Exhibit 10.2
LIEN RELEASE AGREEMENT
     THIS LIEN RELEASE AGREEMENT (this “Agreement”) is made and entered into
this 18th day of March, 2009 by and among Irvine Sensors Corporation, a Delaware
corporation (the “Company”), and Longview Fund, L.P. and Alpha Capital Anstalt
(collectively, the “Lenders”). Each of the Company and the Lenders are sometimes
referred to herein as a “Party,” and collectively as the “Parties.”
RECITALS
          A. WHEREAS, the Company owes the Lenders principal, interest and
related amounts totaling approximately $3.9 million as of January 31, 2009 (the
“Outstanding Obligations”), as set forth in more detail on Schedule A attached
hereto, pursuant to (i) Series 1 Senior Subordinated Secured Convertible Notes
dated as of December 30, 2005 in favor of the Lenders (the “Series 1 Notes”);
and (ii) a Secured Promissory Note dated July 19, 2007 (the “2007 Promissory
Note”) (collectively, the “Debt Instruments”);
          B. WHEREAS, additional principal and interest obligations of the
Company to the Lenders aggregating $15.0 million were extinguished pursuant to a
public UCC sale of the assets of the Company’s wholly owned subsidiary, Optex
Systems, Inc., on October 14, 2008, thereby retiring all of the obligations of
the Company to the Lenders pursuant to, and resulting in the cancellation of,
(i) the Term Notes dated December 29, 2006 payable to the Lenders (the “Term
Notes”) that were issued pursuant to the Term Loan and Security Agreement dated
as of December 29, 2006 among the Company and the Lenders, as amended or
modified from time to time (the “Term Loan Agreement”); (ii) Series 2 Senior
Subordinated Secured Convertible Notes dated as of December 30, 2005 in favor of
the Lenders (the “Series 2 Notes”); and (iii) Secured Promissory Notes
(Restructuring) dated November 28, 2007 payable to the Lenders (the
“Restructuring Notes”) (collectively, the “Retired Debt Instruments”), and
partially retiring the obligations of the Company pursuant to the Series 1 Notes
and the 2007 Promissory Note;
          C. WHEREAS, as of January 31, 2009, prior to giving effect to this
Agreement, approximately $63,374 remains outstanding under those certain
Contingent Secured Promissory Notes (Buyout) dated as of November 28, 2007 in
favor of the Lenders (the “Contingent Notes”);
          D. WHEREAS, the Lenders are parties to, and the Company’s assets are
secured by liens (the “Liens”) pursuant to, as applicable, the (i) Term Loan
Agreement; (ii) Optex Third Party Security Agreement dated December 29, 2006;
(iii) Irvine Sensors Intellectual Property Security Agreement dated December 29,
2006; (iv) Optex Intellectual Property Security Agreement dated December 29,
2006; (v) Security Agreement dated December 30, 2005 as assigned to the Lenders;
(vi) Subsidiary Security Agreements all dated December 30, 2005 as assigned to
Lenders; (vii) Omnibus Security Interest Acknowledgement dated July 19, 2007;
(viii) Subsidiary Guaranty agreements all dated December 30, 2005 as assigned to
Lenders; (ix) Unconditional Guaranty dated December 29, 2006; (x) Third Party
Security Agreement dated December 29, 2006; (xi) Unconditional Guaranty dated
July 19, 2007; (xii) Collateral Agent Agreement dated July 19, 2007;
(xiii) Collateral Agent Agreement dated as of November 5, 2008; and (xiv)
Intercreditor Agreement dated as of November 5, 2008 (collectively, the
“Security Agreements”);

 

