Document:

ex10-2.htm

Exhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made and entered into as of August 9, 2013, by and among Glowpoint, Inc., a Delaware corporation (the “Company”), and GP Investment Holdings, LLC, a Delaware limited liability company (the “Purchaser”).

 

This Agreement is made in connection with that certain Series B-1 Preferred Exchange Agreement dated as of the date hereof among the Company and the Purchaser (the “Purchase Agreement”).

 

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Purchaser agree as follows:

 

1. Definitions.  Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement.  As used in this Agreement, the following terms shall have the following meanings:

 

“Affiliate” means, with respect to any person, any other person which directly or indirectly controls, is controlled by, or is under common control with, such person.

 

“Business Day” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $0.0001 per share, and any securities into which such common stock may hereinafter be reclassified.

 

“Effective Date” means the date that the applicable Registration Statement filed is first declared effective by the Commission.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Losses” shall have the meaning set forth in Section 5(a).

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

 

“Register,” “registered” and “registration” refer to a registration made by preparing and filing a Registration Statement or similar document in compliance with the Securities Act or pursuant to Rule 415, and the declaration or ordering of effectiveness of such Registration Statement or document.

  

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“Registrable Securities” means, with respect to the Registration Statement required to be filed pursuant to the terms hereof, all of (i) the Securities, (ii) any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing;

 

“Registration Statements” means any one or more registration statements of the Company filed under the Securities Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement, amendments and supplements to such Registration Statements, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such Registration Statements.

 

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

 “Securities” means the 6,333,333 shares of the Common Stock held by the Purchaser.

 

 “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

2. Registration.

 

(a) The Company shall, as soon as practical, but not later than ninety (90) days from the date hereof, use its best efforts to effect a Registration Statement with the Commission to the end that the Securities may be sold under the Securities Act as promptly as practical thereafter.  The Company shall use its best efforts to keep any Registration Statement filed pursuant to this Section 2 current and effective until such date as the Purchaser shall have sold all of its Securities or shall have advised the Company that it no longer desires to sell such Securities pursuant to such Registration Statement.

 

(b) In addition, the Company shall, at its sole expense, use its best efforts to: (i) prepare and file with the Commission such amendments and supplements to such Registration Statement and the Prospectus used in connection with such Registration Statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement; (ii) furnish such number of Prospectuses and other documents incident thereto, including any amendment of or supplement to the Prospectus, as the Purchaser from time to time may reasonably request; (iii) notify the Purchaser at any time when a Prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the Prospectus included in such Registration Statement, 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 or incomplete in a light of the circumstances then existing; (iv) cause all Securities registered pursuant thereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed; (v) provide a transfer agent and registrar for all Securities registered pursuant thereunder and a CUSIP number for all such Securities, in each case not later than the Effective Date of such Registration Statement; and (vi) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security investors, as soon as reasonably practicable, an earnings statement satisfying the provisions of Section 11(a) of the Securities Act and covering the period of at least twelve (12) months, but not more than eighteen (18) months, beginning with the first month after the Effective Date of such Registration Statement.

 

(c) The Company shall use its best efforts to qualify the registered Securities for sale in such states as it is otherwise qualifying its securities for sale, or in such states as are reasonably requested by the Purchaser.  However, in no event is the Company required to submit to the jurisdiction of any state other than for the limited consent of service of process relating to the offering or subject itself to taxation in any such jurisdiction.

  

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3. Registration Expenses.  All fees and expenses incident to the Company’s performance of or compliance with its obligations under this Agreement (excluding any underwriting discounts and selling commissions and all legal fees and expenses of legal counsel for the Purchaser) shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement.  The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing, (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing Prospectuses if the printing of Prospectuses is reasonably requested by the Purchaser), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company.

 

4. Lock-Up.  The Purchaser agrees that it shall not, without the prior written consent of the Company, sell or otherwise transfer or dispose of any shares of Common Stock held by the Purchaser for up to 365 days following the date hereof.  Notwithstanding the foregoing, the Purchaser may transfer shares of Common Stock (i) as part of an underwritten registration, (ii) acquired by the Purchaser after the date hereof in open market transactions or (iii) to one or more of the Purchaser’s members or any of its or its members’ Affiliates; provided, however, the Purchaser shall notify the Company prior to any such transfer and agrees to coordinate with the Company to effect any such transfer.

