then:
 
(1)           the number of shares of Common Stock acquirable upon exercise of
this Warrant immediately after the occurrence of any such event shall be
adjusted to equal the number of shares of Common Stock which a record holder of
the same number of shares of Common Stock that would have been acquirable under
this Warrant immediately prior to the record date for such dividend or
distribution or the effective date of such subdivision or combination would own
or be entitled to receive after such record date or the effective date of such
subdivision or combination, as applicable, and
 
(2)           the Current Warrant Price shall be adjusted to equal:

 
 

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(A)           the Current Warrant Price in effect at the time of the record date
for such dividend or distribution or of the effective date of such subdivision
or combination, multiplied by the number of shares of Common Stock into which
this Warrant is exercisable immediately prior to the adjustment, divided by
 
(B)           the number of shares of Common Stock into which this Warrant is
exercisable immediately after such adjustment.
 

 
Any adjustment made pursuant to subparagraph (i) of this Section 4(a) shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to subparagraphs (ii) or (iii) of this Section 4(a) shall
become effective immediately after the effective date of such subdivision or
combination.
 
(b)           Other Provisions Applicable to Adjustments.  The following
provisions shall be applicable to the making of adjustments of the number of
shares of Common Stock into which this Warrant is exercisable and the Current
Warrant Price provided for in Section 4:
 
(i)           When Adjustments to Be Made.  The adjustments required by Section
4 shall be made whenever and as often as any specified event requiring an
adjustment shall occur, except that any that would otherwise be required may be
postponed (except in the case of a subdivision or combination of shares of the
Common Stock, as provided for in Section 4(a)) up to, but not beyond the date of
exercise if such adjustment either by itself or with other adjustments not
previously made adds or subtracts less than 1% of the shares of Common Stock
into which this Warrant is exercisable immediately prior to the making of such
adjustment. Any adjustment representing a change of less than such minimum
amount (except as aforesaid) which is postponed shall be carried forward and
made as soon as such adjustment, together with other adjustments required by
this Section 4 and not previously made, would result in a minimum adjustment or
on the date of exercise. For the purpose of any adjustment, any specified event
shall be deemed to have occurred at the close of business on the date of its
occurrence.
 
(ii)           Fractional Interests.  In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest 1/100th of a share.
 
(iii)           When Adjustment Not Required.  If the Company undertakes a
transaction contemplated under this Section 4 and as a result takes a record of
the holders of its Common Stock for the purpose of entitling them to receive a
dividend or distribution or subscription or purchase rights or other benefits
contemplated under this Section 4 and shall, thereafter and before the
distribution to stockholders thereof, legally abandon its plan to pay or deliver
such dividend, distribution, subscription or purchase rights or other benefits
contemplated under this Section 4, then thereafter no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
 
(iv)           Escrow of Stock.  If after any property becomes distributable
pursuant to Section 4 by reason of the taking of any record of the holders of
Common Stock, but prior to the occurrence of the event for which such record is
taken, a holder of this Warrant exercises the Warrant during such time, then
such holder shall continue to be entitled to receive any shares of Common Stock
issuable upon exercise hereunder by reason of such adjustment and such shares or
other property shall be held in escrow for the holder of this Warrant by the
Company to be issued to holder of this Warrant upon and to the extent that the
event actually takes place. Notwithstanding any other provision to the contrary
herein, if the event for which such record was taken fails to occur or is
rescinded, then such escrowed shares shall be canceled by the Company and
escrowed property returned to the Company.
 
(c)           Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets.

 
 

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(i)           If there shall occur a Change of Control and, pursuant to the
terms of such Change of Control, shares of common stock of the successor or
acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation (“Other Property”), are to be received by or distributed
to the holders of Common Stock of the Company, then the Holder of this Warrant
shall have the right thereafter for the balance of the Exercise Period to
receive, upon the exercise of the Warrant, the number of shares of common stock
of the successor or acquiring corporation or of the Company, if it is the
surviving corporation, and the Other Property receivable upon or as a result of
such Change of Control by a holder of the number of shares of Common Stock into
which this Warrant is exercisable immediately prior to such event.
 
