Document:

CONSENT TO MODIFICATIONS

This Consent to Modifications, dated June 18, 2010, is given and agreed to by the “Purchasers” under the Fifth Amended and Restated Note and Warrant Purchase Agreement by and among the Purchasers, Integral Vision, Inc., a Michigan corporation (the "Company"), and J. M. Warren Law Offices, P.C., as Agent.

Factual Statements

	
A.

	
The undersigned is a Purchaser under the Fifth Amended and Restated Note and Warrant Purchase Agreement (as modified December 15, 2008, January 28, 2009, June 10, 2009,  June 23, 2009, September 16, 2009, and April 19, 2010), dated effective as of the date of execution by such Purchaser, for the purchase of the Notes and Warrants of the Company (the “Purchase Agreement”).

	
B.

	
Some of the Company’s Class 2 Noteholders have indicated a desire to have some payments made by the Company pursuant to their Class 2 Notes applied to the principal outstanding on said notes first rather than be applied first to the accrued interest due as specified in the Purchase Agreement.  The parties to this Purchase Agreement wish to modify the terms therein to allow such an election by the Class 2 Noteholders.

	
C.

	
Class 3 Noteholders are currently limited pursuant to Section 6. of their notes as follows:  “Forbearance from suit. No Note holder of this issue may institute any suit or proceeding for the enforcement of the payment of principal or interest unless the holders of more than 50 percent in amount of all outstanding Notes of this issue join in the suit or proceeding.”  It is in the Company’s and Noteholders’ interest to have the “Events of Default” provisions governing Class 3 Notes be amended to “conform” to the aforementioned forbearance from suit limitations.

Agreement

1.   Modifications.  The undersigned agree to the modifications to the Purchase Agreement as follows:

Section 1. (b) (ii): The sentence in this section, “Payments will be applied first to accrued interest and then to principal.” shall be replaced with as follows:

June 18, 2010 — Integral Vision, Inc. — Consent to Modifications

 

  

1

  

Payments to Class 2 Noteholders will be applied first to accrued interest and then to principal unless a specific Class 2 Noteholder notifies the Company in writing (with said written notice being received by the Company on or before the Company makes a payment to said Class 2 Noteholder) that it wants payments or a portion of said payments (as specified in said written notice to the Company by the Class 2 Noteholder) applied first to principal and then to accrued interest.

Section 14.1. (a): The following shall be added after the word “Agent” in said section:

Notwithstanding the foregoing, it shall not be considered an Event of Default if the Company defaults in the payment of any part of the principal or interest due pursuant to any Class 3 Note when the same shall become due and payable (“Late Class 3 Note Payments”) unless the Company has Late Class 3 Note Payments due to the holders of fifty percent (50%) of the then outstanding Class 3 Notes (said 50% shall be based on the aggregate principal amounts of Class 3 Notes then outstanding);

2.   Voluntary and Informed Execution.  THE PARTIES ACKNOWLEDGE THAT THEY HAVE HAD AN OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL WITH RESPECT TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, AND THAT THE MODIFICATIONS SET FORTH HEREIN WERE KNOWINGLY AND VOLUNTARILY MADE.

3.   Effective Date.  

This agreement shall be effective on the date that the majority of the holders of the Notes and Shares currently outstanding under said Purchase Agreement, the Company (as authorized by its Board of Directors), and the Agent have signed this Consent to Modification

Signed:

Integral Vision, Inc.

 

	
/s/ Charles J. Drake

	  
	
Charles J. Drake

	
Chairman

 

June 18, 2010 — Integral Vision, Inc. — Consent to Modifications

 

  

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Signed:

	  
	
J.M. Warren Law Offices, P.C., As Agent

	  
	  
	 
/s/ J.Michael Warren

	
 

	
J. Michael Warren

	  
	  
	
Signed:

	  
	
John R. Kiely, III

	  
	
John R. Kiely, III Trust dated May 22, 2007,

	
John R. Kiely, III, Trustee

	  
	
John R. & Margaret Lee Kiely Revocable Trust,

	
John R. Kiely, III, Trustee

	  
	
