Document:

Amended and Restated Security Agreement

 Exhibit 10.103 
  
 AMENDED AND RESTATED 
 SECURITY AGREEMENT 
  
 THIS AMENDED AND RESTATED SECURITY AGREEMENT is dated as of January 9, 2004 by and between GOODNOW CAPITAL, L.L.C., a Delaware limited liability company (the “Lender”) as successor-by-merger to Goodnow Capital, Inc., and
INCARA PHARMACEUTICALS CORPORATION (f/k/a Incara, Inc.), a Delaware corporation (the “Company”) and the successor-by-merger to Incara Pharmaceuticals Corporation, the Company’s former parent (the “Parent”).

  
 RECITALS: 
  
 WHEREAS, affiliates of the Lender and the Parent entered into a non-binding
letter of intent dated July 18, 2003 (the “LOI”), providing for the financing of up to an aggregate amount of $8,000,000 by the Lender to the Company; and 
  
 WHEREAS, the Lender advanced $3,000,000 to the Company pursuant to the terms and conditions of that certain Convertible
Secured Promissory Note, dated as of July 28, 2003, made by the Company payable to the order of the Lender (the “$3M Note”); and 
  
 WHEREAS, the obligations of the Company under the $3M Note, together with any future advances made by the Lender to the Company, are secured by a first
priority, perfected security interest in and lien upon the Collateral (as defined herein), pursuant to a security agreement, dated as of July 28, 2003, by and between the Lender and the Company (the “Original ICT Security
Agreement”); and 
  
 WHEREAS, on September 16, 2003, the
Company, the Lender and the Parent entered into a Debenture and Warrant Purchase Agreement (the “Purchase Agreement”), which provides, among other things, for the Lender to advance the balance of the $8,000,000 contemplated by the
LOI, on and subject to the terms and conditions stated therein; and 
  
 WHEREAS, the balance of the $8,000,000 contemplated by the LOI is to be evidenced by a certain Convertible Secured Promissory Debenture, of even date hereof, in the maximum principal amount of $5,000,000, made by the Company payable to the
order of the Lender (the “$5M Note”); and 
  
 WHEREAS, the $5M Note, as a future advance, is secured by the first priority, perfected security interest in and lien upon the Collateral granted pursuant to the Original ICT Security Agreement; and 
  
 WHEREAS, the parties hereto desire to amend and restate the Original ICT
Security Agreement in its entirety to (i) confirm that the $5M Note is a future advance within the original $8,000,000 financing and is secured by the lien and security interest granted by the Original ICT Security Agreement, on the terms and
conditions hereinafter set forth, and (ii) evidence that the $3M Note is no longer outstanding as a result of the automatic conversion of the $3M Note into shares of common stock of the Company upon consummation of the merger of the Parent with and
into the Company on November 20, 2003; 

 NOW, THEREFORE, in consideration of the foregoing and the respective covenants hereinafter set forth, and
for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Lender hereby agree to amend and restate the Original ICT Security Agreement in its entirety, and further agree as follows:

  
 SECTION 1. DEFINITIONS. 
  
 1.1. General Definitions. As used in this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the following terms shall have the meanings set forth below: 
  
 “Agreement” means the Original ICT Security Agreement as amended and restated by this Amended and Restated Security Agreement.

  
 “Chattel Paper” means all chattel paper as
such term is defined in the UCC, now owned or hereafter acquired, including, without limitation, electronic chattel paper, as such term is defined in the UCC. 
  

“Collateral” means and includes all now and hereafter acquired assets of the Company including, without limitation: 
  
 (A) all Inventory; 
  
 (B) all Equipment; 
  
 (C) all General Intangibles; 
  
 (D) all Receivables; 
  
 (E) all Chattel Paper; 
  
 (F) all Letter-of-Credit Rights; 
  
 (G) all Instruments; 
  
 (H) the commercial tort claims set forth on Schedule VII attached
hereto; 
  
 (I) all books, records, ledgercards, files,
correspondence, computer programs, tapes, disks and related data processing software (owned by the Company or in which it has an interest) which at any time evidence or contain information relating to any or all of (A), (B), (C), (D), (E), (F), (G)
and (H) above or are otherwise necessary or helpful in the collection thereof or realization thereupon; 
  
 (J) documents of title, policies and certificates of insurance, securities, Chattel Paper, other documents or instruments evidencing or pertaining to any
or all of (A), (B), (C), (D) (E), (F), (G), (H) and (I) above; 
  
 (K) all Supporting Obligations and guarantees, including letters of credit and guarantees issued in support of Receivables, Chattel Paper, General Intangibles and Investment Property, Liens on real or personal property, leases, and other
agreements and 

  

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property which in any way secure or relate to any or all of (A), (B), (C), (D), (E), (F), (G), (H), (I) and (J) above, or are acquired for the purpose of
securing and enforcing any item thereof; 
  
 (L) (i) all cash
held as cash collateral to the extent not otherwise constituting Collateral, all other cash or property at any time on deposit with or held by the Company for the account of the Company (whether for safekeeping, custody, pledge, transmission or
otherwise), (ii) all present or future deposit accounts (whether time or demand or interest or non-interest bearing) of the Company including those to which any such cash may at any time and from time to time be credited, (iii) all Payment
Intangibles, (iv) all letter of credit obligations, (v) all investments and reinvestments (however evidenced) of amounts from time to time credited to such accounts, and (vi) all interest, dividends, distributions and other proceeds payable on or
with respect to (1) such investments and reinvestments, (2) such accounts, and (3) all Investment Property; and 
  
 (M) all products and proceeds of (A), (B), (C), (D), (E), (F), (G), (H), (I), (J), (K) and (L) above (including, but not limited to, all claims to items
referred to in (A), (B), (C), (D), (E), (F), (G), (H), (I), (J), (K) and (L) above) and all claims of the Company against third parties for (x) loss of, damage to, or destruction of, and payments due or to become due under, leases, rentals and hires
of any or all of (A), (B), (C), (D), (E), (F), (G), (H), (I), (J), (K) and (L) above and (y) proceeds payable under, or unearned premiums with respect to, policies of insurance in whatever form. 
  
 “Company” shall have the meaning set forth in the
introductory paragraph hereof. 
  
 “Copyright
License” means any written agreement, now or hereafter in effect, granting any right to any third party under any Copyright now or hereafter owned by the Company or which the Company otherwise has the right to license, or granting any right
to the Company under any Copyright now or hereafter owned by any third party, and all rights of the Company under any such agreement. 
  
 “Copyrights” means all of the following now owned or hereafter acquired by the Company: (a) all copyright rights in any work subject to
the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise, and (b) all registrations and applications for registration of any such copyright in the United States or any other country,
including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office, including those listed on Schedule IV attached hereto. 
  
 “Customer” means and includes the account debtor with
respect to any Receivable and/or the prospective purchaser of goods, services or both with respect to any contract or contract right, and/or any party who enters into or proposes to enter into any contract or other arrangement with the Company,
pursuant to which the Company is to deliver any personal property or perform any services. 
  
 “Default” means any act or event which, with the giving of notice or passage of time or both, would constitute an Event of Default. 
  
 “Equipment” means all equipment as such term is defined in the UCC, now owned or hereafter acquired,
including, without limitation, equipment, machinery and goods (excluding Inventory), whether or not constituting fixtures, including, without limitation: plant and office equipment, tools, dies, parts, data processing equipment, computer equipment
with 

  

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embedded software and peripheral equipment, furniture and trade fixtures, trucks, trailers, loaders and other vehicles and all replacements and substitutions
therefore and all accessions thereto. 
  
 “Event of
Default” means the occurrence of any of the events set forth in Section 6.1. 
  
 “General Intangibles” means all general intangibles as such term is defined in the UCC, now owned or hereafter acquired, including, without limitation, Payment Intangibles, Intellectual Property,
equipment formulation, manufacturing procedures, quality control procedures, product specifications, registrations, contract rights, choice in action, causes of action, corporate or other business records, goodwill, claims under guarantees,
franchises, tax refunds, tax refund claims, computer programs, computer data bases, computer program flow diagrams, source codes, object codes and all other intangible property of every kind and nature. 
  
 “Instruments” means all instruments as such term is defined
in the UCC, now owned or hereafter acquired, including, without limitation, a negotiable instrument or a certificated security or any other writing which evidences a right to the payment of money. 
  
 “Intellectual Property” means all intellectual and similar
property of the Company of every kind and nature now owned or hereafter acquired by the Company, including inventions, designs, Trademarks, Patents, Copyrights, Licenses, trade secrets, confidential or proprietary technical and business information,
know-how, show-how or other data or information, software and databases and all embodiments or fixations thereof and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records
describing or used in the connection with, any of the foregoing. 
  
 “Inventory” means all inventory as such term is defined in the UCC, now owned or hereafter acquired, including, without limitation, goods, merchandise and other personal property, wherever located, to be furnished under any
contract of service or held for sale or lease, all raw materials, work in process, finished goods and materials and supplies of any kind, nature or description which are or might be used or consumed in business or used in selling or furnishing such
goods, merchandise and other personal property, and all documents of title or other documents representing them. 
  
 “Investment Property” means all investment property as such term is defined in the UCC. 
  
 “Lender” shall have the meaning set forth in the
introductory paragraph hereof. 
  
 “Letter-of-Credit
Rights” means all letter-of-credit rights as such term is defined in the UCC, now owned or hereafter acquired, including, without limitation, rights to payment or performance under a letter of credit, whether or not the beneficiary has
demanded or is entitled to demand payment or performance. 
  
 “License” means any Patent License, Trademark License, Copyright License or other license or sublicense to which the Company is a party. 
  
 “Liens” means any pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, security title, mortgage, security deed or deed of trust, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention
agreement, any financing 

  

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lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a
security interest under the UCC or comparable law of any jurisdiction). 
  
 “LOI” has the meaning set forth in the Recitals. 
  
 “Note” means the $5M Note. 
  
 “Obligations” means any and all obligations, liabilities and indebtedness of every kind, nature and description owing by the Company to the Lender, including principal, interest, charges, fees, costs
and expenses, however evidenced, whether as principal, surety, endorser or otherwise, whether arising under this Agreement, the Note, the Purchase Agreement or otherwise, whether now existing or hereafter arising, and whether direct or indirect,
absolute or contingent, joint or several, secured or unsecured, due or not due, contractual or tortious, and liquidated or unliquidated, including without limitation all future advances, loans, extensions of credit and accommodations. 
  