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          E. WHEREAS, the Company has entered into an agreement to sell most of
its patent portfolio and related assets (“Patent Assets”) to a patent
acquisition company (the “Patent Buyer”) for up to a $9.5 million cash payment
and it is anticipated that the Company will be granted a perpetual, worldwide,
royalty-free, non-exclusive license to use the sold patents in its business (the
“Patent Sale and License”), a condition to which is a requirement that the
Lenders release their Liens relating to the Patent Assets; and
          F. WHEREAS, the parties desire to effect a release of the Lenders’
Liens relating to the Patent Assets and extinguishment of a portion of the
Outstanding Obligations under the Debt Instruments.
AGREEMENT
          NOW THEREFORE, in consideration of the foregoing and the agreements
and covenants contained herein, the Parties agree as follows:
          1. Waiver of Default. The Lenders hereby agree to waive ab initio any
Defaults or Events of Default (as defined in the Debt Instruments, Contingent
Notes, Security Agreements and that certain Certificate of Designations of
Rights, Preferences, Privileges and Limitations of Series A-1 10% Cumulative
Convertible Preferred Stock of the Company) relating to the potential delisting
from the Nasdaq Capital Market described in the letter from the Nasdaq Staff
dated January 14, 2009, and any other delisting from the Nasdaq Stock Market.
          2. Repayment and Satisfaction of Outstanding Obligations; Application
of Payments; Treatment of Surviving Obligations. The Parties agree that
$2.8 million of the balance of the Outstanding Obligations (the “Settlement
Payment”) shall be repaid out of the proceeds from the Patent Sale and License,
and the unpaid balance of the Outstanding Obligations shall become “Surviving
Obligations”; provided that the Patent Buyer shall pay such amount directly to
the Lenders at the closing of the Patent Sale and License. The Settlement
Payment shall be applied as set forth on Schedule B attached hereto. Upon the
closing of the Patent Sale and License and the payment of the Settlement
Payment, approximately $63,374 of the principal and no interest on the
Contingent Notes will be outstanding. The Lenders agree that the maturity date
and/or term of the Surviving Obligations and Contingent Notes shall be extended
from December 31, 2009 to September 30, 2010. The Lenders’ Indemnification
rights and rights of enforcement and the right to receive indemnification
related payments will continue to be due and exercisable pursuant to the terms
of the documents giving rise to such rights.
          3. Release of Liens. The Lenders agree to execute and deliver,
concurrent with the execution and delivery of this Agreement, the release of
Liens relating to the Patent Assets attached hereto as Exhibit A which will be
released only upon actual receipt by Lenders of the Settlement Payment. If the
Lenders foreclose on all or substantially all of the operating assets of the
Company, the Company agrees that it will use reasonable best efforts to transfer
the Company’s perpetual, worldwide, royalty-free, non-exclusive license
described in Recital E to the purchaser of all or substantially all of such
operating assets in such foreclosure in accordance with the terms set forth in
such license under the section titled “Limitation on Transferability of Seller
License.”

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          4. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York without regard to
conflicts of laws that would result in the application of the substantive laws
of another jurisdiction.
          5. Attorneys’ Fees. If any action or proceeding in contract or tort
arising out of or relating to this Agreement is commenced by any party to this
Agreement, the prevailing party shall be entitled to receive from the other
party, in addition to any other relief that may be granted, the reasonable
attorneys’ fees, costs and expenses incurred in the action or proceeding by the
prevailing party, along with any reasonable attorneys’ fees, costs and expenses
incurred to collect any amount awarded in connection with any such action or
proceeding.
          6. Waiver of Jury Trial and Setoff; Consent to Jurisdiction; Etc. In
any litigation in any court with respect to, in connection with, or arising out
of this Agreement or any instrument or document delivered pursuant to this
Agreement, or the validity, protection, interpretation, collection or
enforcement hereof or thereof, or any other claim or dispute howsoever arising,
between the parties hereto WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH
LITIGATION AND ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION
ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER
THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH LENDER AGREES THAT THIS SECTION 6
IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGE THAT THE
OTHER PARTY WOULD NOT ENTER THIS AGREEMENT IF THIS SECTION 6 WERE NOT PART OF
THIS AGREEMENT. Each party irrevocably consents to the exclusive jurisdiction of
any State or Federal Court located within the County of New York, State of New
York, in connection with any action or proceeding arising out of or relating to
this Agreement or any document or instrument delivered pursuant to this
Agreement or otherwise. In any such litigation, each party waives, to the
fullest extent it may effectively do so, personal service of any summons,
complaint or other process and agree that the service thereof may be made by
certified or registered mail directed to such party at its address for notice
determined in accordance with this Section 6. Each party hereby waives, to the
fullest extent it may effectively do so, the defenses of forum non conveniens
and improper venue.
          7. Representation by Counsel. The Parties acknowledge and agree that
they have been represented by counsel of their own choice in the negotiations
leading to their execution of this Agreement, that they have read this
Agreement, and have had it fully explained to them by their counsel. The Parties
further acknowledge that the waivers they made herein are knowing, conscious and
with full appreciation that they are forever foreclosed from pursuing any of the
rights so waived and that they understand this Agreement and are signing it
voluntarily and without coercion.
          8. Admissibility of this Agreement. Each of the parties agrees that
any copy of this Agreement signed by it and transmitted by facsimile for
delivery to the other party shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether or not the original
is in existence.
          9. Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified,