Michael Hughes Kiely Family Trust, dated November 4, 1986,

	
John R. Kiely, III, Trustee

	  
	  
	  
	 
/s/ John R. Kiely, III

	
 

	
John R. Kiely, III

	
In his respective capacities

	  
	  
	
Signed:

	  
	
Michael H. Kiely

	  
	
Michael H. Kiely, Beneficiary (self-directed IRA account)

	
TD Ameritrade, Inc., Custodian for Michael H. Kiely, Account # 370-91506

	  
	
Michael H. Kiely, Trustee for the Michael Hughes Kiely Family Trust, dated November 4, 1986

	  
	  
	 
/s/ Michael H. Kiely

	
 

	
Michael H. Kiely

	
(Personally, as Trustee for Michael Hughes Family Trust, and as Beneficiary for his IRA)

 

June 18, 2010 — Integral Vision, Inc. — Consent to Modifications

  

3

  

Signed:

	
Dean Witter Reynolds

	  	
Industrial Boxboard Company

	
Custodian for John N. Hunter

	  	
John N. Hunter, its General Partner

	
IRA Rollover dtd 3-30-2000

	  	
2249 Davis Court

	
MSDW Account #112-014301

	  	
Hayward, CA  94545

	
245 Lytton Avenue, Suite 200

	  	  
	
Palo Alto, CA  94301

	  	  

	
J.N. Hunter and J.A. Hunter, Trustees

	  	  
	
Industrial Boxboard Corporation

	  	  
	
Profit Sharing Plan and Trust

	  	
by /s/ J.N. Hunter

	
 

	
(July 1, 1989 Restatement and

	  	
J.N. Hunter, in his capacities as

	
subsequent restatements)

	  	
Beneficial Owner of the IRA Rollover,

	
2249 Davis Court

	  	
Trustee of the Profit Sharing Plan,

	
Hayward, CA  94545

	  	
and General Partner of the Industrial

	  	  	
Boxboard Company

 

June 18, 2010 — Integral Vision, Inc. — Consent to Modifications

 

  

4Class 2 Note Amendments – Dated May 17, 2011

The maturity date of all of Integral Vision, Inc.’s (the “Company”) Class 2 Notes amended with this amendment and held in the name of the undersigned as of May 17, 2011 shall be extended to July 1, 2013.

Specified Orders (and related terms):

The Specified Orders for these Class 2 Notes shall be amended to the terms as follows:

Class 2 Notes which are amended with this amendment (“May 17 Class 2 Notes”) shall be repaid from 40% (forty percent) of all payments received by the Company (including, without limitation any Subsidiary of the Company [whether partly or wholly owned by the Company] or successor to the Company) (“Company and its Subsidiaries”) for the design, sale, or service (including modifications or additions thereto) for all display inspection systems or sales or contracts relating thereto:

	
 

	
a.

	
above $6 million from May 1, 2011 through January 1, 2012,

	
 

	
b.

	
above $6.5 million from May 1, 2011 through February 1, 2012 (payments made to May 17 Note holders pursuant to “a.” above shall reduce the amount due May 17 Class 2 Note holders pursuant to this section “b.”),

	
 

	
c.

	
above $7.0 million from May 1, 2011through March 1, 2012 (payments made to May 17 Note holders pursuant to “a.” through “b.” above shall reduce the amount due May 17 Class 2 Note holders pursuant to this section “c.”),

	
 

	
d.

	
increased by $500,000 for each month after March 1, 2012 above the $7.0 million in “c.” above until all of the Company’s May 17 Class 2 Notes are repaid in full including accrued interest due thereon.  Payments made to May 17 Class 2 Note holders pursuant to “a.” through “c.” combined with payments made for any month after March 1, 2012 shall reduce the amount due May 17 Class 2 Note holders for subsequent months after March 1, 2012.

For example, for the period May 1, 2011 through July 1, 2012, the Company is obligated to repay May 17, 2011 Class 2 Note holders 40% of all payments received by the Company above $9.0 million (with payments made to May 17 Class 2 Note holders pursuant to these Specified Orders prior to June 1, 2012 reducing the amount due May 17 Class 2 Note holders for the month ending July 1, 2012.