 

5. Indemnification.

 

(a) The Company shall indemnify and hold harmless the Purchaser from and against any and all losses, claims, damages and liabilities (including fees and expenses of counsel, which counsel may, if the Purchaser requests, be separate from counsel for the Company) (collectively, the “Losses”) caused by any untrue statement or alleged untrue statement of material fact contained in the Registration Statement or any post-effective amendment thereto or any Registration Statement under the Securities Act or any Prospectus included therein required to be filed or furnished or any application or other filing under any state securities law caused by 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 to which the Purchaser may become subject under the Securities Act or other federal or state statutory law or regulation, at common law or otherwise, except insofar as such Losses, are caused by any such untrue statement or alleged untrue statement or omission or alleged omission based upon information furnished to the Company in writing by the Purchaser expressly for use in the Registration Statement or Prospectus.

 

(b) If the indemnification provided for in Section 5(a) from Company is unavailable to an indemnified party hereunder in respect of any Losses, then the Company, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by the Company as a result of Losses in such proportion as is appropriate to reflect the relative fault of the Company and indemnified parties in connection with the actions which resulted in such Losses, as well as any other relevant equitable considerations.  The relative fault of the Company and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, the Company or indemnified parties, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action.  The amount paid or payable by a party as a result of Losses shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or Proceeding.  The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(b) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in this paragraph.  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.

 

6. Miscellaneous.

 

(a) Remedies.  In the event of a breach by the Company or by the Purchaser of any of their obligations under this Agreement, the Purchaser or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement.  The Company and the Purchaser agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.

  

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(b) Entire Agreement.  This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein.  This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

 

(c) Compliance.  The Purchaser covenants and agrees that it will comply with the Prospectus delivery requirements of the Securities Act as applicable to it (unless an exemption therefrom is available) in connection with sales of Registrable Securities pursuant to a Registration Statement and shall sell the Registrable Securities only in accordance with a method of distribution described in such Registration Statement.

 

(d) Amendments and Waivers.  The provisions of this Agreement may not be amended, modified or supplemented unless the same shall be in writing and signed by the Company and the Purchaser.

 

(e) Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing.  The address for such notices and communications shall be as follows:

 

If to the Company:

Glowpoint, Inc.

1776 Lincoln Ave.

Suite 1300

Denver, CO 80203

Attention: President

Tel.  No.: (303) 640-3810

Fax No.: (866) 703-2089

and

 

Glowpoint, Inc.

430 Mountain Avenue

Murray Hill, New Jersey 07974

Attention: General Counsel

Tel.  No.: (908) 376-2172

Fax No.: (908) 464-2482

 

	
  

	
If to the Purchaser:

	
GP Investment Holdings, LLC

c/o Main Street Capital Corporation

1300 Post Oak Boulevard

Suite 800

Houston, Texas 77056

Attention: Robert M. Shuford

Tel. No.: (713) 350-6000

Fax No.: (713) 350-6042;

or such other address as may be designated in writing hereafter, in the same manner, by such Person.

 

(f) Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

  

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(g) Execution and Counterparts.  This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature were the original thereof.

 

(h) Governing Law.  This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York without giving effect conflicts of law principles that would result in the application of the substantive laws of another jurisdiction.  Each of the parties consents to the exclusive jurisdiction of the federal courts whose districts encompass any part of the County of New York located in the City of New York in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such Proceeding in such jurisdictions.  Each party waives its right to a trial by jury.  Each party to this Agreement irrevocably consents to the service of process in any such Proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such party at its address set forth herein.  Nothing herein shall affect the right of any party to serve process in any other manner permitted by law.

 

(i) Cumulative Remedies.  The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

 

(j) Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction.  It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

 

 (Signature page follows)

  

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

 

Glowpoint, Inc.

