F. The Company desires to amend and modify the terms of the Promissory Notes, the SeniorSubordinated Notes and the Security Agreements to permit the New Financing, and the undersignedHolders (consisting, collectively, of the Required Holders (as defined in the Promissory Notes andthe Senior Subordinated Notes) (the “**Required Holders**”)) and the Holder Representative, acting atthe direction of the Required Holders, have agreed to such amendments and modifications and havefurther agreed with the Purchasers to the intercreditor provisions set forth herein.ACCORDINGLY, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, the parties hereto agree as follows:**SECTION 1**Definitions. As used herein, terms that are defined herein shall have themeanings as so defined, and terms not so defined shall have the meanings as set forth in thePromissory Notes, the Senior Subordinated Notes and the Security Agreements, as applicable.**SECTION 2**Amendments to the Promissory Notes. Each of the Promissory Notes shall beamended as follows:(a) The definition of “Permitted Indebtedness” in Section 31 thereof is hereby amended andrestated in its entirety as follows:““**Permitted Indebtedness**” means (A) Indebtedness incurred by the Company that is madeexpressly subordinate in right of payment to the Indebtedness evidenced by this Note, asreflected in a written agreement reasonably acceptable to the Holder Representative andapproved by the Holder Representative in writing, and which Indebtedness does not provide atany time for (1) the payment, prepayment, repayment, repurchase or defeasance, directly orindirectly, of any principal or premium, if any, thereon until ninety-one (91) days afterthe Maturity Date or later and (2) total interest and fees at a rate in excess of sixpercent (6%) per annum, (B) Indebtedness secured by Permitted Liens, (C) Indebtedness totrade creditors or for professional services incurred in the ordinary course of business,(D) any Bridge Notes, (E) senior subordinated Indebtedness in an aggregate principal amountnot to exceed $4,000,000 owing to Costa Brava Partnership III L.P., The Griffin Fund, LP andto certain other investors (on substantially the same terms as such Indebtedness owing toCosta Brava Partnership III L.P.), (F) Indebtedness evidenced by 12% SubordinatedSecured Convertible Notes due 2015 in an aggregate principal amount not to exceed $7,000,000owing to Costa Brava Partnership III L.P., The Griffin Fund, LP and to certain otherinvestors (on substantially the same terms as such Indebtedness owing to Costa BravaPartnership III L.P. and The Griffin Fund, LP) (G) Indebtedness owing to or held bySummit Financial Resources, L.P. incurred by the Company (but in the case of any suchobligations in respect of principal, limited to an aggregate principal amount not more than$500,000 in excess of the aggregate principal amount of the Indebtedness owing under thisclause (G) on March 16, 2011) to factor or finance its accounts receivable, and(H) extensions, refinancings and renewals of any items of Permitted Indebtednessdescribed in clauses (A) through (F) above, provided that the principal amount isnot increased or the terms modified toimpose more burdensome terms upon the Company or its Subsidiary, as the case maybe.”1
 
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(b) The definition of “Permitted Liens” in Section 31 thereof is hereby amended and restatedin its entirety as follows:““**Permitted Liens**” means (i) any Lien for taxes not yet due or delinquent or being contestedin good faith by appropriate proceedings for which adequate reserves have been establishedin accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of businessby operation of law with respect to a liability that is not yet due or delinquent, (iii) anyLien created by operation of law, such as materialmen’s liens, mechanics’ liens and othersimilar liens, arising in the ordinary course of business with respect to a liability thatis not yet due or delinquent or that are being contested in good faith by appropriateproceedings, (iv) Liens securing the Company’s obligations under the Notes, (v) Liens (A)upon or in any equipment acquired or held by the Company or any of its Subsidiaries tosecure the purchase price of such equipment or indebtedness incurred solely for the purposeof financing the acquisition or lease of such equipment, or (B) existing on such equipmentat the time of its acquisition, provided that the Lien is confined solely to the property soacquired and improvements thereon, and the proceeds of such equipment, (vi) Liens securingthe Company’s obligations under the Indebtedness described in clauses (E), (F) and(G) of the definition of “Permitted Indebtedness” (but in the case of anyIndebtedness described in such clause (G), limited to the security interests grantedunder the agreement governing such Indebtedness as in effect on the Initial Closing Date),(vii) Liens incurred in connection with the extension, renewal or refinancing of theindebtedness secured by Liens of the type described in clauses (i) through (vi) above,provided that any extension, renewal or replacement Lien shall be limited to the propertyencumbered by the existing Lien and the principal amount of the Indebtedness being extended,renewed or refinanced does not increase, (viii) leases or subleases and licenses andsublicenses granted to others in the ordinary course of the Company’s business, notinterfering in any material respect with the business of the Company and its Subsidiariestaken as a whole, (ix) Liens in favor of customs and revenue authorities arising as a matterof law to secure payments of custom duties in connection with the importation of goods, and(x) Liens arising from judgments, decrees or attachments in circumstances not constitutingan Event of Default under Section 5(a)(vi).”**SECTION 3**Amendments to the Senior Subordinated Notes. Each of the SeniorSubordinated Notes shall be amended as follows:(a) Section (1)(b) thereof is hereby amended and restated in its entirety as follows:“Mandatory. The **“Maturity Date”**shall be the earlier to occur of March 16,2013, and the fourth (4th) Business Day following the delivery of a writtennotice from the Holder to the Company requesting the repayment of all or part of theoutstanding Principal and accrued and unpaid Interest thereon (the “**Demand Notice**”);provided, however, that the Company shall not be     1 Note: Underlining indicates new or amended language.