(ii)           In case of any such Change of Control described above, the
resulting, successor or acquiring entity (if not the Company) and, if an entity
different from the successor or acquiring entity, the entity whose capital stock
or assets the holders of the Common Stock are entitled to receive as a result of
such Change of Control, shall assume by written instrument all of the
obligations of this Warrant a, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of the
Company), in order to provide for adjustments of shares of the Common Stock into
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in Section 4. For purposes of
Section 4, common stock of the successor or acquiring corporation shall include
stock of such corporation of any class which is not preferred as to dividends or
assets on liquidation over any other class of stock of such corporation and
which is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4 shall similarly apply to successive Change of Control
transactions.
 
(d)           Stock Transfer Taxes.  The issue of stock certificates upon
exercise of this Warrant shall be made without charge to the holder for any tax
in respect of such issue. The Company shall not, however, be required to pay any
tax which may be payable in respect of any transfer involved in the issue and
delivery of shares in any name other than that of the holder of this Warrant,
and the Company shall not be required to issue or deliver any such stock
certificate unless and until the person or persons requesting the issue thereof
shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid.
 
5.           No Rights as Stockholder.  This Warrant does not entitle the Holder
to any voting or other rights as a stockholder of the Company prior to exercise
and payment for the Warrant Price in accordance with the terms hereof.
 
6.           Reservation and Authorization of Common Stock.  From and after the
Closing Date, the Company shall at all times reserve and keep available for
issue upon the exercise of Warrants such number of its authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in full of
all outstanding Warrants
 
7.           Taking of Record; Stock and Warrant Transfer Books.  In the case of
all dividends or other distributions by the Company to the holders of its Common
Stock with respect to which any provision of Section 4 refers to the taking of a
record of such holders, the Company will in each such case take such a record
and will take such record as of the close of business on a Business Day. The
Company will not at any time, except upon dissolution, liquidation or winding up
of the Company, close its stock transfer books or Warrant transfer books so as
to result in preventing or delaying the exercise or transfer of any Warrant.
 
8.           Loss or Mutilation.  Upon receipt by the Company from the Holder of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity or security reasonably
satisfactory to it and reimbursement to the Company of all reasonable expenses
incidental thereto and in case of mutilation upon surrender and cancellation
hereof, the Company, at Holder’s cost, will execute and deliver in lieu hereof a
new Warrant of like tenor to the Holder; provided, however, that in the case of
mutilation, no indemnity shall be required if this Warrant in identifiable form
is surrendered to the Company for cancellation.

 
 

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9.           Office of the Company.  As long as any of the Warrants remain
outstanding, the Company shall maintain an office or agency (which may be the
principal executive offices of the Company) where the Warrants may be presented
for exercise, registration of transfer, division or combination as provided in
this Warrant.
 
10.           Miscellaneous.
 
(a)           Nonwaiver.  No course of dealing or any delay or failure to
exercise any right or obligation hereunder on the part of the Holder or the
Company shall operate as a waiver of such right or obligation, unless the same
shall be in writing signed by the Holder or the Company.

(b)           Notice Generally.  All notices, requests, demands or other
communications provided for herein shall be in writing and shall be given in the
manner and to the addresses set forth below:

If to Holder:

J.P. Turner & Company, L.L.C.
Attn: Investment Banking
3060 Peachtree Rd., NW
11th Floor
Atlanta, GA 30305
Attention: Joe Walker
Phone: 404-479-8339

If to Company:

Bill Joll, CEO
ISC8 Inc.
3001 Red Hill Avenue
Building 4, Suite 108
Costa Mesa, CA 92626
Telephone: 714-549-8211
 
(c)           Successors and Assigns.  Subject to compliance with the provisions
of Section 3, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and assigns of the Holder. The provisions of this Warrant are intended to be for
the benefit of all Holders from time to time of this Warrant, and shall be
enforceable by any such Holder.
 
(d)           Amendment.  This Warrant may be modified or amended or the
provisions of this Warrant waived with the written consent of both the Company
and the Holder.
 
(e)           Severability.  Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be modified to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
 
(f)           Headings.  The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
 
(g)           Governing Law.  This Warrant and the transactions contemplated
hereby shall be deemed to be consummated in the State of Delaware and shall be
governed by and interpreted in accordance with the local laws of the State of
Delaware without regard to the provisions thereof relating to conflicts of laws.