 “Original ICT Security Agreement” has the meaning set forth
in the Recitals. 
  
 “Patent License” means any
written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a Patent, now or hereafter owned by the Company or which the Company otherwise has the right to license, is in
existence, or granting to the Company any right to make, use or sell any invention on which a Patent, now or hereafter owned by any third party, is in existence, and all rights of the Company under any such agreement. 
  
 “Patents” means all of the following now owned or hereafter
acquired by the Company: (a) all letters patent of the United States or any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or any other country, including registrations,
recordings and pending applications in the United States Patent and Trademark Office or any similar offices in any other country, including those listed on Schedule V attached hereto; and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein. 
  
 “Payment Intangibles” means all payment intangibles as such
term is defined in the UCC, now owned or hereafter acquired, including, without limitation a General Intangible under which the account debtor’s principal obligation is a monetary obligation. 
  
 “Premises” means all premises where the Company conducts its
business and has any rights of possession. 
  
 “Purchase
Agreement” has the meaning set forth in the Recitals. 
  
 “Receivables” means all accounts as such term is defined in the UCC, including, without limitation each and every right to the payment of money, whether such right to payment now exists or hereafter arises, whether such
right to payment arises out of a sale, lease or other disposition of goods or other property, out of a rendering of services, out of a loan, out of the overpayment of taxes or other liabilities, or otherwise arises under any contract or agreement,
whether such right to payment is created, generated or earned by the Company or by some other person who subsequently transfers such person’s interest to the Company, whether such right to payment is or is not already earned by performance, and
howsoever such right to payment may 
  

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be evidenced, together with all other rights and interests (including all Liens) which the Company may at any time have by law or agreement against any
account debtor or other obligor obligated to make any such payment or against any property of such account debtor or other obligor; including but not limited to all present and future accounts, contract rights, loans and obligations receivable,
Chattel Paper, bonds, notes and other debt instruments, tax refunds and rights to payment in the nature of General Intangibles. 
  
 “Security Interest” shall have the meaning ascribed to such term in Section 2.1 hereof. 
  
 “Supporting Obligations” means all supporting obligations as
such term is defined in the UCC. 
  
 “Trademark
License” means any written agreement, now or hereafter in effect, granting to any third party any right to use any Trademark, now or hereafter owned by the Company or which the Company otherwise has the right to license, or granting to the
Company any right to use any Trademark now or hereafter owned by any third party and all rights of the Company under any such agreement. 
  
 “Trademarks” means all of the following now owned or hereafter acquired by the Company: (a) all trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all registrations and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office, any State of the United
States or any similar offices in any other country or any political subdivision thereof, and all extensions or renewals thereof, including those listed on Schedule VI attached hereto; (b) all goodwill associated therewith or symbolized
thereby; and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill. 
  
 “UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York. 
  
 “$3M Note” has the meaning set forth in the Recitals.

  
 “$5M Note” has the meaning set forth in the
Recitals. 
  
 SECTION 2. SECURITY INTEREST. 
  
 2.1. Security Interest. 
  
 (a) To secure the prompt and complete payment and performance to the Lender
of the Obligations, the Company hereby assigns, pledges and grants to the Lender a continuing first priority security interest in and to the Collateral, whether now owned or existing or hereafter acquired or arising and wheresoever located, whether
or not the same is subject to Article 9 of the UCC (the “Security Interest”). All of the Company’s ledger sheets, files, records, books of account, business papers and documents relating to the Collateral shall, until delivered
to or removed by the Lender following an Event of Default, be kept by the Company in trust for the Lender until all Obligations have been paid or otherwise satisfied in full. 
  

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 (b) The Company hereby authorizes the Lender to file one or more financing statements (including fixture
filings), amendments, filings with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) or other documents for the purpose of perfecting, confirming,
continuing, enforcing or protecting the Security Interest granted by the Company, without the Company’s signature appearing thereon. The Company agrees to furnish to the Lender promptly upon request any information necessary for the purpose of
perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by the Company. If any Receivable becomes evidenced by a promissory note or any other instrument for the payment of money, the Company will immediately deliver
such instrument to the Lender appropriately endorsed. 
  
 SECTION 3.
REPRESENTATIONS AND WARRANTIES. 
  
 The Company
represents and warrants to the Lender as follows: 
  
 3.1.
Title; No Other Liens. Except for the Lien granted to the Lender pursuant to this Agreement, the Company owns each item of the Collateral free and clear of any and all Liens or claims of others. No security agreement, financing statement or
other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as may have been filed in favor of the Lender pursuant to this Agreement. 
  
 3.2. Perfected First Priority Liens. The Liens granted pursuant to
this Agreement will constitute upon the completion of all the filings or notices listed in Schedule I hereto, perfected Liens on all Collateral, which are prior to all other Liens on such Collateral and which are enforceable as such against all
creditors of the Company. 
  
 3.3. Accounts. No amount
payable to the Company under or in connection with any Receivable that constitutes part of the Collateral is evidenced by any Instrument (other than checks in the ordinary course of business) or Chattel Paper which has not been delivered to the
Lender. The place where the Company keeps its records concerning the Receivables that constitute part of the Collateral is set forth on Schedule II hereto. 
  
 3.4. Consents. No consent, filing, approval, registration, recording, or other action is required (x) for the grant by the Company of the Lien on
the Collateral pursuant to this Agreement or for the execution, delivery or performance of this Agreement by the Company, or (y) to perfect the Lien purported to be created by this Agreement. 
  
 3.5. Inventory. The Inventory that constitutes part of the Collateral
is, as of the date hereof, kept at the locations listed on Schedule II hereto and has not been kept at any other location within the five-month period ending on the date hereof. 
  
 3.6. Chief Executive Office. The Company’s chief executive office and chief place of business is located at 79
T.W. Alexander Drive, 4401 Research Commons, Suite 200, Research Triangle Park, North Carolina 27709. 
  
 3.7. Power and Authority. The Company has full power, authority and legal right to enter into this Agreement and to grant the Lender the Lien on
the Collateral pursuant to this Agreement. 
  

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 3.8. Binding Obligation. This Agreement has been duly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company enforceable in accordance with its terms. 
  
 3.9. Non Violation. The execution, delivery and performance of this Agreement will not violate any provision of any applicable law or regulation or
of any order, judgment, writ, award or decree of any court, arbitrator or governmental authority, domestic or foreign, or of any mortgage, indenture, lease, contract or other agreement, instrument or undertaking to which the Company is a party or
which purports to be binding upon the Company or upon any of its assets and will not result in the creation or imposition of any Lien on any of the assets of the Company except as contemplated by this Agreement. 
  
 3.10. Capitalization. Set forth on Schedule 3.10 hereto is (a)
the authorized capital stock of the Company on the date hereof; (b) the number of shares of capital stock issued and outstanding; (c) the number of shares of capital stock issuable pursuant to the Company’s stock plans; and (d) the number of
shares of capital stock issuable and reserved for issuance pursuant to securities (other than the Note) exercisable for, or convertible into or exchangeable for, any shares of capital stock of the Company. Except as set forth on Schedule
3.10, there are no outstanding warrants, options, convertible securities or other rights, agreements or arrangements of any character under which the Company or any of its Subsidiaries is or may be obligated to issue any equity securities of any
kind. 
  
 SECTION 4. COVENANTS OF THE COMPANY. 
  
 The Company covenants and agrees with the Lender that from and after the
date of this Agreement until the later of (x) the payment or performance in full by the Company of its Obligations, and (y) full and indefeasible repayment of the Note: 
  
 4.1. Further Documentation; Pledge of Instruments and Chattel Paper. At any time and from time to time, upon the
written request of the Lender, and at the sole expense of the Company, the Company will promptly and duly execute and deliver such further instruments and documents and take such further action as the Lender may reasonably request for the purpose of
obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the UCC in effect in any such jurisdiction with
respect to the Liens created hereby and the execution and delivery of a separate security agreement or assignments, in a form acceptable to the Lender, with respect to any of the Intellectual Property in which the Lender has been granted a security
interest hereunder. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument or Chattel Paper, such Instrument or Chattel Paper shall be immediately delivered to the Lender, duly endorsed
in a manner satisfactory to the Lender, to be held as Collateral pursuant to this Agreement. 
  
 4.2. Indemnification. The Company agrees to pay, and to save the Lender harmless from, any and all liabilities, costs and expenses (including, without limitation, legal fees and expenses) (i) with respect to,
or resulting from, any delay in paying, any and all excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral, (ii) with respect to, or resulting from, any delay by the Company in complying
with 

  

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any law or regulation applicable to any of the Collateral, (iii) in connection with any action taken by the Lender in exercising its rights under this
Agreement to protect and maintain the Collateral and the Security Interest, and (iv) in connection with the preparation and enforcement of this Agreement and the related documents. In any suit, proceeding or action brought by the Lender under any
Receivable or contract that constitutes part of the Collateral for any sum owing thereunder, or in connection with Lender’s efforts to collect any Receivable or enforce any provisions of any such contract, the Company will save, indemnify and
keep the Lender harmless from and against all expense, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction or liability whatsoever of the account debtor or obligor thereunder, arising out of a breach by
the Company of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or obligor or its successors from the Company. 
  
 4.3. Maintenance of Records. The Company will keep and maintain, at
its own cost and expense, satisfactory and complete records of the Collateral, including, without limitation, a record of all payments received and all credits granted with respect to the Receivables that constitute part of the Collateral. The
Company hereby grants to the Lender access to all of the Company’s books and records pertaining to the Collateral, and the Company shall turn over any such books and records for inspection at the office of the Company to the Lender or to their
representatives during normal business hours at the request of the Lender. 
  
 4.4. Limitation on Liens on Collateral. The Company (x) will not create, incur or permit to exist, will defend, at its own expense, the Collateral against, and will take such other action as is necessary to
remove, any Lien or claim on or to the Collateral, and (y) will defend the right, title and interest of the Lender in and to any of the Collateral against the claims and demands of all persons whomsoever. 
  
 4.5. Limitations on Dispositions of Collateral. The Company will not
sell, transfer, lease or otherwise dispose of any of the Collateral or attempt, offer or contract to do so, except for sales of Inventory and the collection and use of cash proceeds in the ordinary course of its business and according to the Budget
and the Plan (as defined in the Note), without the express, written agreement of the Lender. 
  