Other terms and conditions:

This May 17 Class 2 Note holder hereby waives (retroactively) its right to receive any payments due it pursuant Specified Orders terms prior to May 17, 2011 that were not remitted to it.

Other terms and conditions (continued):

 

  

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1.

	
Amounts payable to May 17 Class 2 Notes pursuant to the above terms shall be paid first to the latest issued May 17 Class 2 Notes then outstanding until said note is paid in full including accrued interest due thereon.  If more than one May 17 Class 2 Note was issued on the same date, said note holders will share an undivided interest in payments payable by the Company until their notes are paid in full including accrued interest due thereon.  For the purpose of this section, all Class 2 Notes outstanding on September 15, 2008 (the date of a major restructuring of the Company’s notes – $1,576,000 principal face amount) shall be considered to have been issued September 15, 2008.

	
2.

	
All deposits received by the Company and its Subsidiaries on orders placed by its customers shall not be included in the calculations of payments received by the Company and its Subsidiaries until the Company and its Subsidiaries has received the earlier of a second progress payment or the final payment for the system or systems ordered for which the deposit payment was made.

	
3.

	
Additionally, any sales commissions payable to agents of the Company and its Subsidiaries shall be excluded from the amounts of payments received by the Company and its Subsidiaries when calculating the amounts payable to May 17 Class 2 Note holders – said excluded commissions are hereby limited to a maximum of 15% (fifteen percent) of the payment or partial payment received by the Company and its Subsidiaries pursuant to an order.  For the purposes of this section, commissions payable to employees or former employees of the Company and its Subsidiaries (former employees being defined individuals employed by the Company and its Subsidiaries at any time after May 17, 2011) shall not be excluded from the amounts of payments received by the Company and its subsidiaries when calculating the payments due May 17 Class 2 Note holders.

	
4.

	
This May 17 Class 2 Note holder hereby waives any Default Interest payments due on said notes retroactively from September 30, 2010 through May 17, 2011.

	
5.

	
If the Company elects to repay May 17 Class 2 Notes from other funds than those payments required pursuant to the Specified Orders herein, said repayments shall be made in the same order as in Section “1.” above with the following exception:  The designated Agent of the Note holders (pursuant to the Fifth Amended and Restated Note and Warrant Purchase Agreement) may direct the Company to make up to $100,000 of payments to note holders based on “special circumstances” of said note holders rather than paying note holders in the order specified in Section “1.” above.  The Agent’s determination of “special circumstances” shall be in its sole discretion.  The current Agent is The Klonoff Company, Inc.

Other terms and conditions (continued):

Class 2 Note Amendments — Dated May 17, 2011

 

  

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6.

	
This amendment shall be effective when Class 2 Note holders holding at least 90% (ninety percent) of the principal face amount of all of the Company’s Class 2 Notes outstanding at May 17, 2011 sign this amendment.

All of the Class 2 Notes held in the name of the undersigned Note holders as of May 17, 2011 shall be amended according to the terms herein.

Additionally, the Class 2 Notes issued in the name of John R. Kiely, III Trust dated May 22, 2007, John R. Kiely, III, Trustee since September 27, 2010 shall have their trust name corrected to the Kiely 1979 Trust FBO John R. Kiely, III, John R. Kiely, III, Trustee.  The six notes incorrectly titled are as follows: 1) Note 140 issued September 27th in the amount of $86,000, 2) Note 141 issued September 28th in the amount of $39,000, 3) Note 151 issued January 26th in the amount of $65,000, 4) Note 153 issued February 23rd in the amount of $65,000, 5) Note 156 issued March 28th in the amount of $55,000, and 6) Note 159 issued April 20th in the amount of $50,000.  All of the funds for these six notes came from the Kiely 1979 Trust FBO John R. Kiely, III, John R. Kiely, III, Trustee.

