Document:

exv10w8w7

Exhibit
10.8.7

SIXTH AMENDMENT

TO THE

COLT DEFENSE LLC

SALARIED RETIREMENT INCOME PLAN

     WHEREAS, Colt Defense LLC (the “Employer”) sponsors a defined benefit pension plan known as
the Colt Defense LLC Salaried Retirement Income Plan (the “Plan”); and

     WHEREAS, under the terms of the Plan, the Employer has the ability to amend the Plan;

     WHEREAS, effective December 31, 2008, the Employer desires to freeze future benefit accruals
under the Plan, and to freeze participation in the Plan with respect to any Employee who is not a
Participant/in the Plan on December 31, 2008; and

     WHEREAS, the Employer also desires to freeze participation with respect to any former
Participant who may become reemployed following termination of employment or otherwise regain the
status of Employee; provided however, Years of Service for vesting purposes may continue to accrue
for such Employee, subject to the Plan’s break in service rules;

     NOW, THEREFORE, effective as of December 31, 2008, the Employer hereby amends the Plan to
provide as follows:

     1. Section 1.10 of Article 1, the Plan definition of “Credited Service”, is amended by the
addition of the following new paragraph, to be placed at the end of such section:

“Effective December 31, 2008, future benefit accruals under the Plan shall be frozen. In no
event shall any Participant receive Credited Service under the Plan after such date.”

     2. Section 2.1 of Article 2, entitled “Eligibility Requirements”, is amended by the addition
of the following new paragraph (e), to be placed after the existing subparagraph (d):

	 	“(e) 	 	 Plan Freeze: in conjunction with the freezing of future benefit accruals effective
December 31, 2008, any Employee or former Participant who is not a Participant as of such
date shall not be permitted to become a Participant hereunder after December 31, 2008.
However, any former Participant who may become reemployed following termination of employment
or who otherwise regains the status of Employee after December 31, 2008, may continue to
accrue Years of Service for vesting purposes, subject to the Plan’s break in service rules.”

     3. Section 4.1 or Article 4, entitled “Accrued Benefit”, is amended by the addition of a new
subparagraph (c), to be placed after the existing subparagraph (b):

	 	“(c) 	 	 Effective December 31, 2008, future benefit accruals under the Plan shall be frozen, and
each Participant actively accruing Credited Service as of such date shall receive his final
Benefit Credit as of December 31, 2008. In no event shall any
Participant accrue additional Credited Service under the Plan after such date. However,
Interest Credits shall continue to be accumulated on each Participant’s

 

 

	 	 	 	Benefit Account Balance after December 31, 2008 in accordance with the further terms of
the Plan.”

IN WITNESS WHEREOF, the Employer has caused this Amendment to be executed by a duly authorized
person this 31st day of December, 2008.

	 	 	 	 	 	 	 	 	 

	WITNESS	 	 	 	COLT DEFENSE LLC	 	 
	 
	 	 	 	 	 	 	 	 
	/s/
Deneen Silvers

	 	 	 	By:	 	/s/ Carlton S. Chen	 	 
	 

	 	 	 	 	 	 

	 	 
	 

	 	 	 	Title:	 	Vice President and Secretary	 	 
	 

	 	 	 	 	 	 

	 	 

-2-Exhibit 10.1

Exhibit 10.1

FORM OF 12% SENIOR SUBORDINATED SECURED PROMISSORY NOTE

ISSUED BY THE COMPANY TO COSTA BRAVA

SENIOR SUBORDINATED PROMISSORY NOTE

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 UNDER SAID ACT.

Irvine Sensors Corporation

Senior Subordinated Promissory Note

			
	 	 	 
	Issuance Date: March 16, 2010
	 	Principal: U.S. $2,000,000

FOR VALUE RECEIVED, IRVINE SENSORS CORPORATION, a Delaware corporation (the “Company”), hereby
promises to pay to Costa Brava Partnership III L.P. or its registered assigns (“Holder”) the amount
set out above opposite the caption “the Principal” (as such amount may be increased or reduced from
time to time pursuant to the terms hereof, whether through the payment of PIK Interest (as defined
below) or through redemption or otherwise, the “Principal”) when due, whether upon the Maturity
Date (as defined below), acceleration, redemption or otherwise (in each case, in accordance with
the terms hereof) and to pay Interest (as defined below) on the outstanding Principal at the rates,
in the manner and at the times set forth herein. This Senior Subordinated Promissory Note
(including all Senior Subordinated Promissory Notes issued in exchange, transfer or replacement
hereof, this “Note”) is one of an issue of Senior Subordinated Promissory Notes, each on
substantially the same terms as this Note, in an aggregate principal amount not to exceed
$4,000,000 (collectively, the “Notes” and such other Senior Subordinated Promissory Notes, the
“Other Notes”). Certain capitalized terms used herein are defined in Section 31.

(1) PAYMENTS OF PRINCIPAL.

(a) Voluntary. The Company may prepay this Note at any time, in whole or in part,
without penalty or premium. All prepayments of Principal made pursuant to this Section 1(a) shall
be accompanied by accrued and unpaid Interest thereon.

 

 

 

(b) Mandatory. On the Maturity Date, the Holder shall surrender this Note to the
Company and the Company shall pay to the Holder in cash an amount equal to the outstanding
Principal and accrued and unpaid Interest thereon. The “Maturity Date” shall be March 16, 2013.

(2) INTEREST. Simple interest (“Interest”) shall accrue on the outstanding Principal
at the Interest Rate from and including the date set forth above opposite the caption “Issuance
Date” (the “Issuance Date”) until the Principal is paid in full, shall be computed on the basis of
a 365-day year and actual days elapsed and shall be payable in arrears for each Interest Period no
later than the date that is ten (10) Business Days after the last day of the applicable Interest
Period (each such date, an “Interest Payment Date”).

(a) Payment of Interest. Interest shall be payable on each Interest Payment Date to
the record holder of this Note as of the last day of the applicable Interest Period, subject to
Section 2(b), in cash (“Cash Interest”).