 

By: /s/ Peter Holst

      Name: Peter Holst

      Title: Chief Executive Officer

 

GP Investment Holdings, LLC

 

By:  /s/ Brian L. Pessin

      Name: Brian L. Pessin

                                                                                                  Title: Presidentex10-1.htm

Exhibit 10.1

 

NINTH EXTENSION OF FORBEARANCE UNDER

LOAN AND SECURITY AGREEMENT

This Ninth Extension of Forbearance under Loan and Security Agreement (this “Ninth Forbearance Extension”) is entered into as of the 1st day of July, 2013 (the “Ninth Extension Effective Date”), by and between ISC8, Inc. (formerly Irvine Sensors Corporation), a Delaware corporation with its principal place of business at 3001 Red Hill Ave., Bldg. 4/108, Costa Mesa, Orange County, CA 92926 (“Borrower”) and Partners for Growth III, L.P. (“PFG”).  Except as otherwise specified herein, capitalized terms used herein without definition shall have the same meanings given them in the Loan Agreement (as defined below).

WHEREAS, Borrower and PFG entered into that certain Loan and Security Agreement dated as of December 14, 2011, as amended by the Forbearance (as defined below) (the “Loan Agreement”);

WHEREAS, PFG provided the credit contemplated under the Loan Agreement as, when and how specified in the Loan Agreement;

WHEREAS, PFG and Borrower entered into that certain Forbearance, Limited Waiver and Consent under Loan and Security Agreement on August 21, 2012, to, inter alia, address financial covenant defaults by Borrower specified therein (the “Specified Defaults” and such Forbearance, Limited Waiver and Consent under Loan and Security Agreement on August 21, 2012, the “Forbearance”);

WHEREAS, PFG and Borrower entered into that certain Extension of Forbearance under Loan and Security Agreement on September 28, 2012 (the “First Forbearance Extension”) extending PFG’s forbearance until October 31, 2012;

WHEREAS, PFG and Borrower entered into that certain Extension of Forbearance under Loan and Security Agreement on October 31, 2012 (the “Second Forbearance Extension”) extending PFG’s forbearance until December 15, 2012;

WHEREAS, PFG and Borrower entered into that certain Extension of Forbearance under Loan and Security Agreement on December 15, 2012 (the “Third Forbearance Extension”) extending PFG’s forbearance until January 31, 2013;

WHEREAS, PFG and Borrower entered into that certain Extension of Forbearance under Loan and Security Agreement as of February 1, 2013 (the “Fourth Forbearance Extension”) extending PFG’s forbearance until February 28, 2013;

WHEREAS, PFG and Borrower entered into that certain Extension of Forbearance under Loan and Security Agreement as of March 1, 2013 (the “Fifth Forbearance Extension”) extending PFG’s forbearance until March 31, 2013;

WHEREAS, PFG and Borrower entered into that certain Extension of Forbearance under Loan and Security Agreement as of April 1, 2013 (the “Sixth Forbearance Extension”) extending PFG’s forbearance until April 30, 2013;

WHEREAS, PFG and Borrower entered into that certain Extension of Forbearance under Loan and Security Agreement as of May 1, 2013 (the “Seventh Forbearance Extension”) extending PFG’s forbearance until May 31, 2013;

WHEREAS, Borrower in March, 2013, resolved, and ceased to be engaged in its Government-focused business, terminating all of its employees and exiting the facilities associated with that business (the “Shutdown Transaction”), and Borrower treated the Shutdown Transaction as a disposition of obsolete or unneeded Equipment in the ordinary course of Borrower’s business not requiring PFG’s consent under the Loan Documents. Certain terminated employees of Borrower formed a new corporation named “Irvine Sensors Corporation” (“New ISC”) in an attempt to continue Borrower’s former government business. No ownership or security interest exists between Borrower and New ISC.;

 

  

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       WHEREAS, PFG and Borrower entered into that certain Extension of Forbearance under Loan and Security Agreement as of June 1, 2013 (the “Eighth Forbearance Extension”) extending PFG’s forbearance until June 30, 2013;

WHEREAS, Borrower remains in default due to the Specified Default and PFG’s agreement to Forbear (as defined below) expires on the date hereof;

WHEREAS, (i) Borrower, acknowledging that the Specified Defaults have occurred and are continuing, has requested that PFG extend the term of the Forbearance and, subject to the terms and conditions of this Ninth Forbearance Extension, PFG is willing to defer exercising remedies under the Loan Agreement (to “Forbear”) due to the Specified Defaults, extend the term of the Forbearance and modify the terms of the Loan Agreement as set forth herein;

NOW THEREFORE, the parties hereby agree as follows:

1.           Extension of Forbearance. Section 2(a)(i) of the Forbearance which (after giving effect to the Eighth Forbearance Extension) read as follows (with quotes and italicized text added for convenience of reading only):