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return receipt requested, postage prepaid, (iii) delivered by reputable
overnight courier service with charges prepaid, or (iv) transmitted by hand
delivery, electronic mail, or facsimile, addressed as set forth below or to such
other address as such party shall have specified most recently by written
notice. Any notice or other communication required or permitted to be given
hereunder shall be deemed effective (a) upon hand delivery or delivery by
electronic mail or facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company, to: Irvine Sensors
Corporation, 3001 Red Hill Avenue, Costa Mesa, CA 92650, Attn: Chief Financial
Officer, facsimile: (714) 444-8773, with a copy by facsimile only to: Dorsey &
Whitney LLP, 38 Technology Drive, Irvine, CA 92618, Attn: Ellen S. Bancroft,
Esq., facsimile: (949) 271-5318, and (ii) if to the Lenders, LONGVIEW FUND, LP,
600 Montgomery Street, 44th Floor, San Francisco, CA 94111, Fax: (415) 981-5301,
ALPHA CAPITAL ANSTALT, Pradafant 7, 9490 Furstentums, Vaduz, Lichtenstein, Fax:
011-42-32323196, with an additional copy by facsimile only to: Grushko &
Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
facsimile: (212) 697-3575.
          10. Amendments and Modification. No provision hereof shall be
modified, altered, waived or limited except by written instrument expressly
referring to this Agreement and to such provision, and executed by the parties
hereto.
          11. Counterparts/Execution. This Agreement may be executed in any
number of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. This
Agreement may be executed by facsimile signature and delivered electronically.
          12. Successors and Assigns. Whenever in this Agreement reference is
made to any party, such reference shall be deemed to include the successors,
assigns, heirs and legal representatives of such party. No party hereto may
transfer any rights under this Agreement, unless the transferee agrees to be
bound by, and comply with all of the terms and provisions of this Agreement, as
if an original signatory hereto on the date hereof.
          13. Severability. In the event that any term or provision of this
Agreement shall be finally determined to be superseded, invalid, illegal or
otherwise unenforceable pursuant to applicable law by an authority having
jurisdiction and venue, that determination shall not impair or otherwise affect
the validity, legality or enforceability (i) by or before that authority of the
remaining terms and provisions of this Agreement, which shall be enforced as if
the unenforceable term or provision were deleted, or (ii) by or before any other
authority of any of the terms and provisions of this Agreement provided each
party is able to receive the substantial benefit of this Agreement.
          14. Memorandum of Understanding. Anything to the contrary
notwithstanding, that certain Memorandum of Understanding for Settlement and
Debt

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Conversion dated as of September 19, 2008 among the Parties (the “MOU”) shall
remain in full force and effect, except that the first two sentences of
Section 5.4 of the MOU are deleted.

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          IN WITNESS WHEREOF, this Agreement has been executed to be effective
as of the date and year first above written. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by facsimile signature, which signature shall be deemed of the same
legal effect as an original hard copy signature.

            IRVINE SENSORS CORPORATION
a Delaware corporation
      By:   /s/ JOHN CARSON         John Carson,        President and Chief
Executive Officer        LONGVIEW FUND, L.P.
      By:   /s/ S. MICHAEL RUDOLPH         Name:   S. Michael Rudolph       
Title:   CFO — Investment Advisor        ALPHA CAPITAL ANSTALT
      By:   /s/ KONRAD ACKERMAN         Name:   Konrad Ackerman        Title:  
President   

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SCHEDULE A
As of January 31, 2009

                              Longview   Alpha   Total      
 
                       
Reimbursement of Indemnified Expenses
  $ 302,000             $ 302,000  
 
                       
Interest (Series 1 Notes and 2007 Promissory Note)
  $ 162,397     $ 28,892     $ 191,289  
 
                       
Principal (Series 1 Notes and 2007 Promissory Note)
  $ 3,126,209     $ 321,166     $ 3,447,375        
 
                       
 
  $ 3,590,606     $ 350,058     $ 3,940,664  

 

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SCHEDULE B

                              Longview   Alpha   Total      
 
                       
Settlement Payment from Escrow Proceeds
                  $ (2,800,000 )
 
                       
Reimbursement of Indemnified Expenses
  $ 302,000             $ 302,000  
 
                       
Interest and Principal under Series 1 Notes
  $ 1,921,514     $ 251,686     $ 2,173,200  
 
                       
Interest and Principal under 2007 Promissory Note
  $ 324,800             $ 324,800        
 
                       
 
  $ 2,548,314     $ 251,686     $ 0  
 
                       
Amount remaining on Series 1 Notes
  $ 901,627     $ 98,373     $ 1,000,000  
 
                       
Amount remaining on July 2007 Secured Promissory Note
  $ 140,664             $ 140,664  