(b) Restrictions on Cash Interest Payments. Notwithstanding the foregoing, in the
event that the Company would otherwise be required under this Section 2 to pay Interest in the form
of Cash Interest but is not permitted to do so pursuant to Section 33 hereof, the Company shall
instead pay such Interest through the addition of the amount of such Interest to the then
outstanding Principal (any Interest paid in such manner, “PIK Interest”). Interest that is paid in
the form of PIK Interest shall be considered paid or duly provided for, for all purposes under this
Note, and shall not be considered overdue.

(3) [Reserved]

(4) [Reserved]

(5) EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT.

(a) Events of Default. Each of the following events (so long as it is continuing)
shall constitute an “Event of Default”:

	 	(i)	 	any Change of Control;
	 
	 	(ii)	 	the Company’s failure to pay to any Holder any amount of Principal, Interest,
or other amounts when and as due under this Note or any other Transaction Document,
provided, that in the case of a failure to pay Interest when and as due, such failure
shall constitute an Event of Default only if such failure continues for a period of at
least five (5) Business Days;
	 
	 	(iii)	 	any event of default under, redemption of or acceleration prior to maturity of
any Indebtedness of the Company or any of its Subsidiaries (other than the Notes) in an
aggregate principal amount in excess of $500,000;
	 
	 	(iv)	 	the Company or any of its Subsidiaries (other than Optex Systems, Inc.
(“Optex”)) pursuant to or within the meaning of Title 11, U.S. Code, or any
similar Federal, foreign or state law for the relief of debtors (collectively,
“Bankruptcy Law”), (A) commences a voluntary case, (B) consents to the entry of an
order for relief against it in an involuntary case, (C) consents to the appointment
of a receiver, trustee, assignee, liquidator or similar official (a “Custodian”),
(D) makes a general assignment for the benefit of its creditors or (E) admits in
writing that it is generally unable to pay its debts as they become due;

 

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	 	(v)	 	a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (A) is for relief against the Company or any of its Subsidiaries
(other than Optex) in an involuntary case, (B) appoints a Custodian of the Company or
any of its Subsidiaries (other than Optex) or (C) orders the liquidation of the Company
or any of its Subsidiaries (other than Optex);

	 	(vi)	 	other than a judgment in connection with the Settlement Agreement and Release,
dated as of December 20, 2010, between the Company, and FirstMark III, L.P. and
FirstMark Offshore Partners, L.P., but only to the extent the judgment does not exceed
$1,731,900, a final judgment or judgments for the payment of money aggregating in
excess of $500,000 are rendered against the Company or any of its Subsidiaries and
which judgments are not, within sixty (60) days after the entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within sixty (60) days after
the expiration of such stay; provided, however, that any judgment which is covered by
insurance or an indemnity from a creditworthy party shall not be included in
calculating the $500,000 amount set forth above so long as the Company provides the
Holder Representative with a written statement from such insurer or indemnity provider
(which written statement shall be reasonably satisfactory to the Holder Representative)
to the effect that such judgment is covered by insurance or an indemnity and the
Company will receive the proceeds of such insurance or indemnity within thirty (30)
days of the issuance of such judgment or such later date as provided by the terms of
such insurance policy;

	 	(vii)	 	any representation or warranty made by the Company in any Transaction Document
shall prove to be materially false or misleading as of the date made or deemed made;

	 	(viii)	 	the Company shall breach any covenant or other term or condition of any Transaction
Document and, in the case of a breach of a covenant or term or condition which is
curable, such breach continues for a period of at least ten (10) consecutive Business
Days;

	 	(ix)	 	any material provision of any Transaction Document ceases to be of full force
and effect other than by its terms, or the Company contests in writing (or supports any
other person in contesting) the validity or enforceability of any provision of any
Transaction Document;

 

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	 	(x)	 	the Security Agreement shall for any reason (other than pursuant to the terms
thereof) cease to create a valid and perfected lien, with the priority required by the
Security Agreement, on, and security interest in, any material portion of the
Collateral purported to be covered thereby, subject to Permitted Liens and the Liens
securing the Existing Secured Note; or

	 	(xi)	 	any Event of Default (as defined in the Other Notes) occurs with respect to any
Other Notes.

(b) Redemption Right. Upon the occurrence and during the continuance of an Event of
Default, but subject to Section 33, the Holder Representative may and, at the request of the
Required Holders, shall, take either or both of the following actions: (i) declare all or any part
of the outstanding Principal, accrued and unpaid Interest and any other amounts outstanding under
this Note (the aggregate of such amounts, the “Outstanding Note Obligations”) and the Other Notes
to be immediately due and payable; provided, however, that if an Event of Default shall
occur under either clause (iv) or clause (v) of Section 5(a), the outstanding Principal, accrued
and unpaid Interest and any other amounts outstanding under the Notes shall automatically become
immediately due and payable, and (ii) exercise on behalf of itself and the other Holders all rights
and remedies available to it under the Security Agreement, the other Transaction Documents and
applicable law. To the extent that the Holder Representative declares the Notes to be immediately
due and payable (or the Notes become due and payable following an Event of Default under clauses
(iv) or (v) of Section 5(a)), the Company shall pay the sum of the Outstanding Note Obligations to
the Holder within five (5) Business Days after the date that the Outstanding Note Obligations are
declared due and payable, and upon full payment, the Notes shall be extinguished.

 

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(6) RIGHTS UPON FUNDAMENTAL TRANSACTION. The Company shall not enter into or be party
to a Fundamental Transaction unless the Successor Entity assumes in writing all of the obligations
of the Company under this Note and the other Transaction Documents in accordance with the
provisions of this Section 6(a) pursuant to written agreements in form and substance satisfactory
to the Required Holders and approved by the Required Holders (such approval not to be unreasonably
withheld or delayed) prior to such Fundamental Transaction, including agreements to deliver to each
holder of Notes in exchange for such Notes a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to the Notes, including, without
limitation, having a principal amount and interest rate equal to the principal amounts and the
interest rates of the Notes held by such holder and having similar ranking to the Notes, and
satisfactory to the Required Holders (any such approval not to be unreasonably withheld or
delayed). Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed
to, and be substituted for (so that from and after the date of such Fundamental Transaction, the
provisions of this Note referring to the “Company” shall refer instead to the Successor Entity),
and may exercise every right and power of the Company and shall assume all of the obligations of
the Company under this Note with the same effect as if such Successor Entity had been named as the
Company herein. The provisions of this Section shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations on the redemption
of this Note.