 

“(i)           Forbearance by PFG.  In consideration of, among other things, Borrower’s compliance with each and every term of this Forbearance, PFG hereby agrees to forbear from exercising its rights and remedies as a result of the Specified Defaults until the earliest to occur of (i) a Default or an Event of Default under the Loan Agreement (with the sole exception of the Specified Defaults), (ii) the failure of Borrower to promptly, punctually, or faithfully perform or comply with any term or condition of this Forbearance as and when required, it being expressly acknowledged and agreed that TIME IS OF THE ESSENCE, and (iii) 5:00 p.m. (San Francisco, California time) on June 30, 2013 (the period commencing as of the date of the effectiveness of this Forbearance and ending on the earliest of (i), (ii) and (iii) above shall be referred to as the “Forbearance Period”).”

 

shall be amended as from the Ninth Extension Effective Date to read in its entirety (Section 2(a))(i) only) as follows:

 

“(i)           Forbearance by PFG.  In consideration of, among other things, Borrower’s compliance with each and every term of this Forbearance, PFG hereby agrees to forbear from exercising its rights and remedies as a result of the Specified Defaults until the earliest to occur of (i) a Default or an Event of Default under the Loan Agreement (with the sole exception of the Specified Defaults), (ii) the failure of Borrower to promptly, punctually, or faithfully perform or comply with any term or condition of this Ninth Forbearance Extension as and when required, it being expressly acknowledged and agreed that TIME IS OF THE ESSENCE, (iii) the occurrence of any other event or failure of a condition set forth in this Ninth Forbearance Extension (whether by the act of Borrower or a third party), (iv) the failure of Borrower to receive proceeds of at least $3,000,000 from the sale of convertible debt and/or equity by August 2, 2013, and (v) 5:00 p.m. (San Francisco, California time) on September 20, 2013, provided, however, such date shall be accelerated or extended in increments of one calendar week for each $250,000 increment by which the Financing cash proceeds fall short of (or exceed) $3,500,000 (the period commencing as of the date of the effectiveness of this Forbearance and ending on the earliest of (i), (ii), (iii), (iv) and (v) above shall be referred to as the “Forbearance Period”). For example only in respect of clause (v), above, if Borrower raises cash Financing proceeds of $4,125,000 before the end of the Forbearance Period, then the date specified in clause (v) would be extended by two weeks. If prior to the end of such extended period Borrower raised an additional $130,000, then the date specified in clause (v) would be extended by an additional one week.”

 

2.           Payment of Fees and Expenses.  Borrower shall pay to PFG its reasonable out-of-pocket fees and expenses in connection with this Ninth Forbearance Extension.

 

  

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    3.           Additional Terms. 

(a)  Conditional Partial Deferral of Interest. During the Forbearance Period, so long as no Default or Event of Default has occurred other than the Specified Defaults and no Default or Event of Default has occurred under the terms of this Ninth Forbearance, Borrower shall be obligated to pay in cash as and when due on a monthly basis only one-half of the interest due on monetary Obligations, with the balance of such interest, together with interest thereon at the specified Interest Rate, at the end of the Forbearance Period, however occurring.

(b)  Deferred Forbearance Fee. The parties acknowledge that Borrower contemplates closing a bridge financing of Borrower generally upon the terms set forth in that certain term sheet appended hereto for reference (only) as Exhibit A (the “Financing”). In consideration of PFG not accelerating the Obligations on the Ninth Amendment Effective Date, PFG’s deferral of a part of the interest due on outstanding monetary Obligations, and for other good and valuable consideration acknowledged by Borrower, Borrower shall pay PFG a Forbearance Fee, deemed fully earned on the Ninth Forbearance Extension Date but payable as set forth below, equal to: (i) in cash, the product of 12.5% of the gross proceeds of the Financing times 0.077% (determined as at the earlier of final closing of the Financing and December 31, 2013), payable at the end of this Ninth Forbearance Extension Forbearance Period (as grossed up on a monthly basis for additional cash Financing proceeds raised, and (B) in Borrower equity derivatives, warrants to purchase that number of shares of Borrower Common Stock at an exercise price of $0.01 as would result from the product of 12.5% of the gross proceeds of the Financing (determined as at the earlier of final closing of the Financing and December 31, 2013) times 3.97 (the “Warrants”). The Warrants shall be issuable by Borrower upon the earlier of the final closing of the Financing and PFG demand (with the number of shares of Common Stock issuable under the Warrants calculated as of the date of such demand, but with a gross-up provision to reflect any additional warrant coverage based on the final proceeds of the Financing. For the avoidance of doubt, Exhibit A is appended solely for reference and shall have no express or implied effect upon PFG’s rights or obligations under the Loan Documents.