 
 

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(h)           Entire Agreement.  This Warrant constitutes the entire agreement
between the Company and Holder with respect to the subject matter hereof and
supersedes any and all other prior or contemporaneous agreements, either oral or
written, between the Company and Holder with respect to the subject matter
hereof; provided, however, (i) the foregoing shall not have any effect on any
agreements the Holder has entered into with the Company or any of its
subsidiaries prior to the date hereof with respect to any prior investment made
by the Holder in the Company and (ii) nothing contained in this Warrant shall
(or shall be deemed to) waive, alter, modify or amend in any respect any
obligations of the Company or any of its subsidiaries or any rights of or
benefits to the Holder or any other person in any agreement entered into prior
to the date hereof between or among the Company and/or any of its subsidiaries
and the Holder and all such agreements shall continue in full force and effect.
 
(i)           Noncircumvention.  The Company hereby covenants and agrees that
the Company will not, by amendment of its charter, bylaws or through any
reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Current Warrant Price and
(ii) shall take all such actions as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and non-assessable
shares of Common Stock upon the exercise of this Warrant.
 
[Signatures appear on the following page.]

 
 

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IN WITNESS WHEREOF, ISC8 Inc. has caused this Warrant to be executed by its duly
authorized officer and attested by its Secretary or other designated officer.
 
Dated:                                                      
 
ISC8 Inc.
 
By:           
Name:
Title:
 
ACKNOWLEDGED AND AGREED:

 
Holder:
J.P. Turner Partners, L.P.

 
By:
   

 
Name:

 
Title:

 

 
 

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EXHIBIT A
 
SUBSCRIPTION FORM
 
[To be executed only upon exercise of Warrant]
 
1.           The undersigned hereby elects to (a) purchase _____ shares of the
Common Stock of ISC8 Inc. pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full or (b)
exercise such Warrant for _______ shares of the Common Stock of ISC8 Inc.
purchasable under the Warrant pursuant to the provisions of Section 2 of the
Warrant.
 
2.           Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
 

(Name)

(Address)
 
and, if such shares of Common Stock shall not include all of the shares of
Common Stock issuable as provided in this Warrant, that a new Warrant of like
tenor and date for the balance of the shares of Common Stock issuable hereunder
be delivered to the undersigned.
 
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the “Securities Act”) or pursuant to an exemption from
registration under the Securities Act.
 
Capitalized terms not defined herein shall have the meanings assigned to them in
the Warrant Certificate to which this Exercise Form is attached.
 

(Name of Registered Owner)

(Signature of Registered Owner)

(Street Address)

(State) (Zip Code)
 
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the Warrant in every particular, without alteration or
enlargement or any change whatsoever.

 
 

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EXHIBIT B
 
FORM OF INVESTMENT REPRESENTATION LETTER
 
In connection with the transfer of warrants (the “Warrants”) to purchase
________ shares of common stock of ISC8 Inc. (the “Company”), par value $0.01
per share (the “Common Stock”) to _________________ (the “Transferee”), the
Transferee hereby represents and warrants to the Company as follows:
 
The Transferee (i) is an “Accredited Investor” as that term is defined in Rule
501 of Regulation D promulgated under the Securities Act of 1933, as amended
(the “Act”); and (ii) has the ability to bear the economic risks of such
Transferee’s prospective investment, including a complete loss of Transferee’s
investment in the Warrants and the shares of Common Stock issuable upon the
exercise thereof (collectively, the "Securities").
 
The Transferee, by acceptance of the Warrants, represents and warrants to the
Company that the Warrants and all securities acquired upon any and all exercises
of the Warrants are purchased for the Transferee's own account, and not with
view to distribution of either the Warrants or any securities purchasable upon
exercise thereof in violation of applicable securities laws.
 
The Transferee acknowledges that (i) the Securities have not been registered
under the Act, (ii) the Securities are “restricted securities” and the
certificate(s) representing the Securities shall bear the following legend, or a
similar legend to the same effect, until (i) in the case of the shares of Common
Stock underlying the Warrants, such shares shall have been registered for resale
by the Transferee under the Act and effectively been disposed of in accordance
with a registration statement that has been declared effective; or (ii) in the
opinion of counsel for the Company such Securities may be sold without
registration under the Act:
 
“THE TRANSFER OF THIS SECURITY IS SUBJECT TO RESTRICTIONS CONTAINED HEREIN. THIS
SECURITY HAS BEEN ISSUED IN RELIANCE UPON THE REPRESENTATION OF THE SECURITY
HOLDER THAT IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARDS THE RESALE OR OTHER DISTRIBUTION THEREOF. THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY
TO COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.”