(7) [Reserved]

(8) [Reserved]

(9) [Reserved]

(10) [Reserved]

(11) [Reserved]

(12) [Reserved]

(13) [Reserved]

(14) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and
warrants to the Holder that:

(a) Organization. The Company and each of its Subsidiaries (a) is duly incorporated
or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of
its formation, except, in the case of its Subsidiaries, where the failure to be so incorporated,
organized, existing or in good standing would not have a Material Adverse Effect, (b) is duly
qualified to do business as a foreign entity and is in good standing in each jurisdiction where the
nature of the property owned or leased by it or the nature of the business conducted by it makes
such qualification necessary, except where the failure to be so qualified would not have a Material
Adverse Effect, (c) has its principal place of business and chief executive office at 3001 Red Hill
Avenue, Building 4, Suite 108, Costa Mesa, CA 92626 and (d) has all requisite
corporate or other power and authority to own or lease and operate its assets and carry on its
business as presently being conducted.

 

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(b) Authorization; Enforcement. The Company has all requisite corporate power and has
taken all necessary corporate action required for the due authorization, execution, delivery and
performance by the Company of this Note and the other Transaction Documents and no action on the
part of the stockholders of the Company is required. The execution, delivery and performance by
the Company of each of the Transaction Documents have been duly authorized by all necessary
corporate action on the part of the Company. This Note has been duly executed and delivered by the
Company, and the other Transaction Documents and instruments referred to herein to which it is a
party will be duly executed and delivered by the Company, and each such agreement constitutes or
will constitute a legal, valid and binding obligation of the Company enforceable against it in
accordance with its terms, except to the extent that enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general
application affecting enforcement of creditors’ rights generally, and as limited by laws relating
to the availability of specific performance, injunctive relief, or other equitable remedies.

(15) REPRESENTATIONS AND WARRANTIES OF THE HOLDER. By its acceptance of this Note,
the Holder hereby represents and warrants to the Company that:

(a) Organization. The Holder is duly formed, validly existing and in good standing
under the laws of its jurisdiction of formation, has not been organized, reorganized or
recapitalized specifically for the purpose of investing in the Company and has all power and
authority to enter into this Note and the other Transaction Documents and instruments referred to
herein to which it is a party.

(b) Validity. The execution, delivery and performance of this Note, and the other
Transaction Documents and instruments referred to herein, in each case to which the Holder is a
party have been duly authorized by all necessary action on the part of the Holder. This Note has
been duly executed and delivered by the Holder, and the other Transaction Documents and instruments
referred to herein to which it is a party will be duly executed and delivered by the Holder, and
each such agreement and instrument constitutes or will constitute a valid and binding obligation of
the Holder enforceable against it in accordance with its terms except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of
general application affecting enforcement of creditors’ rights generally, and as limited by laws
relating to the availability of specific performance, injunctive relief, or other equitable
remedies.

(c) Investment Representations and Warranties. The Holder understands and agrees that
the offering and sale of the Notes have not been registered under the Securities Act or any
applicable state securities laws and are being made in reliance upon federal and state exemptions
for transactions not involving a public offering which depend upon, among other things, the bona
fide nature of the investment intent and the accuracy of the Holder’s representations as expressed
herein. The Holder acknowledges that the Company has no obligation to register or qualify the
Notes for resale.

 

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(d) Acquisition for Own Account. The Holder is acquiring the Note for its own account
for investment and not with a view toward distribution in a manner which would violate the
Securities Act or any applicable state securities laws.

(e) Ability to Protect Its Own Interests and Bear Economic Risks. The Holder, by
reason of the business and financial experience of its management, has the capacity to protect its
own interests in connection with the transactions contemplated by this Note and the other
Transaction Documents and is capable of evaluating the merits and risks of the investment in the
Notes. The Holder is able to bear the economic risk of an investment in the Notes and is able to
sustain a loss of all of its investment in the Notes without economic hardship if such a loss
should occur.

(f) Accredited Investor. The Holder is an “accredited investor” as that term is
defined in Regulation D promulgated under the Securities Act.

(g) Access to Information. The Holder has been given access to all Company documents,
records, and other information, and has had adequate opportunity to ask questions of, and receive
answers from, the Company’s officers, employees, agents, accountants, and representatives
concerning the Company’s business, operations, financial condition, assets, liabilities, and all
other matters relevant to its investment in the Notes. The foregoing, however, does not limit or
modify the representations and warranties made by the Company pursuant to Section 14 of this Note
or the right of the Holder to rely thereon.

(h) Restricted Securities.

	 	(i)	 	The Holder understands that the Notes will be characterized as “restricted
securities” under the federal securities laws inasmuch as they are being acquired from
the Company in a transaction not involving a public offering and that under such laws
and applicable regulations such Notes may be resold without registration under the
Securities Act only in certain limited circumstances.

	 	(ii)	 	Such Holder acknowledges that the Notes must be held indefinitely unless
subsequently registered under the Securities Act and under applicable state securities
laws or an exemption from such registration is available. Such Holder understands that
the Company is under no obligation to register the Notes.

	 	(iii)	 	The Holder is aware of the provisions of Rule 144 under the Securities Act
which permit limited resale of securities purchased in a private placement.

	 	(16)	 	[Reserved]
	 
	 	(17)	 	COVENANTS.

(a) Incurrence of Indebtedness. So long as this Note is outstanding, the Company
shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly,
incur or guarantee, assume or suffer to exist any Indebtedness, other than (i) the Indebtedness
evidenced by this Note and the Other Notes, (ii) Permitted Indebtedness and (iii) the Existing
Secured Note.