4.           Ratification of Loan Documents.  Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms and conditions of each of the Loan Documents to which it is a party. The authority and incumbency documents and certificates previously delivered to PFG in connection with the Loan Documents from time to time remain in full force and effect, unmodified, and are hereby ratified. The terms and conditions of the Loan Agreement remain in full force and effect, unmodified, notwithstanding PFG’s forbearance.

5.           Representations and Warranties.  Borrower represents and warrants that:

 

(a)           immediately upon execution of this Ninth Forbearance Extension and assuming Borrower’s satisfaction of the conditions set forth in Section 6 hereof (i) the representations and warranties contained in the Existing Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (ii) no Default or Event of Default (other than the Specified Defaults) has occurred and is continuing or would result from the performance of the Loan Documents;

 

(b)           Borrower has the corporate power and authority to deliver this Ninth Forbearance Extension and to perform its Obligations under the Loan Documents and the person(s) executing this Ninth Forbearance Extension on behalf of Borrower are duly empowered to do so;

 

(c)           the certificate of incorporation and other formation and organizational documents of Borrower provided to PFG on the date of the Loan Agreement remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect or, if any such documents have been amended, supplemented or restated or are no longer true, accurate and complete, Borrower shall provide true, complete, correct and current versions of such documents as additional conditions to this Ninth Forbearance Extension under Section 6;

  

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(d)           the execution and delivery by Borrower of this Ninth Forbearance Extension and the performance by Borrower of its Obligations under the Loan Agreement have been duly authorized by all necessary corporate action on the part of Borrower;

 

(e)           this Ninth Forbearance Extension, when executed and delivered by Borrower (i) constitutes the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights; and (ii) does not conflict with any law or regulation or judgment or the organizational documents of Borrower, or any agreement or document to which Borrower is a party or which is binding upon it or any of this assets; and (iii) does not require any authorization, approval, consent, licence or registration in any jurisdiction for its execution, performance, validity or enforceability that has not already been obtained by Borrower;

 

(f)           Borrower acknowledges that PFG has acted in good faith and has conducted in a commercially reasonable manner its relationship with Borrower in connection with this Ninth Forbearance Extension and in connection with the Loan Documents and that, as of the date hereof, it has no defenses against its obligation to pay any and all Obligations; and

 

(g)           the information set forth in the Representations, as updated by Borrower (as required) and delivered to PFG on or prior to the date hereof, continues to be true, correct, accurate and complete as of the Seventh Extension Effective Date.

 

Borrower understands and acknowledges that PFG is entering into this Ninth Forbearance Extension in reliance upon, and in partial consideration for, the above representations and warranties, and agrees that such reliance is reasonable and appropriate.

6.           Conditions.  Subject to the satisfaction of the conditions set forth below, this Ninth Forbearance Extension shall become effective on the date it is executed by the parties hereto, but shall continue to be subject to the satisfaction of all the following conditions:

6.1           Execution and Delivery.  As a condition precedent, Borrower shall have duly executed and delivered an original counterpart of this Ninth Forbearance Extension to PFG via electronic mail by 5:00 p.m. US Pacific Time on July 30, 2013 with the original of such counterpart not later than one Business Day thereafter via overnight courier.

 

6.2           Payment of PFG Expenses.  Borrower shall have paid upon demand all PFG Expenses (including all reasonable attorneys’ fees and expenses) incurred in connection with this Ninth Forbearance Extension.

 

6.3           Updates to Borrower Information. If required to render the Representations identified in Section 5(g) hereof true, correct, accurate and complete as of the date hereof in all material respects, Borrower shall update the Representations.

 

6.4           Guaranty. No demand shall have been made under that certain Unconditional Continuing Guaranty dated as of December 14, 2011 for the return of monies paid over to PFG upon PFG demand and being held by PFG.