 

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EXHIBIT A

 

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RELEASE OF SECURITY INTEREST
     This release of security interest is made and executed by Longview Fund,
L.P., a Delaware corporation, and Alpha Capital Anstalt, a Liechtenstein
company, (together, the “Secured Parties”), in favor of Irvine Sensors
Corporation, a Delaware corporation (“Debtor”).
A. The Secured Parties loaned money to Debtor, and Debtor granted the Secured
Parties a security interest in all of Debtor’s intellectual property assets to
secure indebtedness and obligations of Debtor to the Secured Parties.
B. The Secured Parties recorded their security interest as follows:

                  Debtor   Secured Party   Execution Date   Reel/Frame  
Recordation Date
 
               
Irvine Sensors Corp.
  Longview Fund, L.P. Alpha Capital Anstalt   12/29/2006   018746/0842  
1/05/2007

     NOW, THEREFORE, for valuable consideration received, by its execution of
this Release of Security Interest, the Secured Parties hereby irrevocably and
unconditionally release all right, title and interest in all of the following:
     (a) the patents and patent applications listed in Exhibit A (the
“Patents”);
     (b) all patents and patent applications (i) to which any of the Patents
directly or indirectly claims priority, (ii) for which any of the Patents
directly or indirectly forms a basis for priority, and/or (iii) that directly or
indirectly incorporate by reference, or are directly or indirectly incorporated
by reference into, the Patents;
     (c) all reissues, reexaminations, extensions, continuations, continuations
in part, continuing prosecution applications, requests for continuing
examinations, divisions, registrations of any item in any of the foregoing
categories (a) and (b);
     (d) all non-United States patents, patent applications, and counterparts
relating to the Patents or any item in any of the foregoing categories
(a) through (c), including, without limitation, certificates of invention,
utility models, industrial design protection, design patent protection, other
governmental grants or issuances, and any rights to apply in any or all
countries of the world for patents, certificates of invention, utility models,
industrial design protections, design patent protections, or governmental grants
or issuances of any type related to any of the Patents and the inventions,
invention disclosures, and discoveries therein;
     (e) inventions, invention disclosures, and discoveries described in any of
the Patents of any item in the foregoing categories (a) though (d);
     (f) all rights to apply in any or all countries of the world for patents,
certificates of invention, utility models, industrial design protections, design
patent protections, or other governmental grants or issuances of any type
related to any item in any of the foregoing

 

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categories (a) through (e), including, without limitation, under the Paris
Convention for the Protection of Industrial Property, the International Patent
Cooperation Treaty, or any other convention, treaty, agreement, or
understanding;
     (g) causes of action (whether known or unknown or whether currently
pending, filed, or otherwise) and other enforcement rights under, or on account
of, any of the Patents and/or the rights described in the above subparagraphs
(a) through (f), including, without limitation, all causes of action and other
enforcement rights for
(i) damages,
(ii) injunctive relief, and
(iii) any other remedies of any kind
for past, current and future infringement; and
     (h) all rights to collect royalties and other payments under or on account
of any of the Patents and/or any item in any of the foregoing categories
(a) through (g).
     If necessary or desired, the Secured Parties hereby authorize Debtor’s
authorized representative to file UCC Financing Statement Amendment(s) with the
applicable filing office(s) in order to memorialize the release of any security
interest by the Secured Parties.
     This Release is governed by the law of the State of Delaware, excluding its
choice of law principles to the contrary. This Release shall be binding upon the
Secured Parties and their successors and assigns and inures, to the benefit of,
with respect to the Patents (including any purchaser). The Secured Parties
acknowledge that they are aware that they may hereafter discover facts different
from or in addition to what they now know, believe or suspect to be true with
respect to the matters herein released, that such facts may give rise to claims,
causes of action, damages, consequences or results that are unforeseen or
unsuspected, and that the Secured Parties are nonetheless giving up their
rights, and the releases in this Release Agreement will be and remain in effect
in all respects as complete, general releases, notwithstanding any such
different or additional facts.
     IN WITNESS WHEREOF, the undersigned has executed this Release of Security
Interest on this ___ day of                      2009.

                              Longview Fund, L.P.       Alpha Capital Anstalt  
 
 
                            By:   /s/ S. MICHAEL RUDOLPH       By:   /s/ KONRAD
ACKERMAN                          
 
  Name:   S. Michael Rudolph           Name:   Konrad Ackerman    
 
  Its:   CFO — Investment Advisor           Its: