Filed by Bowne Pure Compliance





Exhibit 10.4




COLLATERAL AGENT AGREEMENT




COLLATERAL AGENT AGREEMENT (this “Agreement”) dated as of November 5, 2008, among S.
Michael Rudolph (the “Collateral Agent”), and Longview Fund, L.P. and Alpha Capital Anstalt
(each an “Initial Lender” and collectively, the “Initial Lenders”), and the Lenders
identified on Schedule A hereto (each a “Bridge Lender” and collectively, the “Bridge
Lenders”). The Initial Lenders and the Bridge Lenders are referred to individually as a
“Lender” and collectively as the “Lenders”. All terms used and not defined herein
shall the meanings ascribed to them in the Term Loan Agreement, as defined below.



WHEREAS, Lenders have loaned funds pursuant to (i) that certain Term Loan and Security
Agreement (“Term Loan Agreement”) by and among Irvine Sensors Corporation (“Irvine
Sensors” or “Debtor” or “Borrower”), a corporation incorporated pursuant to the
laws of the State of Delaware, and the Lenders, dated December 29, 2006, (ii) those certain Series
1 Senior Subordinated Secured Convertible Notes dated December 30, 2005 and Series 2 Senior
Subordinated Secured Convertible Notes dated December 30, 2005 (collectively, the “Notes”),
originally issued by Irvine Sensors pursuant to that certain Securities Purchase Agreement dated as
of December 30, 2005 by and among Irvine Sensors and the purchasers named therein, and subsequently
assigned by the original holders of the Notes to the Lenders pursuant to that certain Assignment of
Series 1 and Series 2 Senior Subordinated Secured Convertible Notes, dated December 29, 2006, (iii)
a Secured Promissory Note (“July 2007 Secured Promissory Note”) issued to Longview Fund
L.P. on July 19, 2007, (iv) Secured Promissory Notes (Restructuring) (“Secured Promissory Notes
Restructuring”) issued to Lenders on November 28, 2007, (v) Secured Promissory Notes (Buyout)
(“Secured Promissory Notes Buyout”) issued to Lenders on November 28, 2007, and (vi) all
other Obligations as such term is defined in the foregoing documents and Initial Lender Security
Documents (defined below) (all items referred to in clauses (i) — (vi) above are collectively
referred to as the “Initial Lenders Obligations”);



WHEREAS, Irvine Sensors has issued to the Bridge Lenders certain Bridge Notes (“Bridge
Notes”) on September 29, 2008, in the aggregate principal amount of up to $1,000,000 and Irvine
Sensors is responsible for Obligations as that term is defined and employed in the Bridge Note and
Bridge Lender Security Documents (defined below) (collectively, the “Bridge Lenders
Obligations”) (the Initial Lenders Obligations and Bridge Lenders Obligations are collectively
referred to as the “Obligations”);



WHEREAS, Initial Lenders and Bridge Lenders have entered into an Intercreditor Agreement
(“Intercreditor Agreement”) at or about the date of this Agreement setting forth their
relative rights in connection with the Obligations;



WHEREAS, the Initial Lenders have entered into a Memorandum of Understanding dated as of
September 19, 2008 (the “MOU”) providing for, among other things, the foreclosure by public
sale of the assets of Optex Systems, Inc., a Texas corporation (“Optex”);



WHEREAS, Irvine Sensor’s obligations to the Lenders are secured by certain collateral;



WHEREAS, it is desirable to provide for the orderly administration of such collateral by
requiring each Lender to appoint the Collateral Agent, and the Collateral Agent has agreed to
accept such appointment and to receive, hold and deliver such collateral, all upon the terms and
subject to the conditions hereinafter set forth; and



WHEREAS, it is desirable to allocate the enforcement of certain rights of the Lenders under
the Obligations for the orderly administration thereof.