 
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obligated to make any such repayment prior to July 16, 2012.On the Maturity Date, the Holder shall surrender this Note to the Company and the Companyshall pay to the Holder in cash an amount equal to the outstanding Principal and accrued andunpaid Interest thereon or, if less, the amount of outstanding Principal and accrued andunpaid Interest set forth in the Demand Notice (the “**Demand Amount**”). If the Demand Amountis less than the Principal balance outstanding on the Note, the Company will issue a newNote (in accordance with Section 21(d)) to the Holder representing the remaining Principalbalance.”(b) The definition of “Permitted Indebtedness” in Section 31 thereof is hereby amended andrestated in its entirety as follows:““**Permitted Indebtedness**” means (A) Indebtedness incurred by the Company that is madeexpressly subordinate in right of payment to the Indebtedness evidenced by this Note, asreflected in a written agreement reasonably acceptable to the Holder Representative andapproved by the Holder Representative in writing, and which Indebtedness does not provide atany time for (1) the payment, prepayment, repayment, repurchase or defeasance, directly orindirectly, of any principal or premium, if any, thereon until ninety-one (91) days afterthe Maturity Date or later and (2) total interest and fees at a rate in excess of sixpercent (6%) per annum, (B) Indebtedness secured by Permitted Liens, (C) Indebtedness totrade creditors or for professional services incurred in the ordinary course of business,(D) any Bridge Notes, (E) Indebtedness owing under the Company’s 12% convertible securednotes due 2015, in an aggregate amount not to exceed $11,020,800 (the “**Convertible Notes**”),(F) Indebtedness owing under the Company’s 12% convertible secured notes due 2015 in anaggregate principal amount not to exceed $7,000,000 (the “**New Convertible Notes**”) (G)Indebtedness owing to or held by Summit Financial Resources, L.P. incurred by the Company(but in the case of any such obligations in respect of principal, limited to an aggregateprincipal amount not more than $500,000 in excess of the aggregate principal amount of theIndebtedness owing under this clause (G) on the Initial Closing Date) to factor orfinance its accounts receivable (the “**Summit Debt**”) and (H) extensions, refinancingsand renewals of any items of Permitted Indebtedness described in clauses (A) through(F) above, provided that the principal amount is not increased or the terms modifiedto impose more burdensome terms upon the Company or its Subsidiary, as the case may be.”(c) The definition of “Permitted Liens” in Section 31 thereof is hereby amended and restatedin its entirety as follows:““**Permitted Liens**” means (i) any Lien for taxes not yet due or delinquent or being contestedin good faith by appropriate proceedings for which adequate reserves have been establishedin accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of businessby operation of law with respect to a liability that is not yet due or delinquent, (iii) anyLien created by operation of law, such as materialmen’s liens, mechanics’ liens and othersimilar liens, arising in the ordinary course of business with respect to a liability thatis not yet due or delinquent or that are being contested in good faith by appropriateproceedings, (iv) Liens securing the Company’s obligations under the Notes, (v) Liens (A)upon or in any equipment acquired or
 
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held by the Company or any of its Subsidiaries to secure the purchase price of such equipment or indebtedness incurredsolely for the purpose of financing the acquisition or lease of such equipment, or (B)existing on such equipment at the time of its acquisition, provided that the Lien isconfined solely to the property so acquired and improvements thereon, and the proceeds ofsuch equipment, (vi) Liens securing the Convertible Notes, provided that such Liens arejunior to the Liens securing the Notes, (vii) Liens securing the New Convertible Notes,provided that such Liens are junior to the Liens securing the Notes, (viii)Liens securing the Summit Debt (but limited to the Liens granted under the agreementgoverning such Indebtedness as in effect on the Initial Closing Date), (ix) Liensincurred in connection with the extension, renewal or refinancing of the indebtednesssecured by Liens of the type described in clauses (i) through (viii) above, providedthat any extension, renewal or replacement Lien shall be limited to the property encumberedby the existing Lien and the principal amount of the Indebtedness being extended, renewed orrefinanced does not increase, (x) leases or subleases and licenses and sublicensesgranted to others in the ordinary course of the Company’s business, not interfering in anymaterial respect with the business of the Company and its Subsidiaries taken as a whole,(xi) Liens in favor of customs and revenue authorities arising as a matter of law tosecure payments of custom duties in connection with the importation of goods, and(xii) Liens arising from judgments, decrees or attachments in circumstances notconstituting an Event of Default under Section 5(a)(vi).”