 4.6. Limitations on Performance of Contracts and Agreements Giving Rise to Receivables. The Company will not (i) fail to exercise promptly and diligently each and every material right or fail to perform each
material obligation which it may have under each contract that constitutes part of the Collateral and each agreement giving rise to a Receivable that constitutes part of the Collateral (other than any right of termination) except where the Company
determines in its reasonable business judgment that the failure to exercise such right or perform such obligation is in the best interest of the Company and consistent with the protection and preservation of the rights and interests of the Lender in
the Collateral or (ii) fail to deliver to the Lender, upon request, a copy of each material demand, notice or document received by it relating in any way to any contract that constitutes part of the Collateral or any agreement giving rise to a
Receivable that constitutes part of the Collateral. The Company will not amend or modify the terms of, or waive any rights under, any contract that constitutes part of the Collateral, without the express written consent of the Lender. 
  

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 4.7. Further Identification of Collateral. The Company will furnish to the Lender from time to
time, upon the request of the Lender, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Lender may reasonably request, all in reasonable detail. 
  
 4.8. Notices. The Company will advise the Lender promptly, in
reasonable detail, at its address in accordance with Section 9.5, (i) of any Lien on, or claim asserted against, any of the Collateral and (ii) of the occurrence of any other event which could reasonably be expected to have a material adverse effect
on the value of any material portion of the Collateral or on the Liens created hereunder. 
  
 4.9. Change of Name; Location of Collateral; Records; Place of Business. The Company shall not make any change (a) in its name, (b) in the location of its chief executive office, its principal place of
business, any office in which it maintains books or records relating to Collateral owned by it or any office facility at which Collateral owned by it is located (including the establishment of any such new office or facility) from the locations set
forth on Schedule II attached hereto, (c) in its identity or type of organization or corporate structure, (d) in its Federal Taxpayer Identification Number or organizational identification number, or (e) in its jurisdiction of incorporation unless
(i) the Company provides the Lender at least thirty (30) days prior written notice of such change and (ii) all filings have been made under the UCC or otherwise that are required in order for the Lender to continue at all times following such change
to have a valid, legal and perfected first priority security interest in all of the Collateral. 
  
 4.10. Subsidiaries. This Agreement is entered into on behalf of and for the benefit of the Company and its subsidiaries and other entities
controlled by the Company which have rights in the Collateral. The security interest granted by the Company hereunder is intended to include all rights of the Company in and to the Collateral, including any rights of its subsidiaries and such other
entities in and to such Collateral, and the Company will not permit such subsidiaries and entities to exercise any of their rights with respect to the Collateral. 
  
 4.11. Payment of Taxes and Other Claims. The Company shall pay or discharge when due all taxes, assessments and
governmental charges or levies imposed upon it unless same are not delinquent, provided, however, that the Company shall have the right to challenge in good faith by appropriate proceedings any disputed taxes, assessments or governmental charges or
levies provided that the Company establishes appropriate reserves therefor in accordance with generally accepted accounting principles; and, provided, further, that notwithstanding any such contest, the Company shall pay such disputed taxes,
assessments and governmental charges or levies if nonpayment would result in the imposition of any Lien on the Company’s assets or properties. 
  
 4.12. Indebtedness; Distributions; Investments; Consolidation and Merger; Subsidiaries; Nature of Business; Affiliate Transactions; Invoices. The
Company shall not (i) create, incur, assume or suffer to exist any indebtedness (exclusive of trade debt) whether secured or unsecured other than the Company’s indebtedness to the Lender; (ii) declare, pay or make any dividend or distribution
on any shares of the common stock or preferred stock of the Company or apply any of its funds, property or assets to the purchase, redemption or other retirement of any common or preferred stock of the Company; (iii) directly or indirectly, prepay

  

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any indebtedness (other than to the Lender but only as permitted by the terms of the Note), or repurchase, redeem, retire or otherwise acquire any
indebtedness of the Company; (iv) make advances, loans or extensions of credit to any person; (v) become either directly or contingently liable upon the obligations of any person by assumption, endorsement or guaranty thereof or otherwise; (vi)
enter into any merger, consolidation or other reorganization with or into any other person or acquire all or a portion of the assets or stock of any person or permit any other person to consolidate with or merge with it; (vii) enter into any
partnership, joint venture or similar arrangement; (viii) materially change the nature of the business in which it is presently engaged; (ix) enter into any transaction with any affiliate, except in the ordinary course on arms-length terms; or (x)
bill accounts under any name except the present name of the Company. 
  
 4.13. Reserved. 
  
 4.14. Use and Disposition
of Collateral. The Company shall (i) not dispose of any of the Collateral whether by sale, lease or otherwise except for (A) the use or sale of Inventory in the ordinary course of business, and (B) the disposition or transfer of obsolete and
worn-out Equipment in the ordinary course of business and (ii) keep and maintain the Equipment in good operating condition, except for ordinary wear and tear, and shall make all necessary repairs and replacements thereof so that the value and
operating efficiency shall at all times be maintained and preserved. 
  
 4.15. Risk of Loss; Insurance. The Company shall bear the full risk of loss from any loss of any nature whatsoever with respect to the Collateral. At the Company’s own cost and expense in amounts and with carriers acceptable to
the Lender, the Company shall (a) keep all its insurable properties and properties in which it has an interest insured against the hazards of fire, flood, sprinkler leakage, those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies engaged in businesses similar to the Company’s including, without limitation, public and product liability insurance, worker’s compensation, insurance against larceny,
embezzlement or other criminal misappropriation of insured’s officers and employees and business interruption insurance; (b) furnish the Lender with (i) copies of all policies and evidence of the maintenance of such policies and will consult in
good faith with the Lender regarding replacement or renewal of coverage in advance of any expiration date, and (ii) obtain appropriate loss payable endorsements in form and substance satisfactory to the Lender, naming the Lender as loss payee and
providing that as to the Lender the insurance coverage shall not be impaired or invalidated by any act or neglect of the Company and the insurer will provide the Lender with at least thirty (30) days notice prior to cancellation. Upon an Event of
Default: (i) all loss recoveries received by the Lender upon any such insurance may be applied to the Obligations, in such order as the Lender in its sole discretion shall determine; (ii) any surplus shall be paid by the Lender to the Company or
applied as may be otherwise required by law: and (iii) any deficiency thereon shall be paid by the Company to the Lender, on demand. 
  
 4.16. Notice of Certain Events. The Company shall promptly inform the Lender in writing of: (a) the commencement of all proceedings and
investigations by or before, and/or the receipt of any notices from, any governmental or nongovernmental body and all actions and proceedings in any court or before any arbitrator against or in any way concerning any of the Company’s
properties, assets or business, which might singly or in the aggregate, have a 

  

 -11- 

 
materially adverse effect on the Company; (b) any amendment of the Company’s certificate of incorporation or by-laws; (c) any change in the
Company’s business, assets, liabilities, condition (financial or otherwise), results of operations or business prospects which has had or might have a material adverse effect on the Company; (d) any Event of Default or Default; (e) any default
or any event which with the passage of time or giving of notice or both would constitute a default under any agreement for the payment of money to which the Company is a party or by which the Company or any of the Company’s properties may be
bound which would have a material adverse effect on the Company’s business, operations, property or condition (financial or otherwise) or the Collateral; (f) any change in the location of the Company’s Inventory or Equipment from the
locations listed on Schedule II attached hereto; (g) any material delay in the Company’s performance of any of its obligations to any Customer and of any assertion of any material claims, offsets or counterclaims by any Customer and of any
allowances, credits and/or other monies granted by it to any Customer; and (h) any material return of goods. 
  
 4.17. Attorney-in-fact. The Company hereby irrevocably appoints the Lender or any other person whom the Lender may designate as the Company’s
attorney-in-fact, with full power and authority in place and stead of the Company and in the name of the Company or in its own name to: (i) on or after the occurrence and continuation of an Event of Default, endorse the Company’s name on any
checks, notes, acceptances, money orders, drafts or other forms of payment or security that may come into the Lender’ possession; (ii) on or after the occurrence and continuation of an Event of Default, sign the Company’s name on any
invoice or bill of lading relating to any Receivables, drafts against Customers, schedules and assignments of Receivables, notices of assignment, financing statements and other public records, verifications of account and notices to or from
Customers; (iii) on or after the occurrence and continuation of an Event of Default, verify the validity, amount or any other matter relating to any Receivable by mail, telephone, telegraph or otherwise with Customers; (iv) on or after the
occurrence and continuation of an Event of Default, execute customs declarations and such other documents as may be required to clear Inventory through United States Customs; (v) do all things necessary to carry out this Agreement; (vi) continue any
insurance existing pursuant to the terms of this Agreement and pay all or any part of the premium therefor and the cost thereof; and (vii) on or after the occurrence and continuation of an Event of Default, notify the post office authorities to
change the address for delivery of the Company’s mail to an address designated by the Lender, and to receive, open and dispose of all mail addressed to the Company. The Company hereby ratifies and approves all acts of the attorney. The powers
conferred on the Lender hereunder are solely to protect its interests in the Collateral and shall not impose any duty upon it to exercise any such powers. Neither the Lender nor the attorney will be liable for any acts or omissions or for any error
of judgment or mistake of fact or law, except for gross negligence or willful misconduct. This power, being coupled with an interest, is irrevocable so long as an account which is assigned to the Lender or in which the Lender has a security interest
remains unpaid and until the Obligations have been fully satisfied. 
  
 4.18. Food and Drug Administration. The Company shall comply in all material respects with all Food and Drug Administration requirements necessary for the Lender to exercise their rights hereunder and to realize on the Collateral.

  
 SECTION 5. RESERVED 
  

 -12- 

 SECTION 6. EVENTS OF DEFAULT; RIGHTS AND REMEDIES. 
  
 6.1. Events of Default. The occurrence of the following events shall
constitute an “Event of Default”: 
  
 (a) an
Event of Default (as defined in the Note) under the Note, the Purchase Agreement or the Amended and Restated Aeolus Guaranty; 
  
 (b) a breach or default by the Company of this Agreement, which breach or default has not been cured within thirty (30) days after receipt by the Company
of notice thereof; 
  
 (c) the security interests granted herein
do not constitute for any reason a first priority perfected security interest in all of the Collateral; or 
  
 (d) if any of the guarantees made by the Company or any of its Affiliates in favor of the Lender with respect to the Note, shall, for any reason, be
terminated or otherwise cease to be valid, binding and enforceable. 
  