 

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(b) Existence of Liens. So long as this Note is outstanding, the Company shall not,
and the Company shall not permit any of its Subsidiaries to, directly or indirectly, allow or
suffer to exist any mortgage, lien, pledge, charge, security interest or other similar encumbrance
upon or in any property or assets (including accounts and contract rights) owned by the Company or
any of its Subsidiaries (collectively “Liens”) other than (i) existing Liens securing the Existing
Secured Note and (ii) Permitted Liens.

(c) Restricted Payments. The Company shall not, and the Company shall not permit any
of its Subsidiaries to, directly or indirectly, redeem, defease, repurchase, repay or make any
payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by
way of open market purchases, tender offers, private transactions or otherwise), all or any portion
of any Indebtedness described in clause (A) of the definition of “Permitted Indebtedness”, whether
by way of payment in respect of principal of (or premium, if any) or interest on such Indebtedness
if at the time such payment is due or is otherwise made or, after giving effect to such payment, an
event constituting, or that with the passage of time and without being cured would constitute, an
Event of Default has occurred and is continuing.

(d) Issuance of Other Notes. The Company shall give written notice to the Holder upon
the issuance of any Other Notes (except that no such notice is required in the case of Other Notes
issued to the Holder or issued on the Initial Closing Date).

(18) [Reserved]

(19) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote at a meeting
duly called for such purpose or the written consent without a meeting of the Required Holders (or
the Holder Representative acting at the direction of the Required Holders) shall be required for
any amendment or waiver to this Note or the Other Notes or to the Security Agreement (including to
release all or substantially all of the Collateral, in any transaction or series of related
transactions); provided that no such amendment or waiver shall:

(a) postpone (i) the Maturity Date or (ii) any Interest Payment Date, in each case without the
consent of the Holder (it being understood that the Required Holders may waive any increase in the
Interest Rate that would otherwise take effect during the continuance of an Event of Default);

(b) reduce the Principal of, or the Interest Rate on, the Note, or any other amounts payable
hereunder or under any other Note Document to the Holder, without the consent of the Holder;
provided, however, that only the consent of the Required Holders shall be necessary to
alter the amount by which the Interest Rate may be increased during the continuance of an Event of
Default or to waive any of the obligation of the Company to pay such increased rate during the
continuance of an Event of Default; or

(c) change any provision of this Section 19, the definition of “Required Holders” or any other
provision hereof specifying the number or percentage of holders of Notes required
to amend, waive or otherwise modify any rights hereunder or to make any determination or grant
any consent hereunder, without the consent of the Holder and of each of the holders of the Other
Notes, in each case to the extent adversely affected thereby;

and provided further that no amendment, waiver or consent shall, unless in writing and signed by
the Holder Representative in addition to the holders of Notes required above, affect the rights or
duties of the Holder Representative under this Note or any other Transaction Document.

 

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(20) HOLDER REPRESENTATIVE

(a) Appointment of Holder Representative, etc. By acceptance of this Note, the Holder
hereby appoints Costa Brava Partnership III L.P. to serve as Holder Representative. The Holder
further agrees that the Holder Representative may be removed at any time by a vote of the Required
Holders, and that if the Holder Representative is so removed, or if it at any time resigns or
declines to serve as Holder Representative, the successor Holder Representative shall be the holder
of the Notes that at any given time holds Notes in an aggregate principal amount that is greater
than the aggregate principal amount of the Notes held by any other holder of the Notes. The Holder
hereby (a) irrevocably authorizes the Holder Representative to (i) enter into the Security
Agreement and (ii) at its discretion, to take or refrain from taking such actions as Holder
Representative and to exercise or refrain from exercising such powers under the Transaction
Documents as are delegated by the terms hereof or thereof, as applicable, together with all powers
reasonably related thereto and (b) agrees and consents to all of the provisions of the Security
Agreement.

(b) Concerning the Holder Representative.

	 	(i)	 	Standard of Conduct. The Holder Representative and its officers,
directors, employees and agents shall be under no liability to the Holder or to any of
its successors or assigns for any action or failure to act taken or suffered in its
capacity as Holder Representative in the absence of gross negligence and willful
misconduct, and any action or failure to act in accordance with an opinion of its
counsel shall conclusively be deemed to be in the absence of gross negligence and
willful misconduct.

	 	(ii)	 	No Implied Duties. The Holder Representative shall have no duties or
responsibilities except as set forth in the Note and the other Transaction Documents,
nor shall it have any fiduciary relationship with the Holder, and no implied covenants,
responsibilities, duties, obligations or liabilities shall be read into the Transaction
Documents or otherwise exist against the Holder Representative.

	 	(iii)	 	Validity. The Holder Representative shall not be responsible to the
Holder or to any of its successors or assigns (a) for the legality, validity,
enforceability or effectiveness of any of the Transaction Documents, (b) for any
recitals, reports, representations, warranties or statements contained in or made in
connection with any of the Transaction Document, (c) for the existence or value of any
assets
included in the Collateral, (d) for the effectiveness of any Lien purported to be
created by the Security Agreement, or (e) unless the Holder Representative shall
have failed to comply with sub-paragraph (i) above, for the perfection of the
security interests created by the Security Agreement.

 

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(c) Compliance. The Holder Representative shall not be obligated to ascertain or
inquire as to the performance or observance of any of the terms of this Note.

(d) Employment of Agents and Counsel. The Holder Representative may execute any of
its duties as Holder Representative under this Note by or through employees, agents and
attorneys-in-fact and shall not be responsible to any of the parties hereto for the default or
misconduct of any such agents or attorneys-in-fact selected by the Holder Representative acting in
the absence of gross negligence and willful misconduct. The Holder Representative shall be
entitled to advice of counsel concerning all matters pertaining to the agency hereby created and
its duties hereunder.