**SECTION 4**Amendment to the Security Agreement. The Security Agreement shall beamended as follows:(a) The definition of “Permitted Liens” in Section 2 of the Security Agreement is herebyamended and restated in its entirety as follows:““**Permitted Liens**” means the liens and security interests permitted by the Notes(as amended by that certain Second Omnibus Amendment, dated as of July 1, 2011, by andamong the Debtor, the Holder Representative, Costa Brava, Griffin, and certain otherinvestors party thereto), including, for the avoidance of doubt, the liens and securityinterests securing Debtor’s obligations with respect to the Existing Secured Note.”**SECTION 5**Amendment to the Senior Subordinated Note Security Agreement. The SeniorSubordinated Note Security Agreement shall be amended as follows:(a) The definition of “Permitted Liens” in Section 2 of the Senior Subordinated Note SecurityAgreement is hereby amended and restated in its entirety as follows:““**Permitted Liens**” means the liens and security interests permitted by the Notes (asamended by that certain Second Omnibus Amendment, dated as of July 1, 2011, by and among theDebtor, the Holder Representative, Costa Brava, The Griffin Fund, LP, and certain otherinvestors party thereto), including, for the avoidance of doubt, the liens and securityinterests securing Debtor’s obligations with respect to the Existing Secured Note.”
 
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**SECTION 6**Intercreditor Provisions.(a) Subject to the security interests of the Existing Secured Note Holder, the New SecuredNote Holders and Summit (as such terms are defined in the Security Agreement), notwithstanding thedate, manner and order of perfection of the security interests in and liens on the Collateral (assuch term is defined in the Security Agreement and the security agreement being entered into inconnection with the New Notes) and notwithstanding any provision of the Uniform Commercial Code, asin effect in any state of appropriate jurisdiction, or any other applicable law or decision, asamong the holders of Promissory Notes and the Purchasers of New Notes (each, a “**Creditor**”), (i)each Creditor shall rank pari passu with respect to their respective security interests in theCollateral and (ii) upon any foreclosure, sale or other disposition in liquidation of all or anypart of the Collateral, each Creditor shall share in the resulting income pertaining to and theproceeds of such foreclosure, sale or other disposition in liquidation of the Collateral pro ratain the manner set forth in Section 6(f) below.(b) Subject to the security interests of the Existing Secured Note Holder, the New SecuredNote Holders and Summit, and except as expressly provided herein, this Amendment shall not limit orimpair the right of a Creditor to take any action permitted under their respective Promissory Notesor New Notes. Subject to the security interests of the Existing Secured Note Holder, the NewSecured Note Holders and Summit, to the extent otherwise permitted under the Promissory Notes orNew Notes, as applicable, that a Creditor holds, a Creditor may proceed to accelerate or demandpayment of the Obligations (as such term is defined in the Security Agreement and the securityagreement being entered into in connection with the New Notes) payable to it, and enforce any otherright or remedy available to it against the Company; provided, however, (i) if aCreditor accelerates or demands payment of any Obligations payable to it, or if there is anautomatic acceleration or demand for payment of any Obligations payable to such Creditor under theterms of their respective Promissory Notes or New Notes as the result of the filing of a petitionin bankruptcy or similar event, such Creditor shall on the date of such acceleration or demand forpayment (or promptly following an automatic acceleration or demand) give written notice ofacceleration or demand to the other Creditor; (ii) prior to enforcing any right to foreclose orotherwise realize on the Collateral after acceleration or demand for payment of the Obligations, orany of them, a Creditor shall give at least 10 days’ prior written notice to the other Creditor ofits any other right or remedy intention to enforce such right; and (iii) prior to enforcing anyother right or remedy available to it against the Company or the Collateral, a Creditor shall giveat least three business days’ prior written notice to the other Creditor of its intention toenforce such right or remedy. With the agreement of the other Creditor, such 10-day and three-daynotice requirements may be waived or reduced at any time.
 
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(c) Subject to the security interests of the Existing Secured Note Holder, the New SecuredNote Holders and Summit, it is the intention of the Creditors that whenever practicable, anyforeclosure or other realization on the Collateral after acceleration or demand for payment of theObligations, or any of them, shall be coordinated among the Creditors and constitute a commonforeclosure or realization on behalf of the Creditors. Each Creditor agrees to endeavor in goodfaith to consult with the other Creditor prior to any foreclosure or other realization on theCollateral after acceleration or demand for payment of the Obligations, or any of them, in order toagree on a common course of action; provided, however, that, to the extentotherwise permitted under the Promissory Notes or New Notes to which it is a party, a Creditor mayproceed immediately to realize on Collateral without any such consultation if it determines in itscommercially reasonable discretion that the time necessary for such consultation woulddiminish the proceeds of such realization. Subject to the foregoing, if any Creditor shall havenotified the other Creditor pursuant to Section 6(b), above, of its intention to enforce any rightto foreclose or otherwise realize on the Collateral after acceleration or demand for payment of theObligations, or any of them, and if such Creditor shall have thereafter determined within the10-day period referred to in Section 6(b) above, to enforce such right, then such Creditor (a“**Foreclosing Creditor**”) shall proceed to foreclose and realize on the Collateral on its own behalfand as agent on behalf of the other Creditor (the “**Non-Foreclosing Creditor**”). The method offoreclosure or other realization on the Collateral (including, without limitation, theacceptability of any bid at any foreclosure sale or transfer in lieu of foreclosure and the methodof collection of accounts receivable or other rights to payment) shall be determined by theForeclosing Creditor after consultation with the Non-Foreclosing Creditor, as the case may be,provided that any such foreclosure or realization shall be conducted by the Foreclosing Creditor ingood faith and in a commercially reasonable and expeditious manner, and further provided that theForeclosing Creditor shall have no right to bid in any Obligations payable to the Non-ForeclosingCreditor without the express written consent of the Non-Foreclosing Creditor. The Non-ForeclosingCreditor hereby agrees to provide the Foreclosing Creditor with any documents or powers necessaryfor the Foreclosing Creditor to foreclose and realize on the Collateral on behalf of theNon-Foreclosing Creditor, as provided above. Except as otherwise provided above, and subject tothe requirements of Section 6(b) above, each Creditor shall have the authority to and may proceedat any time to foreclose and realize on the Collateral to the extent otherwise permitted under thePromissory Notes or New Notes to which it is a party.(d) Each Creditor shall be entitled to collect from the Company all payments of allObligations payable to such Creditor at the time and in the manner specified in the Promissory Noteor New Note held by such Creditor. In the event of receipt of such payments from the Company by aCreditor prior to acceleration or demand for payment of the Obligations, or any of them, suchpayments shall belong to such Creditor as its own property and such Creditor shall have noobligation under this Amendment to hold or remit any part of such payments for the account of anyother Creditor.(e) In the event of receipt of any payments from the Company by a Creditor on account of theObligations payable to such Creditor after acceleration or demand for payment of the Obligations ofany of them, such payments shall be held in trust by such Creditor, and shall be promptly appliedto the payment of the Obligations in the manner set forth in Section 6(f) below.(f) In the event of the acceleration or demand for payment of the Obligations, or any of them,or of any foreclosure, sale or other disposition in liquidation of the Collateral, all moneyscollected or received by the Creditors on account of the Obligations or in respect of theCollateral in excess of the amounts paid to discharge prior liens upon the Collateral shall beapplied to the payment of all proper costs and expenses, if any, incurred in the collection thereofor for the protection of the Collateral pro rata in accordance with the amount of such costs andexpenses, and the balance of such moneys shall be applied pro rata to the payment of the PromissoryNotes and New Notes in that proportion which the amount of such Obligations payable to eachCreditor bears to the aggregate amount of such Obligations taken as a whole.
