Exhibit 10.1

AMENDMENT TO LOAN AND SECURITY AGREEMENT

This Amendment to Loan and Security Agreement (this “Amendment”) is entered into
as of March 30, 2006, by and between SQUARE 1 BANK (“Bank”) and IRVINE SENSORS
CORPORATION (“Borrower”).

RECITALS

Borrower and Bank are parties to that certain Loan and Security Agreement dated
as of December 30, 2005, as amended from time to time (the “Agreement”). On
March 8, 2006, Bank delivered to Borrower a Notice of Default (the “NOD”). The
parties desire to amend the Agreement in accordance with the terms of this
Amendment.

NOW, THEREFORE, the parties agree as follows:

1. Bank hereby waives Borrower’s failure to comply with Section 6.7(c) of the
Agreement as in effect prior to this Amendment, solely for the period ended
January 29, 2006.

2. The restriction on Advances set forth in the NOD hereby is lifted and of no
further force or effect.

3. Section 6.7(a) of the Agreement hereby is amended and restated in its
entirety to read as follows:

“(a) Profitability. As of the last day of each calendar month commencing
August 31, 2006, Profitability of not less than $1.00 for such month, on a
rolling 3-month basis.”

4. Section 6.7(b) of the Agreement hereby is amended and restated in its
entirety to read as follows:

“(b) Debt Service Coverage Ratio. A ratio of EBITDA plus non-cash employee
retirement plan contributions, less cash taxes and cash unfinanced Capitalized
Expenditures, to the principal and interest payments due on the Credit
Extensions during the period, plus any cash principal and interest payments due
on account of Subordinated Debt during the period; all as of the last day of
each month for the rolling three (3) months ending on that date, of not less
than (i) 1.20 to 1.00 from June 30, 2006 through the first anniversary of the
Closing Date; and (ii) 1.25 to 1.00 thereafter.”

5. Section 6.7(c) of the Agreement hereby is amended and restated in its
entirety to read as follows:

“(c) Tangible Net Worth Plus Subordinated Debt. Commencing with the reporting
period ending February 28, 2006, a Tangible Net Worth plus Subordinated Debt at
all times of not less than $3,850,000, increasing quarterly by 50% of net profit
(but not decreasing for losses) and by 100% of any favorable accounting
adjustments to a component of Tangible Net Worth.”

6. New Section 6.2(e) hereby is added to the Agreement to read as follows:

“(e) By Friday of each week, a weekly cash flow forecast, in form and content
reasonably acceptable to Bank, for the following week.”

7. Exhibit E to the Agreement hereby is replaced with Exhibit E attached hereto.

8. No course of dealing on the part of Bank or its officers, nor any failure or
delay in the exercise of any right by Bank, shall operate as a waiver thereof,
and any single or partial exercise of any such right shall not preclude any
later exercise of any such right. Bank’s failure at any time to require strict
performance by Borrower of any provision shall not affect any right of Bank
thereafter to demand strict compliance and performance. Any suspension or waiver
of a right must be in writing signed by an officer of Bank.

9. Unless otherwise defined, all initially capitalized terms in this Amendment
shall be as defined in the Agreement. The Agreement, as amended hereby, shall be
and remain in full force and effect in accordance with its respective terms and
hereby is ratified and confirmed in all respects. Except as expressly set forth
herein, the

 

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execution, delivery, and performance of this Amendment shall not operate as a
waiver of, or as an amendment of, any right, power, or remedy of Bank under the
Agreement, as in effect prior to the date hereof.

10. Borrower represents and warrants that the Representations and Warranties
contained in the Agreement (except as are made as of an earlier date) are true
and correct as of the date of this Amendment, and that, except as waived hereby,
no Event of Default has occurred and is continuing.

11. As a condition to the effectiveness of this Amendment, Bank shall have
received, in form and substance satisfactory to Bank, the following:

(a) this Amendment, duly executed by Borrower;

(b) a Certificate of the Secretary of Borrower with respect to incumbency and
resolutions authorizing the execution and delivery of this Amendment;

(c) an amendment fee in the amount of $10,000, which may be debited from any of
Borrower’s accounts;

(d) all reasonable Bank Expenses incurred through the date of this Amendment,
which may be debited from any of Borrower’s accounts; and

(e) such other documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate.

12. This Amendment may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
instrument.

[Balance of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first
date above written.

 

IRVINE SENSORS CORPORATION By:   /s/ JOHN J. STUART, JR. Title:   Sr. VP & CFO  
  SQUARE 1 BANK By:   /s/ MICHAEL BERRIER Title:   SVP

[Signature Page to Amendment to Loan & Security Agreement]

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EXHIBIT E

COMPLIANCE CERTIFICATE

 

TO:         SQUARE 1 BANK

 

FROM:   IRVINE SENSORS CORPORATION

The undersigned authorized officer of IRVINE SENSORS CORPORATION hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the “Agreement”), (i) Borrower is
in complete compliance for the period ending                      with all
required covenants except as noted below and (ii) all representations and
warranties of Borrower stated in the Agreement are true and correct as of the
date hereof. Attached herewith are the required documents supporting the above
certification. The Officer further certifies that these are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenant

  

Required

   Complies Monthly financial statements   

Monthly within 30 days

   Yes    No Annual (CPA Audited)   

FYE within 150 days

   Yes    No 10K and 10Q   

(as applicable)

   Yes    No A/R & A/P Agings, Borrowing Base Cert.   

Monthly within 10 days

   Yes    No Cash flow forecasts   

Weekly by Friday of each week

   Yes    No A/R Audit   

Initial and Semi-Annual

   Yes    No IP Report   

Quarterly within 30 days

   Yes    No Total amount of Borrower’s cash and investments   

Amount: $                    

      Total amount of Borrower’s cash and investments maintained with Bank   

Amount: $                    

              

Financial Covenant

  

Required

  

Actual

   Complies Minimum Profitability (Rolling 3-Month basis; commencing 8/06)   
$1.00    $                        Yes    No Minimum Debt Service Coverage Ratio
(Rolling 3-Month basis; commencing 6/06)    1.20:1.001                    :1.00
   Yes    No Minimum Tangible Net Worth (from 2/28/06)    $3,850,0002   
$                        Yes    No

 

1 Increasing to 1.25:1.00 from and after the 13th month following the Closing
Date

 

2 Plus 50% of quarterly net income (but not decreasing for losses) and 100% of
favorable accounting adjustments to a component of Tangible Net Worth

 

         Comments Regarding Exceptions: See Attached.    BANK USE ONLY          

Received by:                                                               

Sincerely,    AUTHORIZED SIGNER          

Date:                                                               

         

Verified:                                                               

                                                                               
  
SIGNATURE    AUTHORIZED SIGNER          

Date:                                                               

                                                                               
  
TITLE             Compliance Status                    Yes             No       
                                            
                                           
DATE