(e) Reliance on Documents and Counsel. The Holder Representative shall be entitled to
rely, and shall be fully protected in relying, upon any affidavit, certificate, cablegram, consent,
instrument, letter, notice, order, document, statement, telecopy, telegram, telex or teletype
message or writing reasonably believed in good faith by the Holder Representative to be genuine and
correct and to have been signed, sent or made by the Person in question, including any telephonic
or oral statement made by such Person, and, with respect to legal matters, upon an opinion or the
advice of counsel selected by the Holder Representative.

(f) Holder Representative’s Reimbursement. The Company agrees to indemnify the Holder
Representative for any losses arising from its appointment as Holder Representative or from the
performance of its duties hereunder and to reimburse the Holder Representative for any reasonable
expenses; provided, however, that the Holder Representative shall not be indemnified or
reimbursed for liabilities or expenses to the extent resulting from its own gross negligence, bad
faith or willful misconduct. In addition, if at any time the Holder Representative is a Person
that is not a holder of one or more Notes, such Person shall be entitled to a fee for acting in the
capacity of Holder Representative, in an amount to be agreed between the Holder Representative and
the Required Holders.

(21) REISSUANCE OF THIS NOTE.

(a) Transfer. The Company may, as a condition to the transfer of any of the Notes,
require that the request for transfer be accompanied by an opinion of counsel reasonably
satisfactory to the Company, to the effect that the proposed transfer does not result in a
violation of the Securities Act, unless such transfer is covered by an effective registration
statement or by Rule 144 or Rule 144A under the Securities Act; provided, however,
that an opinion of counsel shall not be required for a transfer by a Holder that is (A) a
partnership transferring to its partners or former partners in accordance with partnership
interests, (B) a corporation transferring to a wholly owned subsidiary or a parent corporation that
owns all of the capital stock of the Holder, (C) a limited liability company transferring to its
members or former members in accordance with their interest in the limited liability company, (D)
an individual

 

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transferring to the Holder’s family member or trust for the benefit of an individual Holder, or (E) transferring its Note
to any Affiliate of the Holder, in the case of an institutional investor, or other Person under
common management with such Holder; provided, further, that (i) the transferee in
each case agrees to be subject to the restrictions in this Section 21 and provides the Company with
a representation letter containing substantially the same representations and warranties set forth
in Section 15 hereof, (ii) the Company satisfies itself that the number of transferees is
sufficiently limited and (iii) in the case of transferees that are partners or limited liability
company members, the transfer is for no consideration. It is understood that the certificates
evidencing any Notes may bear substantially the following legends (in addition to any other legends
as legal counsel for the Company deems necessary or advisable under the applicable state and
federal securities laws or any other agreement to which the Company is a party):

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A OF
SUCH ACT.”

If this Note is to be transferred in compliance with the foregoing, the Holder shall surrender this
Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the
Holder a new Note (in accordance with Section 21(d)), registered as the Holder may request,
representing the outstanding Principal being transferred by the Holder and, if less then the entire
outstanding Principal is being transferred, a new Note (in accordance with Section 21(d)) to the
Holder representing the outstanding Principal not being transferred.

(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note,
and, in the case of loss, theft or destruction, of an indemnification undertaking by the Holder to
the Company, in customary form and, in the case of mutilation, upon surrender and cancellation of
this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with
Section 21(d)) representing the outstanding Principal.

(c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon
the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes
(in accordance with Section 21(d) and in principal amounts of at least $100,000) representing in
the aggregate the outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

 

11

 

(d) Issuance of New Notes. Whenever the Company is required to issue a new Note
pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii)
shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or
in the case of a new Note being issued pursuant to Section 21(a) or Section 21(c), the Principal
designated by the Holder which, when added to the principal represented by the other new Notes
issued in connection with such issuance, does not exceed the Principal remaining outstanding under
this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as
indicated on the face of such new Note which is the same as the Issuance Date of this Note, (iv)
shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid
Interest of this Note from the Issuance Date.

(22) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.

(a) The remedies provided in this Note shall be cumulative and in addition to all other
remedies available under this Note and any of the other Transaction Documents, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and, subject to
Section 22(b) and Section 33 below, nothing herein shall limit the Holder’s right to pursue
monetary damages for any failure by the Company to comply with the terms of this Note. Amounts set
forth or provided for herein with respect to payments and the like (and the computation thereof)
shall be the amounts to be received by the Holder and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance thereof). The
Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm
to the Holder and that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be
entitled, in addition to all other available remedies, to an injunction restraining any breach,
without the necessity of showing economic loss and without any bond or other security being
required.

(b) Notwithstanding the foregoing, but subject to Section 22(c), the Holder may not pursue any
remedy with respect to this Note unless:

	 	(i)	 	the Holder has previously given the Holder Representative written notice that
an Event of Default is continuing;

	 	(ii)	 	holders of at least 25% in aggregate principal amount of the total outstanding
Notes have requested the Holder Representative to pursue the remedy;

	 	(iii)	 	such holders of the Notes have offered the Holder Representative security or
indemnity reasonably satisfactory to it against any loss, liability or expense;

	 	(iv)	 	the Holder Representative has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity; and

	 	(v)	 	the Required Holders have not given the Holder Representative a direction
inconsistent with such request within such 60-day period.

 

12

 

(c) Notwithstanding the foregoing, but subject to Section 33, the right of the Holder to
receive payment of Principal and Interest on the Note, on or after the respective due dates set
forth herein, or to bring suit for the enforcement of any such right to payment, shall not be
impaired or affected without the consent of the Holder.

(23) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed
in the hands of an attorney for collection or enforcement or is collected or enforced through any
legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to
enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization,
receivership of the Company or other proceedings affecting Company creditors’ rights and involving
a claim under this Note, then the Company shall pay the costs incurred by the Holder for such
collection, enforcement or action or in connection with such bankruptcy, reorganization,
receivership or other proceeding, including, but not limited to, reasonable attorneys’ fees and
disbursements.

(24) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the
Company and the Holder and shall not be construed against any person as the drafter hereof. The
headings of this Note are for convenience of reference and shall not form part of, or affect the
interpretation of, this Note.

(25) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder
in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege.

(26) [Reserved]

(27) NOTICES; PAYMENTS.

(a) Notices. All notices, requests, consents, and other communications under this
Note shall be in writing and shall be deemed delivered (a) when delivered, if delivered personally,
(b) four business days after being sent by registered or certified mail, return receipt requested,
postage prepaid; (c) one Business Day after being sent via a reputable nationwide overnight courier
service guaranteeing next business day delivery, or (d) when receipt is acknowledged, in the case
of facsimile, in each case to the intended recipient as set forth below:

(i) If to the Holder, at its address set forth on Schedule I hereto

(ii) If to the Company:

Irvine Sensors Corporation

3001 Red Hill Avenue

Building 4, Suite 108

Costa Mesa, CA 92626

Attention: John J. Stuart, Jr.

Facsimile No.: (714) 444-8773

 

13

 

with a copy to:

Dorsey & Whitney LLP

38 Technology Drive, Suite 100

Irvine, CA 92618

Attention: Ellen Bancroft, Esq.

Facsimile No: (949) 932-3601

or at such other address as the Company or the Holder each may specify by written notice to
the other parties hereto in accordance with this Section 27.

The Company shall provide the Holder with prompt written notice of all actions taken pursuant to
this Note, including in reasonable detail a description of such action and the reason therefore.

(b) Payments. Whenever any payment of cash is to be made by the Company to any Person
pursuant to this Note, such payment shall be made in lawful money of the United States of America
by a check drawn on the account of the Company and sent via overnight courier service to such
Person at such address as previously provided to the Company in writing; provided that the
Holder may elect to receive a payment of cash via wire transfer of immediately available funds by
providing the Company with prior written notice setting out such request and the Holder’s wire
transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on
any day which is not a Business Day, the same shall instead be due on the next succeeding day which
is a Business Day.

(c) Withholding Taxes. All payments made by the Company hereunder shall be made
without withholding for or on account of any present or future taxes (other than overall net income
taxes imposed on the recipient). If any such withholding is so required, the Company shall make
the withholding, pay the amount withheld to the appropriate authority before penalties attach
thereto or interest accrues thereon and pay to the recipient such additional amount as may be
necessary to ensure that the net amount actually received by the recipient free and clear of such
taxes (including taxes on such additional amount) is equal to the amount that the recipient would
have received had such withholding not been made. If the recipient is required to pay any such
taxes, penalties or interest, the Company shall reimburse the recipient for that payment on demand.
If the Company pays any such taxes, penalties or interest, it shall deliver official tax receipts
or other evidence of payment to the recipient on whose account such withholding was made on or
before the thirtieth day after payment. The Holder agrees to provide, promptly following the
Company’s request therefore, such forms or certifications as it is legally able to provide to
establish an exemption from, or a reduction in, any withholding taxes that might otherwise apply.

(28) CANCELLATION. After all Principal, accrued Interest and other amounts at any
time owed on this Note have been paid in full, this Note shall automatically be deemed canceled,
shall be surrendered to the Company for cancellation and shall not be reissued.

(29) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives
demand, notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note.

 

14

 

(30) GOVERNING LAW. This Note shall be construed and enforced in accordance with, and
all questions concerning the construction, validity, interpretation and performance of this Note
shall be governed by, the internal laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions other than the
State of New York.

(31) CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have
the following meanings:

(a) [Reserved]

(b) “Bankruptcy Code” means Chapter 11 of Title 11 of the United States Code, as amended from
time to time and any successor statute and all rules and regulations promulgated thereunder.

(c) “Bridge Notes” means the 10% Unsecured Convertible Promissory Notes due May 31, 2011
issued by the Company in an original aggregate amount of $3,000,000.

(d) “Business Day” means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain closed.

(e) [Reserved]

(f) “Change of Control” means any Fundamental Transaction other than (A) a Fundamental
Transaction in which holders of the Company’s voting power immediately prior to the Fundamental
Transaction continue after the Fundamental Transaction to hold publicly traded securities and,
directly or indirectly, the voting power of the surviving entity or entities necessary to elect a
majority of the members of the board of directors (or their equivalent if other than a corporation)
of such entity or entities, (B) a Fundamental Transaction with any Holder, any Affiliate of any
Holder or any person otherwise related to or associated with a Holder, or (C) pursuant to a
migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of
the Company.

(g) [Reserved]

(h) “Collateral” has the meaning given to such term in the Security Agreement.

(i) “Contractual Obligation” means, with respect to any Person, any contract, agreement, deed,
mortgage, lease, sublease, license, sublicense or other legally enforceable commitment, promise,
undertaking, obligation, arrangement, instrument or understanding, whether written or oral, to
which or by which such Person is a party or otherwise subject or bound or to which or by which any
property, business, operation or right of such Person is subject or bound.

 

15

 

(j) “Convertible Notes” has the meaning given to such term in clause (E) of the definition of
“Permitted Indebtedness”.

(k) [Reserved]

(l) “Distribution” means (i) any payment or distribution made by the Company on account of the
Note, whether in the form of cash, securities or other property, by setoff or otherwise, or (ii)
any redemption, purchase or other acquisition by the Company of all or a portion of the Note, in
each of cases (i) and (ii), other than any payment, distribution, redemption,
purchase or other acquisition made (x) through the exchange of all or a portion of the Note into or
for (I) equity securities of the Company or (II) debt securities of the Company that (A) are
subordinated in right of payment to the Existing Secured Note to at least the same extent as the
Notes are subordinated to the Existing Secured Note, (B) do not have the benefit of any obligation
of any Person (whether as issuer, guarantor or otherwise) unless the Existing Secured Note has at
least the same benefit of the obligation of such Person and the obligation of such Person to the
Holder is subordinated to the obligations of such Person to the Existing Secured Note Holder to at
least the same extent that this Note is subordinated to the Existing Secured Note and (C) is either
unsecured or secured by liens that are subordinated to the liens securing the Existing Secured
Note, (y) at any time that no “Default” (as defined in the Existing Secured Note) has occurred and
is continuing under Section 6(a) or 6(c) of the Existing Secured Note or (z) through the accrual
and addition to principal of capitalized interest in the amounts and at the times specified in this
Note.

(m) [Reserved]

(n) [Reserved]

(o) [Reserved]

(p) “Existing Secured Debt” means all obligations, liabilities and indebtedness of every
nature of the Company from time to time owed to the Existing Secured Note Holder under the Existing
Secured Note, including, without limitation, the principal amount of all debts, claims and
indebtedness, accrued and unpaid interest and all costs and expenses, whether primary, secondary,
direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due
or payable, whether before or after the filing of a Proceeding under the Bankruptcy Code together
with any interest accruing thereon after the commencement of a Proceeding, without regard to
whether or not such interest is an allowed claim.

(q) “Existing Secured Note” means the Secured Promissory Note, dated April 14, 2010, issued by
the Company to Timothy Looney, as in effect as of the date hereof.

(r) “Existing Secured Note Holder” means Timothy Looney or any of his successors or assigns as
the Payee of the Existing Secured Note (as such term is defined therein).

 

16

 

(s) “Fundamental Transaction” means that the Company shall, directly or indirectly, in one or
more related transactions, (i) consolidate or merge with or into (whether or not the Company is the
surviving corporation) another Person, or (ii) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the assets of the Company to
another Person, or (iii) allow another Person to make a purchase, tender or exchange offer that is
accepted by the holders of more than the 50% of the outstanding shares of Company Common Stock (not
including any shares of Company Common Stock held by the Person or Persons making or party to, or
associated or affiliated with the Persons making or party to, such purchase, tender or exchange
offer), or (iv) consummate a stock purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than the 50% of the outstanding shares of
Company Common Stock (not including any shares of Company Common Stock held by the other Person or
other Persons making or party to, or associated or affiliated with the other Persons making or
party to, such stock purchase agreement or other business combination), or (v) reorganize,
recapitalize or reclassify its Company Common Stock. A Fundamental Transaction shall not include
any transaction with any Holder, any Affiliate of any Holder, or any Person otherwise related to or
associated with a Holder.

(t) “Guarantee” means, with respect to any Person, (a) any guarantee of the payment or
performance of, or any contingent obligation in respect of, any Indebtedness or other Liability of
any other Person, (b) any other arrangement whereby credit is extended to any obligor (other than
such Person) on the basis of any promise or undertaking of such Person (i) to pay the Indebtedness
or other Liability of such obligor, (ii) to purchase any obligation owed by such obligor, (iii) to
purchase or lease assets under circumstances that are designed to enable such obligor to discharge
one or more of its obligations or (iv) to maintain the capital, working capital, solvency or
general financial condition of such obligor and (c) any liability as a general partner of a
partnership or as a venturer in a joint venture in respect of Indebtedness or other Liabilities of
such partnership or venture.

(u) “Holder Representative” means, as of the Initial Closing Date, Costa Brava Partnership III
L.P. and at any time thereafter, the Person most recently appointed to act as Holder Representative
pursuant to Section 20(a).

(v) “Indebtedness” means, with respect to any Person, and without duplication, all
Liabilities, including all obligations in respect of principal, accrued interest, penalties, fees
and premiums, of such Person (a) for borrowed money (including amounts outstanding under overdraft
facilities), (b) evidenced by notes, bonds, debentures or other similar Contractual Obligations,
(c) in respect of “earn-out” obligations and other obligations for the deferred purchase price of
property, goods or services (other than trade payables or accruals incurred in the ordinary course
of business), (d) for the capitalized liability under all capital leases of such Person (determined
in accordance with GAAP), (e) in respect of letters of credit and bankers’ acceptances, (f) for
Contractual Obligations relating to interest rate protection, swap agreements and collar
agreements, in each case, to the extent payable if such Contractual Obligation is terminated at the
Closing, and (g) in the nature of Guarantees of the obligations described in clauses (a) through
(f) above of any other Person.

(w) “Initial Closing Date” means March 16, 2011, or at such other time and place as the
Company and Holder may agree.

 

17

 

(x) [Reserved]

(y) “Interest Period” means, initially, the period beginning on and including the Issuance
Date and ending on and including June 30, 2011 and each successive period for each year until the
Maturity Date as follows: the period beginning on and including July 1 and ending on and including
September 30; the period beginning on and including October 1 and ending on and including December
31; the period beginning on and including January 1 and ending on and including March 31; the
period beginning on and including April 1 and ending on and including June 30.

(z) “Interest Rate” means twelve percent (12.0%) per annum; provided that upon the
occurrence and during the continuance of an Event of Default, the Interest Rate shall be increased
to twenty percent (20.0%) per annum. In the event that such Event of Default is subsequently cured
or waived, the Interest Rate shall be reduced to twelve percent (12.0%) per annum as of the date of
such cure or waiver, it being understood, however, that unless the Required Holders otherwise agree
in writing, such reduction shall not apply retroactively to the period when such Event of Default
was continuing.

(aa) “Issuance Date” has the meaning set forth in Section 2 hereof.

(bb) “Liability” means, with respect to any Person, any liability or obligation of such Person
whether known or unknown, whether asserted or unasserted, whether determined, determinable or
otherwise, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, whether directly incurred or consequential, whether due or to become due and whether
or not required under GAAP to be accrued on the financial statements of such Person.

(cc) “Material Adverse Effect” means any (i) adverse effect on the issuance or validity of the
Notes or the transactions contemplated hereby or on the ability of the Company to perform its
obligations under the Notes or the other Transaction Documents, or (ii) material adverse effect on
the condition (financial or otherwise), properties, assets, liabilities, business or operations of
the Company and its Subsidiaries taken as a whole.

(dd) “Outstanding Note Obligations” shall have the meaning given to such term in Section 5(b).