 

  

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6.5           Restatement of Outstanding Warrants. Upon the occurrence of a Next Equity Financing, at PFG’s option, either each of the Warrants issued to PFG and its designees in connection with the Forbearance and each Forbearance Extension shall be amended to specify the Number of Shares of Next Equity Financing Stock (or Common Stock, as the case may be) and relevant Exchange Price of Warrant Stock, or the Company shall provide PFG and its designees an officer’s certificate showing the Number of Shares of Next Equity Financing Stock (or Common Stock, as the case may be) and relevant Exchange Price for each Warrant held. Schedule A hereto sets forth the Warrants outstanding to PFG and its designees as of the Ninth Extension Effective Date. Borrower acknowledges that (i) all possible reductions in the Number of Shares under the Warrants (under the respective Section 1.7’s thereof), have expired and are no longer of any force and effect, and (ii) all Warrants (including the Warrants issued on the date of the Loan Agreement) shall reflect an Exchange Price of the lower of $0.11 and the Effective Price of the securities issued in a Next Equity Financing, the “Effective Price” being a value that excludes any value associated with any other consideration given in the Next Equity Financing, such as warrants or other rights, consistent with the manner in which the term “Effective Price” is used in the Warrants issued in connection with the Forbearance and each Forbearance Extension.

For the avoidance of doubt, the failure of any of the conditions set forth in this Section 6 at any time, unless waived by PFG in its sole discretion, shall constitute an Event of Default.

 

7.           Terms Related to Shutdown Transaction.  PFG expressly reserves all rights under the Loan Documents with respect to the Shutdown Transaction, a transaction PFG believes (and advised Borrower) required its prior consent. PFG’s execution of this forbearance shall not be deemed a waiver of any rights PFG may have in relation to the Shutdown Transaction. Borrower shall promptly pay over to PFG, to be held by PFG as a non-segregated deposit against Borrower’s monetary Obligations: (i) any consideration received or to be received by Borrower from the New ISC in connection with the Shutdown Transaction and (ii) any payments received or to be received by Borrower as license fees, royalty payments or otherwise from or in connection with New ISC.  Borrower shall promptly provide such details and information regarding the commercial relationship between Borrower and New ISC as PFG may reasonably request at any and all times.

8.           Counterparts.  This Forbearance may be signed in any number of counterparts, and by different parties hereto in separate counterparts, with the same effect as if the signatures to each such counterpart were upon a single instrument.  All counterparts shall be deemed an original of this Forbearance.

9.           Integration; Construction.  This Ninth Forbearance Extension, the Eighth Forbearance Extension, the Seventh Forbearance Extension, the Sixth Forbearance Extension, the Fifth Forbearance Extension, the Fourth Forbearance Extension, Third Forbearance Extension, the Second Forbearance Extension, the First Forbearance Extension, the Forbearance (including without limitation the release set forth in Section 4 thereof, which shall be deemed incorporated by reference herein and given as of the Ninth Extension Effective Date), the Loan Agreement, the other Loan Documents and any documents executed in connection herewith or therewith or pursuant hereto or thereto contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, offers and negotiations, oral or written, with respect thereto and no extrinsic evidence whatsoever may be introduced in any judicial or arbitration proceeding, if any, involving this Ninth Forbearance Extension; except that any financing statements or other agreements or instruments filed by PFG with respect to Borrower shall remain in full force and effect. The title of this Agreement and section headings are for the readers’ convenience only and shall be ignored for purposes of integration into the Loan Agreement. The quotation marks around modified clauses set forth herein and any differing font styles, if any, in which such clauses are presented herein are for ease of reading only and shall be ignored for purposes of construing and interpreting this Ninth Forbearance Extension. The Recitals to this Ninth Forbearance Extension are expressly incorporated by reference herein. The General Provisions set forth in Section 9 of the Loan Agreement are incorporated herein by reference.

 

10.           Governing Law; Venue.  THIS NINTH FORBEARANCE EXTENSION SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.  Borrower and PFG each submit to the exclusive jurisdiction of the State and Federal courts in San Francisco County, California.

 

[Signature Page Follows]

  

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IN WITNESS WHEREOF, the parties hereto have caused this Ninth Forbearance Extension to be executed as of the Ninth Extension Effective Date.