 
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**SECTION 7**Effectiveness. This Amendment shall become effective on the date (the“Effective Date”) on which each of the following conditions is satisfied:(a) The Holder Representative’s receipt of the following, each of which shall be originals orfacsimiles or electronic copies (followed promptly by originals) unless otherwise specified:(1) counterparts of this Amendment, executed and delivered by the Company, the HolderRepresentative, Costa Brava and Griffin;(2) a copy of a good standing certificate of the Company;(3) copies of resolutions of the Board of Directors of the Company, certified by theSecretary of the Company, authorizing and approving the execution, delivery and performanceof the documents and instruments to be delivered pursuant hereto;(4) a copy of the certificate of incorporation and by-laws of the Company, certified bythe Secretary of the Company; and(5) a certificate of incumbency, executed by the Secretary of the Company certifyingthe names, titles and signatures of the officers authorized to execute the documents andinstruments to be delivered pursuant hereto.(b) The Company shall have entered into the Security Agreement, in substantially the formattached as Exhibit A; and(c) The Company shall have obtained all consents or waivers necessary to execute and performits obligations under the New Financing.**SECTION 8**Effect of Amendment. Upon the Effective Date, (i) the applicable portionsof this Amendment shall be a part of each Promissory Note, Senior Subordinated Note or the SecurityAgreements, as the case may be, each as amended hereby, and (ii) each reference in any suchdocument to “this Note”, “this Agreement”, “hereof”, “hereunder”, or words of like import, and eachreference in any other document or agreement to any of the Promissory Notes, the SeniorSubordinated Notes or the Security Agreements shall mean and be a reference to the PromissoryNotes, the Senior Subordinated Notes or the Security Agreements, as the case may be, as amendedhereby. Except as expressly amended hereby, each of the Promissory Notes, the Senior SubordinatedNotes and the Security Agreements amended herein shall remain in full force and effect and arehereby ratified and confirmed by the parties hereto.
 
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**SECTION 9**Representations and Warranties. Each of the parties hereto represents andwarrants that it is duly incorporated or otherwise organized, validly existing and (to the extentapplicable) in good standing under the laws of the jurisdiction of its formation, that it has allrequisite power and authority to enter into this Amendment and that this Amendment has been dulyauthorized, executed and delivered by it and constitutes its legal, valid and binding obligation.Each of the parties hereto other than the Company further represents and warrants that it is (i) an“accredited investor” as that term is defined in Regulation D promulgated under the Securities Actof 1933, (ii) acquiring the New Notes (and the shares of the Company’scommon stock issuable upon conversion thereof) for its own account for investment and not witha view toward distribution in a manner which would violate the Securities Act of 1933 or anyapplicable state securities laws and (iii) aware that the New Notes (and the shares of theCompany’s common stock issuable upon conversion thereof) are “restricted securities” under thefederal securities laws and must be held indefinitely unless subsequently registered under theSecurities Act of 1933 and under applicable state securities laws or an exemption from suchregistration is available.**SECTION 10**Consent. Pursuant to Section 19 of each of the Promissory Notesand the Senior Subordinated Notes, the Required Holders hereby consent to the terms of theamendments to the Promissory Notes, the Senior Subordinated Notes and the Security Agreementscontained in this Amendment and direct the Holder Representative to enter into this Amendment.**SECTION 11**Governing Law; Miscellaneous. (a) **THIS AMENDMENT SHALL BE GOVERNED BY ANDCONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OFCONFLICTS OF LAW.**(b) Headings used herein are for convenience of reference only and shall not affect themeaning of this Amendment.(c) This Amendment may be executed in any number of counterparts, and by the parties hereto onseparate counterparts, each of which shall be an original and all of which taken together shallconstitute one and the same agreement. Executed counterparts may be delivered via facsimile.[*Signatures Follow*]
 
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**IN WITNESS WHEREOF**, the parties have caused this Amendment to be executed by their respectiveduly authorized representatives, as of the date first above written.      **IRVINE SENSORS CORPORATION**