 6.2. Rights and Remedies. Upon the occurrence and continuation of any Event of Default, the Lender shall have the right to demand repayment in full of all Obligations. Until all Obligations have been fully and indefeasibly satisfied,
the Lender shall retain its Security Interest in all Collateral. The Lender shall have, in addition to all other rights provided herein, the rights and remedies of a secured party under the UCC and under other applicable law, all other legal and
equitable rights to which the Lender may be entitled, including without limitation, the right to take immediate possession of the Collateral, to require the Company to assemble the Collateral, at the Company’s expense, and to make it available
to the Lender at a place designated by the Lender which is reasonably convenient to both parties and to enter any of the Premises of the Company or wherever the Collateral shall be located, with or without process of law, and to keep and store the
same at any such premises until sold (and in the case of Collateral located at any of the Premises or any other property of the Company, the Company agrees not to charge the Lender for storage thereof). Further, the Lender may, at any time or times
after the occurrence of an Event of Default, sell and deliver all Collateral held by or for the Lender in one or more parcels at public or private sale for cash, upon credit or otherwise, at such prices and upon such terms as the Lender, in the
Lender’s sole discretion, deems advisable or the Lender may otherwise recover upon the Collateral in any commercially reasonable manner as the Lender, in its sole discretion, deems advisable. Except as to that part of the Collateral which is
perishable or threatens to decline speedily in nature or is of a type customarily sold on a recognized market, the requirement of reasonable notice shall be met if such notice is mailed postage prepaid to the Company at the Company’s address as
shown in the Lender’s records, at least ten (10) days before the time of the event of which notice is being given. The Lender may be the purchaser at any sale, if it is public. Until the Lender is able to effect a sale, lease, or other
disposition of Collateral, the Lender shall have the right to use or operate Collateral, or any part thereof, to the extent that it deems appropriate for the purpose of preserving Collateral or its value or for any other purpose deemed appropriate
by the Lender. The Lender shall have no obligation to the Company to maintain or preserve the rights of the Company as against third parties with respect to Collateral while Collateral is in the possession of the Lender. The Lender 

  

 -13- 

 
may, if it so elects, seek the appointment of a receiver or keeper to take possession of Collateral and to enforce any of the Lender’s remedies with
respect to such appointment without prior notice or hearing. In connection with the exercise of the foregoing remedies, the Lender is granted permission to use: (a) all of the Company’s Intellectual Property which are used in connection with
Inventory for the purpose of disposing of such Inventory; and (b) any Equipment for the purpose of completing the manufacture of unfinished goods. The proceeds of sale shall be applied first to all costs and expenses of sale, including reasonable
and documented attorneys’ fees and expenses, and second to the payment (in whatever order the Lender elects) of all Obligations. The Lender will return any excess to the Company and the Company shall remain liable to the Lender for any
deficiency. 
  
 6.3. Grant of License to Use Intellectual
Property. For the purpose of enabling the Lender to exercise rights and remedies under this Article at such time as the Lender shall be lawfully entitled to exercise such rights and remedies, the Company hereby grants to the Lender an
irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to the Company) following the occurrence of an Event of Default, to use, license or sublicense any of the Collateral consisting of Intellectual Property
now owned or hereafter acquired by the Company, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs
used for the compilation or printout thereof. The use of such license by the Lender shall be exercised, at the option of the Lender, upon the occurrence and during the continuation of an Event of Default; provided that any license, sublicense or
other transaction entered into by the Lender in accordance herewith shall be binding upon the Company notwithstanding any subsequent cure of an Event of Default. 
  

 -14- 

 SECTION 7. SENIORITY. 
  
 The Security Interest granted hereunder upon the Collateral shall be senior to and have priority over all debt of the
Company. 
  
 SECTION 8. LIABILITY DISCLAIMER. Under no circumstances
whatsoever shall the Lender be deemed to assume any responsibility for or obligation or duty with respect to any part or all of the Collateral, of any nature or kind whatsoever, or with respect to any matter or proceedings arising out of or relating
thereto. The Lender shall not be required to take any action of any kind to collect or protect any interest in the Collateral, including but not limited to any action necessary to preserve its, or the Company’s rights against prior parties to
any of the Collateral. Except in cases of gross negligence or willful misconduct, the Lender shall not be liable or responsible in any way for the safekeeping, care or custody of any of the Collateral, or for any loss or damage thereto, or for any
diminution in the value thereof, or for any act or default of any agent or bailee of the Lender or the Company, or of any carrier, forwarding agency or other person whomsoever, or for the collection of any proceeds, but the same shall be at the
Company’s sole risk at all times. Except in cases of gross negligence or willful misconduct, the Company hereby releases the Lender from any claims, causes of action and demands at any time arising out of or with respect to this Agreement or
the Obligations, and any actions taken or omitted to be taken by the Lender with respect thereto, and the Company agrees to defend and hold the Lender harmless from and with respect to any and all such claims, causes of action and demands.

  
 SECTION 9. MISCELLANEOUS. 
  
 9.1. No Waiver; Cumulative Remedies. No failure or delay by the
Lender in exercising any right, power or remedy under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy under this Agreement. The remedies provided in this Agreement are cumulative and not exclusive of any remedies provided by law. 
  
 9.2. Waivers. The Company waives presentment and protest of any instrument and notice thereof, notice of default and all other notices to which the
Company might otherwise be entitled. 
  
 9.3. Security Interest
Absolute. All rights of the Lender hereunder, the Security Interest and all the Obligations shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of any agreement with respect to any of the Obligations,
(b) any change in the time, manner or place of payment of, or in any other term of, the Obligations, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure
from any guarantee securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Company in respect of the Obligations or this Agreement.

  

 -15- 

 9.4. Amendments, Etc. No amendment, modification, termination or waiver of any provision of this
Agreement or consent to any departure by the Company therefrom or any release of a Lien shall be effective unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances. 
  
 9.5. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be in writing and shall be sent by mail, personal delivery, facsimile transmission or courier and shall be effective five (5) days after being placed in the mail, if mailed, or upon receipt, if delivered personally, by
facsimile transmission or by courier, in each case addressed to a party at such party’s address (or facsimile transmission number) shown below or such other address (or facsimile transmission number) as a party shall have provided by notice to
the other party in accordance with this provision. In the case of any notice to the Company, such notice shall be addressed to the Company, P.O. Box 14287 (if by U.S. mail), 79 T.W. Alexander Drive, 4401 Research Commons, Suite 200, Research
Triangle Park, North Carolina 27709, Attention: Clayton I. Duncan (facsimile transmission number (919) 544-1245), and a copy shall also be given to: Wyrick Robbins Yates & Ponton LLP, 4101 Lake Boone Trail, Suite 300, Raleigh, North Carolina
27607 Attention: Larry E. Robbins, Esq., and in the case of any notice to the Lender, such notice shall be addressed to the Lender at 152 West 57th Street, 21st Floor, New York, New York 10019, Attention: Mitchell D. Kaye (facsimile transmission
number (212) 247-1329), and a copy shall be given to: Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey 07068 Attention: Steven E. Siesser, Esq. (facsimile transmission number (973) 597-2507). 
  
 9.6. Costs and Expenses. 
  
 (a) The Company shall pay all of the Lender’s reasonable and documented
out-of-pocket costs and expenses in connection with the prosecution or defense of any action, contest, dispute, suit or proceeding concerning any matter in any way arising out of, related to or connected with this Agreement. The Company shall also
pay all of the Lender’s reasonable and documented out-of-pocket costs and expenses, including, without limitation, fees and disbursements of counsel, in connection with: (i) the preparation, execution and delivery of any waiver, amendment or
consent proposed or executed in connection with the transactions contemplated by this Agreement; (ii) the Lender’s obtaining performance of the Company’s obligations under this Agreement, including, but not limited to, the enforcement or
defense of the Security Interest, assignments of rights and Liens hereunder as valid perfected security interests; and (iii) any attempt to inspect, verify, protect, collect, sell, liquidate or otherwise dispose of any Collateral. 
  
 (b) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby. The provisions of this Section 9.6 shall remain operative and in full force and effect regardless of the termination of this Agreement, the Note or any other agreement entered into in connection therewith, the repayment
of the amounts advanced under the Note, the invalidity or unenforceability of any term or provision of this Agreement or any investigation made by or on behalf of the Lender. All amounts due under this Section 9.6 shall be payable on written demand
therefor. 
  

 -16- 

 9.7. Counterparts; Faxes. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed via facsimile, which shall be deemed an original. 
  
 9.8. Binding Effect; Assignment; Complete Agreement. This Agreement
shall be binding upon and inure to the benefit of the Company and the Lender and their respective successors and assigns, except that the Company shall not have the right to assign or transfer its rights or obligations hereunder or any interest
herein or in the Collateral (and any such assignment or transfer shall be void). Upon a transfer by the Lender, the Lender shall be released from all responsibility for the Collateral for all actions arising after the date of such transfer to the
extent same is assigned to any transferee. For purposes of emphasis and clarity, the Company hereby acknowledges that this Agreement inures to the benefit of the Lender named herein as the successor-by-merger to Goodnow Capital, Inc., a Delaware
corporation, the lender named in the Original ICT Security Agreement as though the Lender named herein were the original party thereto. 
  
 9.9. Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions hereof. 
  
 9.10. Titles and Subtitles; Cross-References. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All
references in this Agreement to Articles, Sections, subsections, Exhibits and Schedules, shall be to Articles, Sections, subsections, Exhibits and Schedules of this Agreement unless otherwise explicitly specified. All references to statutes and
related regulations shall include any amendments of same and any successor statutes and regulations. 
  
 9.11. Governing Law; Consent to Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the internal laws of
the State of New York, without reference to the choice of law principles thereof. Any legal action, suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby shall only be instituted, heard and
adjudicated (excluding appeals) in a state or federal court located in the Southern District of New York, and each party hereto knowingly, voluntarily and intentionally waives any objection which such party may now or hereafter have to the laying of
the venue of any such action, suit or proceeding, and irrevocably submits to the exclusive personal jurisdiction of any such court in any such action, suit or proceeding. Service of process in connection with any such action, suit or proceeding may
be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Notwithstanding the foregoing to the contrary, the Company may institute and prosecute any action, suit or
proceeding in any court of competent jurisdiction it shall deem advisable in connection the enforcement of its rights against the Collateral. 
  