 


 









 





NOW, THEREFORE, in consideration of the premises set forth herein and for other good and
valuable consideration, the parties hereto agree as follows:



1. Collateral.



(a) The following security agreements secure Obligations:



(i) Term Loan Agreement;



(ii) Optex Third Party Security Agreement dated December 29, 2006, executed and delivered to
Initial Lenders by Optex;



(iii) Irvine Sensors Intellectual Property Security Agreement dated December 29, 2006,
executed and delivered to Initial Lenders by Irvine Sensors in favor of Lenders;



(iv) Optex Intellectual Property Security Agreement dated December 29, 2006, executed and
delivered to Initial Lenders by Optex in favor of Lenders;



(v) Security Agreement, dated December 30, 2005, by and among Irvine Sensors and Pequot
Private Equity Fund III, L.P. and Pequot Offshore Private Equity Partners III, L.P. (“various
Pequot entities”);



(vi) Subsidiary Security Agreements, all dated December 30, 2005, by and among various
subsidiaries of Irvine Sensors (including Optex) and various Pequot entities (items (v) and (vi) as
amended and as assigned to Lenders pursuant to that certain Assignment Agreement by and among the
various Pequot entities and Lenders, dated December 29, 2006 in favor of Lenders);



(vii) Omnibus Security Interest Acknowledgement dated July 19, 2007 delivered by Irvine
Sensors and Optex to Initial Lenders; and



(viii) Security Agreement executed and delivered by Irvine Sensors to the Collateral Agent on
behalf of the Bridge Lenders on                     , 2008.



(b) Items listed in clauses (i) — (viii) hereinabove are collectively referred to as the
“Security Agreements,” all of which grant a security interest in assets owned by Debtor
(such assets, including, but not limited to, the Collateral listed on Schedule 2 are
referred to herein and in such Security Agreements as the “Collateral”). A portion of the
Collateral consists of all non-classified government contracts with a value in excess of $1,000,000
entered into and to be entered into by Irvine Sensors, which includes, but is not limited to, the
contracts listed on Schedule 2 (all such contracts, including, but not limited to, those on
Schedule 2 being referred to as the “Government Contracts Collateral”). Lenders hereby
assign their security interests in the Collateral, including, but not limited to, the Government
Contracts Collateral, to the Collateral Agent. The Security Agreements, together with the
Government Contracts Collateral and all other agreements and documents executed and delivered with
respect to the Obligations are referred to herein, collectively, as the “Borrower
Documents.” As used herein the term “Bridge Lender Security Documents” shall mean the
Security Agreement reference in Section 1(a)(viii) and any UCC financing statements related
thereto.



(c) “Optex Collateral” shall mean all components of the Collateral that is now or hereafter
subject to a security interest under the documents described in Sections 1(a)(ii), (iv) and (vii)
above; owned by Optex at any time; subject to sale in the foreclosure described in the MOU;
“Optex-Texas Collateral” as defined in the MOU and the equity ownership interest of Irvine Sensors
in Optex. Anything to the contrary herein or in any Bridge Lender Security Documents
notwithstanding, the Bridge Lenders have no claim, security interest nor rights to or in the Optex
Collateral. Subject to the rights of the Bridge Lenders described in this Agreement, the
Collateral Agent and Initial Lenders relationship to each other shall remain unchanged by this
Agreement and shall be governed by the Collateral Agent Agreement entered into by them on July 19,
2007 (“Initial Collateral Agent Agreement”), which shall remain in full force and effect
vis-à-vis the Optex Collateral, Collateral and Initial Lenders Obligations, as if this Agreement
were not entered into. From and after the date Bridge Lenders Obligations are no longer
outstanding, the Initial Collateral Agent Agreement shall continue to govern the relative rights
and
obligations among the Initial Lenders and Collateral Agent. Hereinafter, the term
Collateral as employed in this Agreement shall exclude Optex Collateral.


 


- 2 -









 





(d) For purposes solely of perfection of the security interests granted to the Collateral
Agent, as agent on behalf of the Lenders, and on its own behalf under the Borrower Documents and
hereunder, the Collateral Agent hereby acknowledges that any Collateral held by the Collateral
Agent is held for the benefit of the Lenders in accordance with this Agreement and the Borrower
Documents. No reference to the Borrower Documents or any other instrument or document shall be
deemed to incorporate any term or provision thereof into this Agreement unless expressly so
provided.



(e) The Collateral Agent will distribute any proceeds received from the realization of the
Collateral which are distributable to the Lenders in the order and priority set forth in the
Intercreditor Agreement.




2. Appointment of the Collateral Agent.



The Lenders hereby appoint the Collateral Agent (and the Collateral Agent hereby accepts such
appointment) to take any action including, without limitation, the registration of any Collateral
in the name of the Collateral Agent or its nominees prior to or during the continuance of an Event
of Default (as defined in the Borrower Documents), the exercise of voting rights upon the
occurrence and during the continuation of an Event of Default, the application of any Collateral
received by the Collateral Agent to the payment of the Obligations, the making of any demand under
the Borrower Documents, the exercise of any remedies given to the Lenders or the Collateral Agent
pursuant to the Borrower Documents and the exercise of any authority pursuant to the appointment of
the Collateral Agent as an attorney-in-fact pursuant to the Borrower Documents that the Collateral
Agent deems necessary or proper for the administration of the Collateral pursuant to the Borrower
Documents. Upon realizing on any of the Collateral in accordance with the Borrower Documents, the
Collateral Agent shall promptly distribute in accordance with Section 1(e) above any cash or
Collateral after deduction of any amounts pursuant to Section 5 herein. Lenders must notify
Collateral Agent in writing of the existence of future Obligations owed by Debtor to Lenders. The
Collateral Agent will not be required to act hereunder in connection with future Obligations the
existence of which was not disclosed in writing to the Collateral Agent nor will the Collateral
Agent be required to act on behalf of any assignee of Obligations without the written consent of
Collateral Agent.




3. Action by the Majority in Interest.



(a) Certain Actions. Each of the Lenders covenants and agrees that for so long as any
Bridge Lenders Obligations remain outstanding, Bridge Lenders who in the aggregate hold more than
50% of the Bridge Lenders Obligations shall constitute a majority in interest (a “Majority in
Interest”), shall have the right, but not the obligation, to undertake the following actions with
respect to the Bridge Lenders Obligations and such of the Borrower Documents necessary to
effectuate the following actions (it being expressly understood that less than a Majority in
Interest hereby expressly waive the following rights that they may otherwise have under the
Borrower Documents):



(i) Acceleration. If an Event of Default occurs or is continuing, after the
applicable cure period, if any, a Majority in Interest may, on behalf of all the Lenders, instruct
the Collateral Agent to provide to Debtor notice to cure such default and/or declare the unpaid
principal amount of the Bridge Lenders Obligations to be due and payable, together with any and all
accrued interest thereon and all costs payable pursuant to such Bridge Lenders Obligations;



(ii) Enforcement. Upon the occurrence of any Event of Default after the applicable
cure period, if any, a Majority in Interest may instruct the Collateral Agent to proceed to
protect, exercise and enforce, on behalf of all the Bridge Lenders, their rights and remedies under
the Borrower Documents against Debtor, and such other rights and remedies as are provided by law or
equity;


 


- 3 -









 





(iii) Waiver of Past Defaults. A Majority in Interest may instruct the Collateral
Agent to waive any Event of Default with respect to the Bridge Lenders Obligations by written
notice to Debtor, and the other Lenders; and



(iv) Amendment. A Majority in Interest may instruct the Collateral Agent to waive,
amend, supplement or modify any term, condition or other provision in the Bridge Lenders
Obligations or Borrower Documents giving rise to such Bridge Lenders Obligations in accordance with
the terms of the Bridge Lenders Obligations or such Borrower Documents so long as such waiver,
amendment, supplement or modification is made with respect to all of the Bridge Lenders Obligations
and with the same force and effect with respect to each of the Bridge Lenders.



(b) Permitted Subordination. A Majority in Interest may instruct the Collateral Agent
to agree to subordinate any Collateral to any claim and may enter into any agreement with Debtor to
evidence such subordination.



(c) Further Actions. A Majority in Interest may instruct the Collateral Agent to take
any action that it may take under this Agreement by instructing the Collateral Agent in writing to
take such action on behalf of all the Lenders.




4. Power of Attorney.



(a) To effectuate the terms and provisions hereof, the Lenders hereby appoint the Collateral
Agent as their attorney-in-fact (and the Collateral Agent hereby accepts such appointment) for the
purpose of carrying out the provisions of this Agreement including, without limitation, taking any
action on behalf of, or at the instruction of, the Majority in Interest at the written direction of
the Majority in Interest and executing any consent authorized pursuant to this Agreement and taking
any action and executing any instrument that the Collateral Agent may deem necessary or advisable
(and lawful) to accomplish the purposes hereof.



(b) All acts done under the foregoing authorization are hereby ratified and approved and
neither the Collateral Agent nor any designee nor agent thereof shall be liable for any acts of
commission or omission, for any error of judgment, for any mistake of fact or law except for acts
of gross negligence or willful misconduct.



(c) This power of attorney, being coupled with an interest, is irrevocable while this
Agreement remains in effect.



5. Expenses of the Collateral Agent. The Lenders shall pay any and all costs and
expenses incurred by the Collateral Agent in proportion to their interests in the Obligations, all
waivers, releases, discharges, satisfactions, modifications and amendments of this Agreement, the
administration and holding of the Collateral, insurance expenses, and the enforcement, protection
and adjudication of the parties’ rights hereunder by the Collateral Agent, including, without
limitation, the reasonable disbursements, expenses and fees of the attorneys the Collateral Agent
may retain, if any, each of the foregoing in proportion to their interests in the Obligations,
except such costs or expenses resulting from the Collateral Agent’s gross negligence or willful
misconduct. Unless otherwise advised in writing by a lender, the proportions will be based on
outstanding principal amount of the Obligations. The Collateral Agent may rely on any such notice
without independent verification or on any other source of information, including the Debtor.



6. Reliance on Documents and Experts. The Collateral Agent shall be entitled to rely
upon any notice, consent, certificate, affidavit, statement, paper, document, writing or
communication (which may be by telegram, cable, telex, telecopier, or telephone) reasonably
believed by it to be genuine and to have been signed, sent or made by the proper person or persons,
and upon opinions and advice of its own legal counsel, independent public accountants and other
experts selected by the Collateral Agent.


 


- 4 -









 





7. Duties of the Collateral Agent; Standard of Care.



(a) The Collateral Agent’s only duties are those expressly set forth in this Agreement, and
the Collateral Agent hereby is authorized to perform those duties in accordance with commercially
reasonable practices. The Collateral Agent may exercise or otherwise enforce any of its rights,
powers, privileges, remedies and interests under this Agreement and applicable law or perform any
of its duties under this Agreement by or through its officers, employees, attorneys, or agents.



(b) The Collateral Agent shall act in good faith and with that degree of care that an
ordinarily prudent person in a like position would use under similar circumstances.



(c) Any funds held by the Collateral Agent hereunder shall be segregated from other funds and
shall not be commingled with the assets of the Collateral Agent. The Collateral Agent shall be
under no liability for interest on any funds received by it hereunder.



8. Resignation. The Collateral Agent may resign and be discharged of its duties
hereunder at any time by giving ten (10) days prior written notice of such resignation to the other
parties hereto, stating the date such resignation is to take effect. Within ten (10) days of the
giving of such notice, a successor collateral agent shall be appointed by the Majority in Interest;
provided, however, that if the Lenders are unable so to agree upon a successor
within such time period, and notify the Collateral Agent during such period of the identity of the
successor collateral agent, the successor collateral agent may be a person designated by the
Collateral Agent, and any and all fees of such successor collateral agent shall be the joint and
several obligation of the Lenders. The Collateral Agent shall continue to serve until the
effective date of the resignation or until its successor accepts the appointment and receives the
Collateral held by the Collateral Agent but shall not be obligated to take any action hereunder.
The Collateral Agent may deposit any Collateral with the Supreme Court of the State of New York for
New York County or any such other court in New York State that accepts such Collateral.



9. Exculpation. The Collateral Agent and its officers, employees, attorneys and
agents, shall not incur any liability whatsoever for the holding or delivery of documents or the
taking of any other action in accordance with the terms and provisions of this Agreement, for any
mistake or error in judgment, for compliance with any applicable law or any attachment, order or
other directive of any court or other authority (irrespective of any conflicting term or provision
of this Agreement), or for any act or omission of any other person engaged by the Collateral Agent
in connection with this Agreement and each party hereto hereby waives any and all claims and
actions whatsoever against the Collateral Agent and its officers, employees, attorneys and agents,
arising out of or related directly or indirectly to any or all of the foregoing acts, omissions and
circumstances, unless occasioned by the exculpated person’s own gross negligence or willful
misconduct.



10. Indemnification. The Lenders hereby agree to indemnify, reimburse and hold
harmless the Collateral Agent and its directors, officers, employees, attorneys and agents, jointly
and severally, from and against any and all claims, liabilities, losses and expenses that may be
imposed upon, incurred by, or asserted against any of them, arising out of or related directly or
indirectly to this Agreement or the Collateral, except such as are occasioned by the indemnified
person’s own gross negligence or willful misconduct.



11. Assignment of Government Contracts Collateral. With respect to the Government
Contracts Collateral, and notwithstanding anything in any agreement evidencing the Obligations to
the contrary to the extent not previously accomplished, (a) Irvine Sensors will deliver within a
reasonable period of time after the date hereof, assignments with respect to the Government
Contracts Collateral (the “Assignments”); and (b) the Collateral Agent will hold the
Assignments for the benefit of the Lenders, and will not deliver the Assignments to the applicable
governmental entity until such time as he is instructed to do so by the Lenders with a Majority in
Interest. The Lenders hereby agree that any such instruction to the Collateral Agent to deliver
the Assignments to the applicable governmental entity shall not be given unless and until the
Collateral Agent enters into a control agreement on commercially reasonable terms with respect to a
depositary account (the “Lockbox Account”) at U.S. Bank (the “Depositary Bank”)
into which payments under the Government Contracts Collateral would be made. Such control
agreement shall provide that (a) until the earlier to occur of (i) such time as a default or event
of default with respect to the



 


- 5 -









 






Bridge Lenders Obligations has occurred and is continuing (or until such time as there is an
event or occurrence which, with notice or lapse of time or both, would, if not cured or waived,
become an event of default), or (ii) the end of the Forbearance Period (as defined in the MOU) (the
“Trigger Date”) (a) all payments made to the Lockbox Account are payable to Irvine Sensors,
and (b) after the occurrence of a Trigger Date, , all payments made to the Lockbox Account are
payable to the Collateral Agent on behalf of the Lenders. Upon request of the Collateral Agent,
Irvine Sensors agrees to cooperate with putting the Lockbox Account in place with the Depositary
Bank and entering into the control agreement described above, in accordance with the terms of this
Section 11. Irvine Sensors represents and warrants that Schedule 2 delivered to the Collateral
Agent on the date hereof sets forth the true and complete list as of the date hereof of all
non-classified government contracts with a value in excess of $1,000,000 which shall constitute
Government Contracts Collateral. In the event of any conflict between the duties of Irvine Sensors
under this Agreement and the Initial Collateral Agent Agreement, the terms of this Agreement shall
control and Irvine Sensors shall comply with this Agreement.




12. Miscellaneous.



(a) Rights and Remedies Not Waived. No act, omission or delay by the Collateral Agent
shall constitute a waiver of the Collateral Agent’s rights and remedies hereunder or otherwise. No
single or partial waiver by the Collateral Agent of any default hereunder or right or remedy that
it may have shall operate as a waiver of any other default, right or remedy or of the same default,
right or remedy on a future occasion.



(b) 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.




(c) Waiver of Jury Trial and Setoff; Consent to Jurisdiction; Etc.



(i) 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 Collateral Agent and the Lenders or any Lender, then each
Lender, to the fullest extent it may legally do so, (A) waives the right to interpose any setoff,
recoupment, counterclaim or cross-claim in connection with any such litigation, irrespective of the
nature of such setoff, recoupment, counterclaim or cross-claim, unless such setoff, recoupment,
counterclaim or cross-claim could not, by reason of any applicable federal or state procedural
laws, be interposed, pleaded or alleged in any other action; and (B) 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 12(c) IS A SPECIFIC AND
MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGE THAT THE COLLATERAL AGENT WOULD NOT ENTER THIS
AGREEMENT IF THIS SECTION 12(c) WERE NOT PART OF THIS AGREEMENT.



(ii) Each party hereto 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 hereto
waives, to the fullest extent it may effectively do so, personal service of any summons, complaint
or other process and agrees that the service thereof may be made by certified or registered mail
directed to such Lender at its address for notice determined in accordance with Section 12(e)
hereof. Each party hereto hereby waives, to the fullest extent it may effectively do so, the
defenses of forum non conveniens and improper venue.


 


- 6 -









 





(d) Admissibility of this Agreement. Each of the Lenders agrees that any copy of this
Agreement signed by it and transmitted by telecopier for delivery to the Collateral Agent shall be
admissible in evidence as the original itself in any judicial or administrative proceeding,
whether or not the original is in existence.



(e) Notices. Any notice or other communication under the provisions of this Agreement
shall be given in writing and delivered in person, by reputable overnight courier or delivery
service, by facsimile machine (receipt confirmed) with a copy sent by first class mail on the date
of transmission, or by registered or certified mail, return receipt requested, directed to such
party’s addresses set forth below (or to any new address of which any party hereto shall have
informed the others by the giving of notice in the manner provided herein):




In the case of the Collateral Agent, to:


S. Michael Rudolph

Viking Asset Management, LLC

The Transamerica Pyramid

600 Montgomery Street, 44th Floor

San Francisco, CA 94111

Fax: (415) 981-5301





In the case of the Initial Lenders, to:


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



In the case of the Bridge Lenders, to:



To the address and telecopier number set forth on

Schedule A hereto.



If to Initial Lenders, or Collateral Agent,

with a copy by telecopier only to:



Grushko & Mittman, P.C.

551 Fifth Avenue, Suite 1601

New York, New York 10176

Fax: (212) 697-3575




(f) Amendments and Modification; Additional Lender. 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. Any transferee of Obligations
who acquires Obligations after the date hereof will become a party hereto by signing the signature
page and sending an executed copy of this Agreement to the Collateral Agent and receiving a signed
acknowledgement from the Collateral Agent.


 


- 7 -









 





(g) Fee. Upon the occurrence of an Event of Default , the Lenders collectively shall
pay the Collateral Agent, in proportion to their interests in the Obligations, the sum of $10,000
to apply against an hourly fee of $500 to be paid to the Collateral Agent by the Lenders for
services rendered
pursuant to this Agreement. All payments due to the Collateral Agent under this Agreement
including reimbursements must be paid when billed. The Collateral Agent may refuse to act on
behalf of or make a distribution to any Lender who is not current in payments to the Collateral
Agent. Payments required pursuant to this Agreement shall be pari passu to the
Lenders’ interests in the Obligations. The Collateral Agent is hereby authorized to deduct any
sums due the Collateral Agent from Collateral in the Collateral Agent’s possession.