	
John R. Kiely, III,

	
John R. Kiely, III, Co-Trustee

	
John R. Kiely, III Trust dated May 22, 2007

	
Michael Hughes Kiely 1986 Family Trust

	
17817 Davis Road

	
dated November 3, 1986

	
Dundee, Michigan  48131

	
17817 Davis Road

	  	
Dundee, Michigan  48131

	  	  
	
John R. Kiely, III, Trustee

	
John R. Kiely, III, Trustee

	
John R. & Margaret Lee Kiely Revocable Trust

	
Kiely 1979 Trust FBO John R. Kiely, III

	
in care of First Republic Investment Management

	
17817 Davis Road

	
Custodian Account # A 9 G - 3 0 1 7 5 7

	
Dundee, Michigan  48131

	
1000 SW Broadway, Suite 1810

	  
	
Portland, OR  97205

	
 

	
/s/ John R. Kiely, III

	  
	
By John R. Kiely, III in his respective capacities

	  

Note:  Michael H. Kiely, Co-Trustee of the Michael Hughes Kiely 1986 Family Trust has to sign a note amendment for the notes held is said trust to be amended.

	
Michael H. Kiely (personally)

	
Michael H. Kiely, Co-Trustee

	  	
Michael Hughes Kiely 1986 Family Trust

	
30 Gladys Drive

	
dated November 3, 1986

Class 2 Note Amendments — Dated May 17, 2011 (corrected)

 

  

Page 3 of 5

  

	
Spring Valley, NY  10977

	
17817 Davis Road

	  	
Dundee, Michigan  48131

	
/s/ Michael H. Kiely

	  
	
By Michael H. Kiely in his respective capacities

	  

	
Note:

	
John R. Kiely, III, Co-Trustee of the Michael Hughes Kiely 1986 Family Trust has to sign a note amendment for the notes held is said trust to be amended.

 

Dale Renee Kehoe, Trustee

Dale Renee Kehoe Living Trust

in care of P. Robert Klonoff

1631 North 201st Street

Shoreline, WA 98133

	
/s/ Dale Renee Kehoe

	  
	
By Dale Renee Kehoe, Trustee

	  

 

Michael H. Kiely (self directed) IRA account.

This custodian for this account was TD Ameritrade, Inc., Account # 370-91506.  Michael has transferred this account to Equity Trust Company.  Equity Trust Company has assigned account

# 83574 to this IRA.

	
/s/ Michael H. Kiely

	  
	
By Michael H. Kiely, beneficiary

	  

Maria P. Kiely (self directed) IRA account

This custodian for this account was TD Ameritrade, Inc., Account # 370-91507.  Maria has transferred this account to Equity Trust Company.  Equity Trust Company has assigned account

# 83580 to this IRA.

 

	/s/ Maria P. Kiely	 
	
By Maria P. Kiely, beneficiary 

	  
	
P. Robert Klonoff and Susan J. Klonoff

	  
	
1631 North 201st Street

	  
	
Shoreline, WA 98133

	  

Class 2 Note Amendments — Dated May 17, 2011 (corrected)

 

  

Page 4 of 5

  

 

	
/s/ P. Robert Klonoff

	 	
/s/ Susan J. Klonoff

	
P. Robert Klonoff

	 	
Susan J. Klonoff

The Klonoff Company, Inc.

	
/s/ P. Robert Klonoff

	  
	
By P. Robert Klonoff, its President

	  

Susan W. Pillsbury, Trustee

Susan W. Pillsbury 1998 Revocable

Trust, dtd 3-13-0998

	
/s/ Susan W. Pillsbury

	  
	
Susan W. Pillsbury,

	  
	
Trustee

	  

	
John N. Hunter, Trustee

	  	
John N. Hunter (personally)

	
Industrial Boxboard Corporation

	  	
in care of

	
Profit Sharing Plan and Trust

	  	
Industrial Boxboard Corporation

	
2247 Davis Court

	  	
2247 Davis Court

	
Hayward, CA  94545

	
  

	
Hayward, CA  94545

	
/s/ J.N. Hunter

	  
	
By J. N. Hunter, in his respective capacities

	  

Class 2 Note Amendments — Dated May 17, 2011 (corrected)

 

  

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