 9.12. No Jury Trial. Each party acknowledges and agrees that any controversy that may arise under this Agreement is likely to involve complicated
and difficult issues. ACCORDINGLY, EACH SUCH PARTY HEREBY KNOWINGLY, VOLUNTARILY 

  

 -17- 

 
AND INTENTIONALLY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. Each party certifies and acknowledges that (i) no other party has represented, expressly or otherwise, that such other party would not,
in the event of litigation, seek to enforce the foregoing waiver, (ii) each such party understands and has considered the implications of this waiver, and (iii) each such party has been induced to enter into this Agreement by, among other things,
the waivers and certifications in this Section 9.12. 
  
 9.13.
Recapture. Anything in this Agreement to the contrary notwithstanding, if the Lender receives any payment or payments on account of the Obligations, which payment or payments or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver, or any other party under the United States Bankruptcy Code, as amended, or any other federal or state bankruptcy, reorganization, moratorium or insolvency law
relating to or affecting the enforcement of creditors’ rights generally, common law or equitable doctrine, then to the extent of any sum not finally retained by the Lender, the Company’s obligations to the Lender shall be reinstated and
this Agreement shall remain in full force and effect (or be reinstated) until payment shall have been made to the Company, which payment shall be due on demand. 
  

9.14. Termination. When all Obligations shall have been indefeasibly paid in full, this Agreement shall terminate, and the Lender shall
forthwith cause to be assigned, transferred and delivered, against receipt but without any recourse, warranty or representation whatsoever, any remaining Collateral and money received in respect thereof, to or on the order of the Company and to be
released and canceled all licenses and rights granted to it hereunder. The Lender shall also execute and deliver to the Company upon such termination such UCC termination statements and such other documentation as shall be reasonably requested by
the Company to effect the termination of the release of the Liens on the Collateral. 
  
 9.15. Construction. The parties acknowledge that each party and its counsel have reviewed this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against
the drafting party shall not be employed in the interpretation of this Agreement or any amendments, schedules or exhibits hereto. 
  
 9.16 Entire Agreement. This Agreement supersedes, amends, restates and replaces the Original ICT Security Agreement in its entirety, and
constitutes the entire agreement of the parties hereto with respect to the subject matter hereof. For purposes of clarity and emphasis, this Agreement does not grant a new Lien and Security Interest in the Collateral, but instead, among other
things, confirms that the Lien and Security Interest originally granted to the Lender pursuant to the Original ICT Security Agreement secures the $5M Note as of the date of the Lien and Security Interest granted pursuant to the Original ICT Security
Agreement. 
  
 [Signatures begin on the following page]

  

 -18- 

 IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year first above written.

  

	 COMPANY:

	
	 INCARA PHARMACEUTICALS CORPORATION

		
	 By:
	 	  

	 Name:
	 	  

	 Title:
	 	  

	
	 GOODNOW CAPITAL, L.L.C.

		
	 By:
	 	  

	 Name:
	 	  

	 Title:
	 	  

  

 -19-Stock Purchase Agreement dated December 11, 2003

 Exhibit 4.2 
  

Irvine Sensors Corporation 
 Shares
of Common Stock and Common Stock Warrants 
  
 STOCK
PURCHASE AGREEMENT 
  
 This Stock Purchase Agreement (the
“Agreement”) is made as of December 11, 2003 by and among Irvine Sensors Corporation, a Delaware corporation (the “Company”), and those purchasers set forth on Schedule A attached hereto (each a
“Purchaser” and collectively, the “Purchasers”). 
  
 1. Purchase and Sale of Securities. 
  
 (a) The Securities. Subject to the terms and conditions herein contained, the Company agrees to issue and sell to the Purchasers up to an
aggregate of 1,000,000 shares (the “Shares”) of the Company’s Common Stock, par value $0.01 per share (the “Common Stock”) to Purchasers, and the Purchasers agree to purchase from the Company,
that number of shares of as set forth opposite such Purchaser’s name on Schedule A attached hereto (the “Shares”) at a purchase price of $1.75 per share (the “Purchase Price”). In connection with
such purchase, the Company agrees to issue to each Purchaser a Warrant to Purchase Common Stock (a “Warrant”), in substantially the form attached hereto as Exhibit A, to acquire up to one (1) share of Common Stock for
every four (4) shares of Common Stock purchased hereunder, up to a aggregate of 250,000 shares of Common Stock (the “Warrant Shares”), as set forth opposite such Purchaser’s name on Schedule A attached hereto. The
Shares and the Warrants are sometimes herein collectively referred to as the “Securities.” This Agreement and the Warrants are sometimes herein collectively referred to as the “Transaction Documents.”
The Securities will be offered and sold to the Purchasers without such offers and sales being registered under the Securities Act of 1933, as amended (together with the rules and regulations of the Securities and Exchange Commission (the
“Commission”) promulgated thereunder, the “Securities Act”), in reliance on exemptions therefrom. 
  
 (b) Closing. The closing of the purchase and sale of the Shares hereunder (the “Closing”) shall be held at the offices of
Dorsey & Whitney LLP, 38 Technology Drive, Irvine, California 92618, on December 11, 2003, or at such other date as the Purchasers and the Company may agree upon (the “Closing Date”). As soon as reasonably practicable
following the Closing Date, the Company shall deliver, or shall have delivered, to the Purchasers, and/or the Escrow Agent (as defined below) for the benefit of the Purchasers, one or more stock certificates evidencing the Shares purchased hereunder
and the Warrants registered in the name of the Purchasers or their nominees as per the directions set forth on the signature page hereof, against payment by each Purchaser of the purchase price therefor by wire transfer of immediately available
funds to the Company, and/or to the account of the Escrow Agent for the benefit of the Company, in the amounts set forth on Schedule A hereto. In the event the Shares and the Warrants are not delivered to the Purchasers and/or the Escrow
Agent, as set forth on Schedule A hereto, within ten (10) business day from the Closing Date, in addition to other rights available to the Purchasers, each Purchaser shall have the right to demand the immediate return of the aggregate
Purchase Price paid by such Purchaser. 

 (c) Escrow. The amount of the aggregate Purchase Price to be paid by the Purchaser at Closing to
the account of the Escrow Agent to be held for the benefit of the Company, and the number of Shares and the Warrants to be delivered promptly thereafter to the Escrow Agent by the Company to be held for the benefit of the Purchasers, as set forth on
Schedule A hereto, represent the maximum number of Rescission Shares and the Warrants subject to the Rescission Right pursuant to Section 6 hereof, and shall be deposited with the Escrow Agent pursuant to that certain Escrow Agreement dated
as of the date hereof between the Company, the Purchasers and Grushko & Mittman, P.C (“Escrow Agent”) in substantially the form attached hereto as Exhibit C hereto, and delivered contemporaneously herewith (the
“Escrow Agreement”). 
  
 2.
Representations and Warranties of the Company. The Company represents and warrants to the Purchasers as follows: 
  
 (a) The Company has filed all reports required to be filed by it under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), including pursuant to Section 13(a) or 15(d) thereof, since October 1, 2001 (the “Disclosure Documents”), on a timely basis or has received a valid extension of such time of filing and has filed any such
reports prior to the expiration of any such extension. The Disclosure Documents at the time they were filed (after giving effect to any updated disclosures therein) with the Commission, complied in all material respects with the requirements under
the Securities Act and /or the Exchange Act, as applicable. 
  
 (b) Each of the Company and its operational subsidiaries set forth on Schedule B attached hereto (the “Subsidiaries”) has been duly incorporated and each of the Company and the Subsidiaries is validly existing
in good standing as a corporation under the laws of its jurisdiction of incorporation, with the requisite corporate power and authority to own its properties and conduct its business as now conducted as described in the Disclosure Documents and is
duly qualified to do business as a foreign corporation in good standing in all other jurisdictions where the ownership or leasing of its properties or the conduct of its business requires such qualification, except where the failure to be so
qualified would not, individually or in the aggregate, have a material adverse effect on the business, financial condition, properties, or results of operations of the Company and the Subsidiaries, taken as a whole (any such event, a
“Material Adverse Effect”). The Company has the authorized, issued and outstanding capitalization set forth in the Disclosure Documents (subject to the issuance of shares pursuant to outstanding warrants, options or other
convertible securities or pursuant to securities issued under the Company’s stock option plans or employee stock purchase plans, or any other rights to acquire shares described in the Disclosure Documents). Except as set forth in the Disclosure
Documents, the Company does not have any subsidiaries and does not own directly or indirectly any of the capital stock or other equity or long-term debt securities of or have any equity interest in any other entity. All of the outstanding shares of
capital stock of the Company and the Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable and were not issued in violation of any preemptive or similar rights. Except as set forth in the Disclosure Documents,
no options, warrants or other rights to purchase from the Company or any Subsidiary, agreements or other obligations of the Company or any Subsidiary to issue or other rights to convert any obligation into, or exchange any securities for, shares of
capital stock 

  

 2 

 
of or ownership interests in the Company or any Subsidiary are outstanding. Except as set forth in the Disclosure Documents, there is no agreement,
understanding or arrangement among the Company or any Subsidiary and each of their respective stockholders or any other person relating to the ownership or disposition of any capital stock of the Company or any Subsidiary or the election of
directors of the Company or any Subsidiary. 
  
 (c) The Company
has the requisite corporate power and authority to execute, deliver and perform its obligations under the Transaction Documents. Each of the Transaction Documents has been duly and validly authorized by the Company and, when executed and delivered
by the Company, will constitute a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms except as the enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors’ rights generally or (B) general principles of equity and the discretion of the court before which any proceeding therefore
may be brought (regardless of whether such enforcement is considered in a proceeding at law or in equity) (collectively, the “Enforceability Exceptions”). 
  
 (d) The Shares and the Warrants have been duly authorized and, when issued upon payment thereof in accordance with this
Agreement, will have been validly issued, fully paid and nonassessable. The Warrant Shares have been duly authorized and validly reserved for issuance, and when issued upon exercise of the Warrants in accordance with the terms thereof and upon
payment to the Company of the exercise price therefor (whether by cash or by net exercise pursuant to the terms of the Warrant), will have been validly issued, fully paid and nonassessable. 
  