(ee) [Reserved]

(ff) “Permitted Indebtedness” means (A) Indebtedness incurred by the Company that is made
expressly subordinate in right of payment to the Indebtedness evidenced by this Note, as reflected
in a written agreement reasonably acceptable to the Holder Representative and approved by the
Holder Representative in writing, and which Indebtedness does not provide at any time for (1) the
payment, prepayment, repayment, repurchase or defeasance, directly or indirectly, of any principal
or premium, if any, thereon until ninety-one (91) days after the Maturity Date or later and (2)
total interest and fees at a rate in excess of six percent (6%) per annum, (B) Indebtedness secured
by Permitted Liens, (C) Indebtedness to trade 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 secured notes due 2015, in
an aggregate amount not to exceed $11,020,800 (the “Convertible Notes”), (F) 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 aggregate principal amount not more than
$500,000 in excess of the aggregate principal amount of the Indebtedness owing under this clause
(F) on the Initial Closing Date) to factor or finance its accounts receivable (the “Summit Debt”)
and (G) extensions, refinancings and renewals of any items of Permitted Indebtedness described in
clauses (A) through (E) above, provided that the principal amount is not increased or the terms
modified to impose more burdensome terms upon the Company or its Subsidiary, as the case may be.

 

18

 

(gg) “Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being
contested in good faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of
business by operation of law with respect to a liability that is not yet due or delinquent, (iii)
any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other
similar liens, arising in the ordinary course of business with respect to a liability that is not
yet due or delinquent or that are being contested in good faith by appropriate proceedings, (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 to secure the purchase price of such
equipment or indebtedness incurred solely 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 is confined solely to the property so acquired and improvements thereon, and the proceeds of
such equipment, (vi) Liens securing the Convertible Notes, provided that such Liens are junior to
the Liens securing the Notes, (vii) Liens securing the Summit Debt (but limited to the Liens
granted under the agreement governing such Indebtedness as in effect on the Initial Closing Date),
(viii) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness
secured by Liens of the type described in clauses (i) through (vii) above, provided that any
extension, renewal or replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the Indebtedness being extended, renewed or refinanced does not
increase, (ix) leases or subleases and licenses and sublicenses granted to others in the ordinary
course of the Company’s business, not interfering in any material respect with the business of the
Company and its Subsidiaries taken as a whole, (x) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payments of custom duties in connection with the
importation of goods, and (xi) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 5(a)(vi).

(hh) “Person” means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, any other entity and a government
or any department or agency thereof.

(ii) “Proceeding” means any voluntary or involuntary insolvency, bankruptcy, receivership,
custodianship, liquidation, dissolution, reorganization, assignment for the benefit of creditors,
appointment of a custodian, receiver, trustee or other officer with similar powers or any other
proceeding for the liquidation, dissolution or other winding up of a Person.

 

19

 

(jj) [Reserved]

(kk) [Reserved]

(ll) “Required Holders” means the holders of Notes representing at least a majority of the
aggregate principal amount of the Notes then outstanding.

(mm) [Reserved]

(nn) [Reserved]

(oo) “Subsidiary” means any corporation, association trust, limited liability company,
partnership, joint venture or other business association or entity (i) at least 50% of the
outstanding voting securities of which are at the time owned or controlled directly or indirectly
by the Company or (ii) with respect to which the Company possesses, directly or indirectly, the
power to direct or cause the direction of the affairs or management of such Person.

(pp) “Successor Entity” means the Person, which may be the Company, formed by, resulting from
or surviving any Fundamental Transaction or the Person with which such Fundamental Transaction
shall have been made.

(qq) “Summit Debt” has the meaning given to such term in clause (F) of the definition of
“Permitted Indebtedness”.

(rr) “Transaction Documents” means this Note, the Other Notes, the Security Agreement and any
other documents or agreements which the parties agree shall constitute a “Transaction Document”.

(32) SECURITY. The Notes shall be secured by and to the extent provided in the
Security Agreement.

(33) SUBORDINATION. It is a requirement of the Existing Secured Note that any secured
Indebtedness of the Company, including this Note, be subordinated in right of payment to the
Existing Secured Note. Accordingly, each of the Company and, by acceptance of this Note, the
Holder and each of its successors and assigns hereby covenants and agrees that for so long (but
only for so long) as the Outstanding Note Obligations are secured by any of the assets of the
Company, the following provisions of this Section 33 shall apply:

(a) Subordination of Note to Existing Secured Debt. Notwithstanding anything to the
contrary set forth herein or in any of the Transaction Documents, this Note shall be subordinated
in right and time of payment, to the extent and in the manner set forth in this Section 33, to the
prior indefeasible payment in full in cash of the Existing Secured Debt.

 

20

 

(b) Payment Restrictions. The Company hereby agrees that it may not make, and the
Holder hereby agrees that it will not accept, any Distribution with respect to this Note until
the earlier of (a) the date that is one (1) day following the date the Existing Secured Debt
is indefeasibly paid in full in cash and (b) in the event that the Existing Secured Note Holder has
acknowledged in writing that the Existing Secured Debt has been indefeasibly paid in full in cash,
the date of such payment and acknowledgment in writing.

(34) Registered Obligation. The Company shall establish and maintain a record of
ownership (the “Register”) in which it will register by book entry the interest of the
initial Holder and of each subsequent assignee in this Note, and in the right to receive any
payments of principal and interest or any other payments hereunder, and any assignment of any such
interest. Notwithstanding anything herein to the contrary, this Note is intended to be treated as
a registered obligation for federal income tax purposes and the right, title, and interest of the
Holder and its assignees in and to payments under this Note shall be transferable only upon
notation of such transfer in the Register. This Section shall be construed so that the Note is at
all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and
881(c)(2) of the Internal Revenue Code and any related regulations (or any successor provisions of
the Code or such regulations).

[Signature Page Follows]

 

21

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issuance
Date set out above.

	 	 	 	 	 	 	 
	 	 	IRVINE SENSORS CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 

Note

 

 

 

Schedule I

to Senior Subordinated Promissory Note

Costa Brava Partnership III LP.

222 Berkeley Street, 17th floor

Boston, MA 02116

Attention: Seth Hamot

Fax: (617) 267-6785

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00186-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00186-of-00352.parquet"}]]