(h)  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 by
facsimile transmission.



(i) 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.



(j) Captions; Certain Definitions. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of convenience; such captions
are not a part of this Agreement and shall not be deemed in any manner to modify, explain, enlarge
or restrict any of the provisions of this Agreement. As used in this Agreement the term
“person” shall mean and include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated organization and a government
or any department or agency thereof.



(k) 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.



(l) Entire Agreement. This Agreement contains the entire agreement of the parties and
supersedes all other agreements and understandings, oral or written, with respect to the matters
contained herein, except as otherwise set forth herein.



(m) Schedules. The Collateral Agent is authorized to annex hereto any schedules
referred to herein.



[THIS SPACE INTENTIONALLY LEFT BLANK]



 


- 8 -









 





IN WITNESS WHEREOF, the parties hereto have caused this Collateral Agent Agreement to be
signed, by their respective duly authorized officers or directly, as of the date first written
above.



“INITIAL LENDERS”






	 	 	 	 	 	 	 	 	 	 	 
	ALPHA CAPITAL ANSTALT	 	 	 	LONGVIEW FUND, L.P.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ KONRAD ACKERMAN
 

Print Name of Signator: Konrad Ackerman
	 	 
	 	By:
	 	/s/ S. MICHAEL RUDOLPH
 

Print Name of Signator: S. Michael Rudolph
	 	 






BRIDGE LENDERS SIGNATURES ON OMNIBUS SIGNATURE PAGES IN

SUBSCRIPTION AGREEMENTS



	 	 	 	 	 
	 	COLLATERAL AGENT

 	 
	 	By:  	/s/ S. MICHAEL RUDOLPH
 	 
	 	 	S. MICHAEL RUDOLPH 	 





Acknowledged and, solely as to Section 11, Agreed:



IRVINE SENSORS CORPORATION



	 	 	 	 
	By:

	 	/s/ JOHN J. STUART, JR.	 
	 

	 	Name: John J. Stuart, Jr.	 
	 

	 	Title: Sr. VP & CFO	 






This Collateral Agent Agreement may be signed by facsimile signature and delivered by

confirmed facsimile transmission.




[Signature Page to Collateral Agent Agreement]



 


 









 





SCHEDULE 2 TO COLLATERAL AGENT AGREEMENT




LIST OF INITIAL GOVERNMENT CONTRACTS, WHICH COMPRISE GOVERNMENT CONTRACTS COLLATERAL (which
shall be amended and supplemented to include all other Government Contracts entered into by Irvine
Sensors, all of which shall be considered Government Contracts even if not added to this Schedule
1):



The following Government Contracts are with Irvine Sensors:



FA8650-04-C-7120

N00178-05-C-3062

FA8650-06-C-7626




The term “Collateral” shall mean any and all property of Debtor, whether now owned by Debtor or
hereafter acquired or existing, and wherever located (collectively, the “Collateral”), including
without limitation:




	 	(a)	 	all Accounts;

	 
	 	(b)	 	all Inventory;

	 
	 	(c)	 	all Equipment;

	 
	 	(d)	 	all General Intangibles;

	 
	 	(e)	 	all Investment Property;

	 
	 	(f)	 	all Instruments and Documents;

	 
	 	(g)	 	all Related Collateral (all capitalized
terms set forth in (a) — (g) are used as defined in the Term Loan
Agreement);

	 
	 	(h)	 	all Government Contracts Collateral;

	 
	 	(i)	 	all accessions to and additions to,
substitutions for, replacements, products; and

	 
	 	(j)	 	products and proceeds of any and all of the
foregoing.