 (e) No consent, approval, authorization, license, qualification, exemption
or order of any court or governmental agency or body or third party is required for the performance of the Transaction Documents by the Company or for the consummation by the Company of any of the transactions contemplated thereby, or the
application of the proceeds of the issuance of the Securities as described in the this Agreement, except for such consents, approvals, authorizations, licenses, qualifications, exemptions or orders (i) as have been obtained or (ii) the failure to
obtain which would not have a Material Adverse Effect. 
  
 (f)
None of the Company or the Subsidiaries is (i) in material violation of its Certificate of Incorporation or Bylaws (or similar organizational document), (ii) in breach or violation of any statute, judgment, decree, order, rule or regulation
applicable to it or any of its properties or assets, which breach or violation would, individually or in the aggregate, have a Material Adverse Effect, or (iii) in default in the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust, loan agreement, note, lease, license, franchise agreement, permit, certificate or agreement or instrument to which it is a party or to which it is subject, which default would
have a Material Adverse Effect. 
  
 (g) The execution, delivery
and performance by the Company of the Transaction Documents and the consummation by the Company of the transactions contemplated thereby and the fulfillment of the terms thereof will not (a) violate, conflict with or constitute or 

  

 3 

 
result in a breach of or a default under (or an event that, with notice or lapse of time, or both, would constitute a breach of or a default under) any of
(i) the terms or provisions of any contract, indenture, mortgage, deed of trust, loan agreement, note, lease, license, franchise agreement, permit, certificate or agreement or instrument to which any of the Company or the Subsidiaries is a party or
to which any of their respective properties or assets are subject, (ii) the certificate of incorporation or bylaws of any of the Company or the Subsidiaries (or similar organizational document) or (iii) any statute, judgment, decree, order, rule or
regulation of any court or governmental agency or other body applicable to the Company or the Subsidiaries or any of their respective properties or assets or (b) result in the imposition of any lien upon or with respect to any of the properties or
assets now owned or hereafter acquired by the Company or any of the Subsidiaries, which violation, conflict, breach, default or lien would have a Material Adverse Effect. 
  
 (h) The audited consolidated financial statements included in the Disclosure Documents present fairly the consolidated
financial position, results of operations, cash flows and changes in stockholders’ equity of the entities, at the dates and for the periods to which they relate and have been prepared in accordance with generally accepted accounting principles
in the United States applied on a consistent basis. The interim unaudited consolidated financial statements included in the Disclosure Documents present fairly the consolidated financial position, results of operations and cash flows of the
entities, at the dates and for the periods to which they relate, subject to year-end audit adjustments and have been prepared in accordance with generally accepted accounting principles in the United States (except for year end adjustments and the
lack of footnotes), applied on a consistent basis with the audited consolidated financial statements included therein. Grant Thornton LLP, which has examined certain of such financial statements as set forth in its report included in the Disclosure
Documents, is an independent certified public accountant as required by the Securities Act for an offering registered thereunder. 
  
 (i) Except as described in the Disclosure Documents, there is not pending or, to the knowledge of the Company, overtly threatened any action, suit,
proceeding, inquiry or investigation, governmental or otherwise, to which any of the Company or the Subsidiaries is a party, or to which their respective properties or assets are subject, before or brought by any court, arbitrator or governmental
agency or body, that, if determined adversely to the Company or any such Subsidiary, would, individually or in the aggregate, have a Material Adverse Effect or that seeks to restrain, enjoin, prevent the consummation of or otherwise challenge the
issuance or sale of the Securities to be sold hereunder or the application of the proceeds therefrom or the other transactions described in the Disclosure Documents. 
  
 (j) The Company and the Subsidiaries own or possess adequate licenses or other rights to use all patents, trademarks,
service marks, trade names, copyrights, know-how and other intellectual property rights that are necessary to conduct their businesses as described in the Disclosure Documents, except where the failure to own or possess such rights would not have a
Material Adverse Effect. None of the Company or the Subsidiaries has received any written notice of infringement of (or knows of any such infringement of) asserted rights of others with respect to any patents, trademarks, service marks, trade names,
copyrights, know-how or other intellectual property rights that, if such assertion of infringement or conflict were sustained, would, individually or in the aggregate, have a Material Adverse Effect. 
  

 4 

 (k) Each of the Company and the Subsidiaries possesses all licenses, permits, certificates, consents,
orders, approvals and other authorizations from, and has made all declarations and filings with, all federal, state, local and other governmental authorities, all self-regulatory organizations and all courts and other tribunals currently required or
necessary to own or lease, as the case may be, and to operate its respective properties and to carry on its respective businesses as now or proposed to be conducted as set forth in the Disclosure Documents (“Permits”), except
where the failure to obtain or possess such Permits would not have a Material Adverse Effect. None of the Company or the Subsidiaries has received any notice of any proceeding relating to revocation or modification of any such Permit, except as
described in the Disclosure Documents or except where such revocation or modification would not have a Material Adverse Effect. 
  
 (l) Subsequent to the respective dates as of which information is given in the Disclosure Documents and except as described therein, (i) the Company and
the Subsidiaries have not incurred any material liabilities or obligations, direct or contingent; (ii) the Company and the Subsidiaries have not purchased any of their respective outstanding capital stock, or declared, paid or otherwise made any
dividend or distribution of any kind on any of their respective capital stock or otherwise (other than, with respect to any of such Subsidiaries, the purchase of capital stock by the Company), (iii) there has not occurred any event or condition that
has, or could reasonably be expected to have, a Material Adverse Effect, and (iv) the Company and the Subsidiaries have not sustained any material loss or interference with respect to their respective businesses or properties from fire, flood,
hurricane, earthquake, accident or other calamity, whether or not covered by insurance, or from any labor dispute or any legal or governmental proceeding. 
  
 (m) There are no material legal or governmental proceedings nor are there any material contracts or other documents required by the Securities Act to be
described in a prospectus that are not described in the Disclosure Documents. Except as described in the Disclosure Documents, none of the Company or the Subsidiaries is in default under any of the material contracts described in the Disclosure
Documents, has received a notice or claim of any such default or has knowledge of any breach of such contracts by the other party or parties thereto, except for such defaults or breaches as would not, individually or in the aggregate, have a
Material Adverse Effect. 
  
 (n) Each of the Company and the
Subsidiaries has good and marketable fee simple title to all real property and good and marketable title to all personal property described in the Disclosure Documents as being owned by it, free and clear of all liens, charges, encumbrances or
restrictions, except, in each case, as described in the Disclosure Documents or such as would not, individually or in the aggregate, have a Material Adverse Effect. All material leases, contracts and agreements to which the Company or any of the
Subsidiaries is a party or by which any of them is bound are valid and enforceable against the Company or any such Subsidiary, are, to the knowledge of the Company, valid and enforceable against the other party or parties thereto and are in full
force and effect. 
  

 5 

 (o) Each of the Company and the Subsidiaries has filed all necessary federal, state and foreign income
and franchise tax returns, except where the failure to so file such returns would not, individually or in the aggregate, have a Material Adverse Effect, and has paid all taxes shown as due thereon. Other than tax deficiencies which the Company or
any Subsidiary is contesting in good faith and for which adequate reserves have been provided in accordance with generally accepted accounting principles, there is no tax deficiency that has been asserted against the Company or any Subsidiary that
would, individually or in the aggregate, have a Material Adverse Effect. 
  
 (p) None of the Company or the Subsidiaries is, or immediately after the Closing Date will be, required to register as an “investment company” or a company “controlled by” an “investment
company” within the meaning of the Investment Company Act of 1940, as amended (the “Investment Company Act”). 
  
 (q) None of the Company or the Subsidiaries or, to the knowledge of the Company, any of such entities’ directors, officers, employees, agents or
controlling persons, has taken, directly or indirectly, any action designed, or that might reasonably be expected, to cause or result, under the Securities Act or the Exchange Act, or otherwise, in, or that has constituted, stabilization or
manipulation of the price of the Common Stock. 
  
 (r) None of
the Company, the Subsidiaries or any of their respective Affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act) directly, or through any agent, engaged in any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) in connection with the offering of the Securities or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act. Assuming the accuracy of the
Purchasers’ representations and warranties set forth in Section 4, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby. 
  
 (s) Except as set forth in the Disclosure Documents, there is no strike,
labor dispute, slowdown or work stoppage with the employees of the Company or any of the Subsidiaries which is pending or, to the knowledge of the Company or any of the Subsidiaries, threatened. 
  
 (t) The Company is insured by insurers of recognized financial
responsibility against such losses and in such amounts that are reasonably prudent and comparable to other companies of its size and similar business. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business. 
  
 (u) Except as set forth in the Disclosure Documents, none of the officers or directors of the Company and, to the knowledge
of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of such services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments in excess of 

  

 6 

 
$60,000 to or from any officer director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee
has a substantial interest or is an officer, director, trustee or partner. 
  
 (v) The Company will not pay any claims for services, either in the nature of a finder’s fee or financial advisory fee, with respect to the offering of the Shares and the transactions contemplated by the
Transaction Documents. 
  
 (w) The Common Stock is listed on the
Nasdaq SmallCap Market. The Company currently is not in violation of, and the consummation of the transactions contemplated by the Transaction Documents will not violate, any rule of the National Association of Securities Dealers, Inc. The Shares
and the Warrant Shares will be listed on the Nasdaq SmallCap Market immediately following their issuance. 
  
 (x) The Company is eligible to use Form S-3 for the resale of the Shares and the Warrant Shares by the Purchasers or their transferees. 
  
 (y) The Company shall not sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Purchasers. 
  
 (z) The Company shall not sell any security in a manner that the Company
believes would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of the Nasdaq SmallCap Market. The Company believes that the offer and sale of the Securities pursuant to this Agreement, excluding the
Rescission Shares (as defined below) and the related Warrants, does not integrate with prior offerings of securities by the Company for purposes of the rules and regulations of the Nasdaq SmallCap Market. 
  
 3. Conditions of the Purchaser’s Obligations. The obligation of
each Purchaser to purchase and pay for the Securities is subject to the following conditions unless waived in writing by such Purchaser: 
  
 (a) The representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects on and as of the
Closing Date. The Company shall have complied in all material respects with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date. 
  
 (b) None of the issuance and sale of the Securities pursuant to this
Agreement or any of the transactions contemplated by any of the other Transaction Documents shall be enjoined (temporarily or permanently) and no restraining order or other injunctive order shall have been issued in respect thereof. There shall not
have been any legal action, order, decree or other administrative proceeding instituted or, to the Company’s knowledge, threatened against the Company or against any Purchaser relating to the issuance of the Securities or any Purchaser’s
activities in connection therewith or any other transactions contemplated by this Agreement, the other Transaction Documents or the Disclosure Documents. 
  