 

Borrower:                                                                      

 

ISC8, Inc.

a Delaware corporation

 

By: /s/ John Vong

Name: John Vong

Title: Sr. Vice President and Chief Financial Officer

PFG:                                                           

 

Partners for Growth III, L.P.

By:  /s/ Lorraine Nield

Name: Lorraine Nield

Title:   Manager, Partners for Growth III, LLC,

its General Partner

  

-6-

  

Schedule A to Ninth Forbearance Extension

	
Original Loan

	
Warrant Stock

	
Exchange Price

	
PFG

	
6,750,000 CS

	
Lower of $0.11 and NEFEP1

	
PFGEI

	
990,000 CS

	
Lower of $0.11 and NEFEP1

	
SVB

	
7,260,000 CS

	
Lower of $0.11 and NEFEP1

	
8/21/12 Forb.

	
(@ Holder option)

	  
	
PFG

	
($101,250/NEFEP) NEFS or 920,455 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
PFGEI

	
($14,850/NEFEP) NEFS or 135,000 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
SVB

	
($108,900/NEFEP) NEFS or 990,000 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
9/28/12 Extension

	
(@ Holder option)

	  
	
PFG

	
($101,250/NEFEP) NEFS or 920,455 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
PFGEI

	
($14,850/NEFEP) NEFS or 135,000 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
SVB

	
($108,900/NEFEP) NEFS or 990,000 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
10/31/12 Extension

	
(@ Holder option)

	  
	
PFG

	
($101,250/NEFEP) NEFS or 920,455 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
PFGEI

	
($14,850/NEFEP) NEFS or 135,000 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
SVB

	
($108,900/NEFEP) NEFS or 990,000 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
12/15/12 Extension

	
(@ Holder option)

	  
	
PFG

	
($101,250/NEFEP) NEFS or 920,455 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
PFGEI

	
($14,850/NEFEP) NEFS or 135,000 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
SVB

	
($108,900/NEFEP) NEFS or 990,000 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
2/1/13 Extension

	
(@ Holder option)

	  
	
PFG

	
($101,250/NEFEP) NEFS or 920,455 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
PFGEI

	
($14,850/NEFEP) NEFS or 135,000 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
SVB

	
($108,900/NEFEP) NEFS or 990,000 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
3/1/13 Extension

	
(@ Holder option)

	  
	
PFG

	
($101,250/NEFEP) NEFS or 920,455 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
PFGEI

	
($14,850/NEFEP) NEFS or 135,000 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
SVB

	
($108,900/NEFEP) NEFS or 990,000 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
4/1/13 Extension

	
(@ Holder option)

	  
	
PFG

	
($101,250/NEFEP) NEFS or 920,455 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
PFGEI

	
($14,850/NEFEP) NEFS or 135,000 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
SVB

	
($108,900/NEFEP) NEFS or 990,000 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
5/1/13 Extension

	
(@ Holder option)

	  
	
PFG

	
($101,250/NEFEP) NEFS or 920,455 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
PFGEI

	
($14,850/NEFEP) NEFS or 135,000 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
SVB

	
($108,900/NEFEP) NEFS or 990,000 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
6/1/13 Extension

	
(@ Holder option)

	  
	
PFG

	
($101,250/NEFEP) NEFS or 920,455 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
PFGEI

	
($14,850/NEFEP) NEFS or 135,000 CS

	
NEFEP (NEFS) or $0.11 (CS)

	
SVB

	
($108,900/NEFEP) NEFS or 990,000 CS

	
NEFEP (NEFS) or $0.11 (CS)

Note 1. The 8/21/12 Forbearance adjusted the Exchange Price of the original Warrants.

Terms below are as defined in the Warrants

NEFS = “Next Equity Financing Stock”

NEFEP = “Next Equity Financing Effective Price”

CS = Common Stock

Example: Based on proposed terms of Next Equity Financing, PFG 8/21/12 Warrant would be restated for (or an officer’s certificate in favor of PFG would reflect) ($101,250 divided by $[NEFEP]) exchangeable at $[NEFEP] shares of NEFS or 920,455 shares of CS exchangeable at $0.11 per share. Based on currently-advised terms of Next Equity Financing, Holders would always elect NEFS at the assumed NEFEP and the restated warrant or officer’s certificate would reflect the same.

 

-7-

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