 7 

 (c) The Purchasers shall have received a certificate, dated the Closing Date and signed by the Chief
Financial Officer of the Company to the effect of paragraphs 3(a) and (b). 
  
 (d) The Purchasers shall have received an opinion of Dorsey & Whitney LLP, counsel to the Company, with respect to the authorization of the Shares, the Warrants and the Warrant Shares and certain other customary
matters. 
  
 (e) The Company shall have obtained any and all
consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by the Transaction Documents. 
  
 4. Representations and Warranties of the Purchasers. 
  
 (a) Purchaser represents and warrants to the Company that the Securities to be acquired by it hereunder (including the Warrant Shares that it may acquire
upon exercise of the Warrants) are being acquired for its own account for investment (and/or on behalf of managed accounts who are purchasing solely for their own accounts for investment) and with no intention of distributing or reselling such
Securities (including the Warrant Shares that it may acquire upon exercise of the Warrants, as the case may be) or any part thereof or interest therein in any transaction which would be in violation of the securities laws of the United States of
America or any State, without prejudice, however, to a Purchaser’s right, subject to the provisions of this Agreement, at all times to sell or otherwise dispose of all or any part of such Shares or Warrant Shares under an effective registration
statement under the Securities Act and in compliance with applicable state securities laws or under an exemption from such registration. By executing this Agreement, each Purchaser further represents that such Purchaser does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant participation to any Person with respect to any of the Securities. 
  
 (b) Purchaser understands that the Securities (including the Warrant Shares that it may acquire upon exercise of the Warrants) have not been registered
under the Securities Act and may not be offered, resold, pledged or otherwise transferred except (a) pursuant to an exemption from registration under the Securities Act (and, if requested by the Company, based upon an opinion of counsel acceptable
to the Company) or pursuant to an effective registration statement under the Securities Act and (b) in accordance with all applicable securities laws of the states of the United States and other jurisdictions. 
  
 (c) Purchaser agrees to the imprinting, so long as appropriate, of the
following or similar legend on the Securities (including the Warrant Shares that it may acquire upon exercise of the Warrants), together with any other legends required under the State Securities laws: 
  

	THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH

  

 8 

	RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL TO THE EFFECT THAT THE PROPOSED TRANSACTION DOES NOT INVOLVE A
VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.

  
 (d) Each Purchaser
agrees that, in connection with any transfer of the Shares or the Warrant Shares by it pursuant to an effective registration statement under the Securities Act, such Purchaser will comply with all prospectus delivery requirements of the Securities
Act. 
  
 (e) Purchaser is an “accredited investor”
within the meaning of Rule 501(a) of Regulation D under the Securities Act. 
  
 (f) Purchaser represents and warrants to the Company that it, or its general partner, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits
and risks of the prospective investment in the Securities, having been represented by counsel, and has so evaluated the merits and risks of such investment and is able to bear the economic risk of such investment and, at the present time, is able to
afford a complete loss of such investment. 
  
 (g) Purchaser
represents and warrants to the Company that (i) the purchase of the Securities to be purchased by it has been duly and properly authorized and this Agreement has been duly executed and delivered by it or on its behalf and constitutes the valid and
legally binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or
affecting creditors’ rights generally and to general principals of equity; (ii) the purchase of the Securities to be purchased by it does not conflict with or violate its limited partnership agreement, operating agreement or other charter
documents, or any law, regulation or court order applicable to it; and (iii) the purchase of the Securities to be purchased by it does not impose any penalty or other onerous condition on Purchaser under or pursuant to any applicable law or
governmental regulation. 
  
 (h) Purchaser represents and
warrants to the Company that neither it nor any of its directors, officers, employees, agents, partners, members or controlling persons has taken, directly or indirectly, any actions designed, or might reasonably be expected to cause or result,
under the Securities Act or Exchange Act or otherwise, in, or that has constituted, stabilization or manipulation of the price of the Company’s Common Stock. 
  
 (i) Purchaser acknowledges it has reviewed the Disclosure Documents and further acknowledges that it has been afforded (i)
the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the
Securities and (ii) access to information about the Company and the Company’s financial condition, results of operations, business, properties and management. 
  

 9 

 (j) Purchaser represents and warrants to the Company that it has based its investment decision solely
upon the information contained in the Disclosure Documents and such other information as may have been provided to it by the Company in response to its inquiries, and has not based its investment decision on any research or other report regarding
the Company prepared by any third party (“Third Party Reports”). Purchaser understands and acknowledges that (i) the Company does not endorse any Third Party Reports and (ii) its actual results may differ materially from
those projected in any Third Party Report. 
  
 (k) Purchaser
understands and acknowledges that (i) any forward-looking information included in the Disclosure Documents supplied to Purchaser by the Company or its management is subject to risks and uncertainties, including those risks and uncertainties set
forth in the Disclosure Documents (and in particular the “Risk Factors” section of the Company’s most recent annual or quarterly report filed with the Commission) and (ii) the Company’s actual results may differ materially from
those projected by the Company or its management in such forward-looking information. 
  
 (l) Purchaser agrees to furnish to the Company certified statement as to the number of shares of Common Stock beneficially owned by such Purchaser and identification of the person or persons that has voting and
dispositive control over the Registrable Securities in connection with the Company’s preparation of the Registration Statement (as defined below). 
  
 5. Termination. 
  
 (a) This Agreement may be terminated in the sole discretion of the Company by notice to Purchasers if at the Closing Date: 
  
 (i) the representations and warranties made by Purchasers in Section 4 are
not true and correct in all material respects; 
  
 (ii) as to the
Company, the sale of the Securities hereunder (i) is prohibited or enjoined by any applicable law or governmental regulation or (ii) subjects the Company to any penalty, or in its reasonable judgment, other onerous condition under or pursuant to any
applicable law or government regulation that would materially reduce the benefits to the Company of the sale of the Securities to such Purchaser, so long as such regulation, law or onerous condition was not in effect in such form at the date of this
Agreement; or 
  
 (iii) the Company has been unable to obtain the
consent to the issuance of these Securities by the shareholders holding the requisite number of outstanding shares purchased under that certain Common Stock Purchase Agreement dated September 23, 2003 among the Company and the purchasers thereto
(the “Prior Purchase Agreement”). 
  
 (b)
This Agreement may be terminated in the sole discretion of Purchasers by notice to the Company given in the event that the Company shall have failed, refused or been unable to satisfy all conditions on its part to be performed or satisfied hereunder
on or prior to the Closing Date or if after the execution and delivery of this Agreement and prior 

  

 10 

 
to the Closing Date trading in securities of the Company or in securities generally on the New York Stock Exchange, the American Stock Exchange or the Nasdaq
National or SmallCap Market shall have been suspended or minimum or maximum prices shall have been established on any such exchange. 
  
 (c) This Agreement may be terminated by mutual written consent of both parties. 
  
 6. Rescission Right. 
  
 (a) If, prior to December 26, 2003 (the “Rescission Deadline”), the Nasdaq Stock Market determines that stockholder approval is
required for the issuance of any of the Securities, and notifies the Company of such determination in writing, the sale of up to 600,000 of the Shares (the “Rescission Shares”) and the Warrants sold or issued hereunder may be
rescinded, at the Company’s sole option, and the Purchase Price paid by the Purchasers for such Rescission Shares shall be immediately refunded to the Purchaser. The exact number of Rescission Shares that may be repurchased, up to a maximum of
600,000 Shares, shall be the minimum number of shares necessary to satisfy the Nasdaq Stock Market that no stockholder approval is necessary in connection with the sale of the Securities to the Purchasers. 
  
 (b) Any rescission effected pursuant to this Section 6 shall be made on a
pro rata basis among the Purchasers in proportion to the number of Shares then held by them. This Rescission Right shall be exercisable by giving written notice to each Purchaser in accordance with the notice provisions of Section 12 below (the
“Rescission Notice”), and to the Escrow Agent in accordance with the Escrow Agreement, which notice shall indicate (1) the exact number of Rescission Shares to be rescinded, (2) the aggregate price to be refunded to the
Purchaser for the Rescission Shares to be rescinded (the “Rescission Price”), and (3) the date on which such rescission is to be effected, such date to not be more than eight (8) days after the date of the Rescission Notice
(the “Rescission Date”). 
  
 (c) In the
event of such a rescission, the Purchaser shall surrender its right to the Rescission Shares and the Purchaser shall be entitled to receive payment of the Rescission Price. The Company shall promptly direct the Escrow Agent to pay to the Purchasers,
out of the funds which have been deposited in escrow with the Escrow Agent, the Rescission Price for the Rescission Shares. In the event of a rescission for less that the maximum number of Rescission Shares, the Company shall promptly issue a new
certificate or certificates representing the balance of the Shares not rescinded, and the balance of the funds held in escrow shall be forwarded to the Company by the Escrow Agent. 
  
 (d) Notwithstanding that the certificates evidencing any such shares so called for rescission shall not have been
surrendered, such Rescission Shares shall be cancelled and shall no longer be deemed to be outstanding, the Purchaser shall cease to be a stockholder with respect to such Rescission Shares, and all rights whatsoever with respect to such Rescission
Shares (except for the right of the holders thereof to receive the Rescission Price without interest upon surrender of their certificates) shall terminate. 
  

 11 

 (e) In order to enforce the Rescission Right as set forth in this Section 6, the Company may further
impose stop-transfer instructions on the Shares. 
  
 (f) If the
Company exercises its Rescission Right pursuant to this Section 6, the Warrants shall be cancelled in their entirety and shall not be exercisable pursuant to their terms. In this event, the Company hereby agrees to issue to the Purchasers as of the
Rescission Date warrants to purchase up to one (1) share of Common Stock for every four (4) Shares purchased hereunder and not so rescinded (the “Replacement Warrants”), which Replacement Warrants shall be in substantially
the same form as the Warrants, except that the exercise price per share thereof shall be equal to the market price of the Common Stock, such market price to equal the five day average of the closing bid price of the Common Stock as of the Closing
Date or as otherwise calculated in accordance with the rules of the Nasdaq Stock Market so that no stockholder approval is required for the issuance of the Replacement Warrants. The Company shall promptly deliver to Purchasers any such Replacement
Warrants at the address set forth on the signature page hereto. 
  
 7. Registration. 
  
 (a) As promptly as
possible, and in any event on or prior to thirty (30) days from the Closing Date, the Company shall prepare and file with the Commission a Registration Statement (the “Registration Statement”) covering the resale of all of
the Shares and the Warrant Shares (the “Registrable Securities”) for an offering to be made on a continuous basis pursuant to Rule 415; provided, however, that the above-referenced deadline shall be extended for any period of
time for which the Company is unable to file the Registration Statement solely due to the failure of any of the Purchasers to provide the information regarding the Registration Statement reasonably requested by the Company. The Registration
Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form and shall contain (except if otherwise
directed by the Purchasers or the Commission) the “Plan of Distribution” in substantially the form attached hereto as Exhibit B. 
  
 (b) The Company shall use its commercially reasonable efforts to cause the Registration Statement to be declared effective by the Commission as promptly
as possible after the filing thereof, but in any event prior to the 120 days from the Closing Date, but the Company shall not be liable for any damages should such effectiveness be delayed by reason of the SEC review process or by failure of the
Purchaser to provide information regarding the Registration Statement reasonably requested by the Company. The Company shall use its commercially reasonable efforts to keep the Registration Statement continuously effective under the Securities Act
until the second anniversary of the Effective Date or such earlier date when all Registrable Securities covered by such Registration Statement have been sold (the “Effectiveness Period”). If the Company receives notification
from the Commission that the Registration Statement will receive no action or review from the Commission, then the Company will request that the Registration Statement become effective within five (5) trading days after such notification. The
Company shall notify each Purchaser as promptly as possible (and in any event within one (1) trading day) after receiving notification from the Commission that the Registration Statement has been declared effective. 
  

 12 

 (c) Notwithstanding anything in this Agreement to the contrary, the Company may, by written notice to
the Purchasers, suspend sales under a Registration Statement after the Effective Date thereof and/or require that the Purchasers immediately cease the sale of shares of Common Stock pursuant thereto and/or defer the filing of any subsequent
Registration Statement if the Company is engaged in a material merger, acquisition or sale and the Board of Directors determines in good faith, by appropriate resolutions, that, as a result of such sales activity it would be materially detrimental
to the Company (other than relating solely to the price of the Common Stock). Upon receipt of such notice, each Purchaser shall immediately discontinue any sales of Registrable Securities pursuant to such registration until such Purchaser has
received copies of a supplemented or amended prospectus or until such Purchaser is advised in writing by the Company that the then-current prospectus may be used and has received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in such prospectus. In no event, however, shall this right be exercised to suspend sales beyond the period during which (in the good faith determination of the Company’s Board of Directors) the failure to
require such suspension would be materially detrimental to the Company. Immediately after the end of any suspension period under this Section, the Company shall take all necessary actions (including filing any required supplemental prospectus) to
restore the effectiveness of the applicable Registration Statement and the ability of the Purchasers to publicly resell their Registrable Securities pursuant to such effective Registration Statement. 
  
 (d) The Company shall not, prior to the date the Registration Statement is
declared effective by the Commission, prepare and file with the Commission a registration statement relating to an offering solely for the account of others under the Securities Act of any of its equity securities, except that the Company may file a
registration statement on its own account if all of the Registrable Securities are included in such registration statement or may file any amendments or supplements to any of its previously filed and effective registration statements if deemed
appropriate, advisable or necessary by the Company’s counsel, provided that no additional previously unregistered securities are included in such amendments or supplements. 
  
 8. Registration Procedures. In connection with the Company’s registration obligations hereunder, the Company
shall: 
  
 (a) Prior to the filing of the Registration Statement
or any related prospectus or any amendment or supplement thereto, the Company shall (i) furnish to each Purchaser and any one counsel designated by the Purchaser (“Purchaser Counsel”) copies of all such documents proposed to
be filed (other than those incorporated or deemed to be incorporated by reference), which documents will be subject to the review of such Purchaser and Purchaser Counsel, and (ii) cause its officers and directors, counsel and independent certified
public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of Purchaser Counsel, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file a Registration
Statement or any prospectus or any amendments or supplements thereto to which Purchasers holding a majority of the Registrable Securities shall reasonably object in good faith. 
  

 13 

 (b) Prepare and file with the Commission such amendments, including post-effective amendments, to each
Registration Statement and the prospectus used in connection therewith as may be necessary to keep the Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with
the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related prospectus to be amended or supplemented by any required prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible, and in any event within twenty (20) trading days, to any comments received from the Commission with respect to the Registration
Statement or any amendment thereto, and as promptly as reasonably possible provide the Purchasers, upon request, true and complete copies of all correspondence from and to the Commission relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the applicable period in accordance with the intended methods
of disposition by the Purchasers thereof set forth in the Registration Statement as so amended or in such prospectus as so supplemented. 
  
 (c) Notify the Purchasers of Registrable Securities as promptly as reasonably possible, and, if requested by any such Purchaser, confirm such notice in
writing no later than one (1) trading day thereafter, of any of the following events: (i) the Commission comments in writing on any Registration Statement (in which case the Company shall deliver to each Purchaser, if requested, a copy of such
comments and of all written responses thereto); (ii) any Registration Statement or any post-effective amendment is declared effective; (iii) the Commission or any other Federal or state governmental authority requests any amendment or supplement to
any Registration Statement or prospectus or requests additional information related thereto; (iv) the Commission issues any stop order suspending the effectiveness of any Registration Statement or initiates any proceedings for that purpose; (v) the
Company receives notice of any suspension of the qualification or exemption from qualification of any Registrable Securities for sale in any jurisdiction; or (vi) the financial statements included in any Registration Statement become ineligible for
inclusion therein or any statement made in any Registration Statement or prospectus or any document incorporated or deemed to be incorporated therein by reference is untrue in any material respect or any revision to a Registration Statement,
prospectus or other document is required so that it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. 
  
 (d) Use its
commercially reasonable efforts to avoid the issuance of or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of the Registration Statement or (ii) any suspension of the qualification (or exemption from qualification)
of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment. 
  
 (e) Furnish to each Purchaser, upon request, without charge, at least one conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules and all documents incorporated or deemed to be incorporated therein by reference to the extent requested by such Purchaser, and all exhibits to the extent requested by such Purchaser (including those
previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission. 
  

 14 

 (f) Promptly deliver to each Purchaser, without charge, as many copies of the prospectus or prospectuses
and each amendment or supplement thereto as such Purchasers may reasonably request in connection with resales by the Purchaser of the Registrable Securities. The Company hereby consents to the use of such prospectus and each amendment or supplement
thereto by each of the selling Purchasers in connection with the offering and sale of the Registrable Securities covered by such prospectus and any amendment or supplement thereto. 
  
 (g) Prior to any resale of Registrable Securities, use its commercially reasonable efforts to register or qualify or
cooperate with the selling Purchasers and the Purchaser Counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or
blue sky laws of such jurisdictions within the United States as any Purchaser requests in writing, to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by a Registration Statement; provided, however, that the Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise subject.

  
 (h) If requested by Purchasers, cooperate with the Purchasers
to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to transferee, and to enable such Registrable Securities to be in such denominations and registered in such names as any such
Purchasers may request, and provided further that if Registrable Securities were sold pursuant to a Registration Statement and in compliance with the prospectus delivery and other federal and applicable state securities requirements, facilitate the
timely preparation and delivery of certificates representing Registrable Securities to be delivered to transferee without legend. 
  
 (i) Upon the occurrence of any event described in Section 8(c)(vi), as promptly as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the related prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered,
neither the Registration Statement nor such prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. 
  
 (j) Cooperate
with any due diligence investigation undertaken by the Purchasers in connection with the sale of Registrable Securities, including without limitation by making available any documents and information; provided that the Company will not deliver or
make available to any Purchaser material, nonpublic information unless such Purchaser 

  

 15 

 
specifically requests in advance to receive reasonable material, nonpublic information in writing and such Purchaser executes a confidentiality agreement in
form and substance acceptable to Company’s counsel. 
  
 9.
Furnishing of Information. As long as any Purchaser owns Securities, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company
after the date hereof pursuant to the Exchange Act. The Company further covenants that it will take such further action as any holder of Securities may reasonably request, all to the extent required from time to time to enable such holder to sell
such Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144. 
  
 10. Securities Laws Disclosure; Publicity; Non-Public Information. The Company may, following the Closing Date, issue a press release or file a
Current Report on Form 8-K, in each case reasonably acceptable to the Purchasers disclosing the transactions contemplated hereby and (ii) make such other filings and notices in the manner and time required by the Commission. The Company and the
Purchasers shall consult with each other in issuing any press releases with respect to the transactions contemplated hereby, and neither party shall issue any such press release or otherwise make any such public statement without the prior consent
of the other, which consent shall not unreasonably be withheld, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication.

  
 11. Indemnification 
  
 (a) Indemnification by the Company with Respect to the Transaction
Documents. The Company will indemnify and hold the Purchasers and their respective directors, officers, shareholders, partners, employees and agents (each, a “Purchaser Party”) harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation (collectively,
“Losses”) that any such Purchaser Party may suffer or incur as a result of or relating to (a) any misrepresentation, breach or inaccuracy of any of the representations, warranties, covenants or agreements made by the Company
in this Agreement or in the Transaction Documents or (b) any cause of action, suit or claim brought or made against such Purchaser Party and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement or
any of the other Transaction Documents as of the Closing Date. 
  
 (b) Indemnification by the Company with Respect to the Registration Statement. The Company shall indemnify and hold harmless each Purchaser, and the officers, directors, agents and employees of each of them, each person who controls
any such Purchaser (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling person, to the fullest extent permitted by applicable law, from
and against any and all Losses, to the extent arising out of or relating to (i) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any prospectus or any form of prospectus or in any amendment or

  

 16 

 
supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, except to the extent, but only to the
extent, that such untrue statements or omissions are based solely upon information regarding such Purchaser furnished to the Company by such Purchaser expressly for use therein, or to the extent that such information relates to such Purchaser or
such Purchaser’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Purchaser expressly for use in the Registration Statement, such prospectus or such form of prospectus or in
any amendment or supplement thereto (it being understood that the Purchaser has approved Exhibit B hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 7(c) or Section 8(c)(iv)-(vi), the
use by such Purchaser of a suspended, disqualified, outdated or defective prospectus unless the Company has notified such Purchaser in writing that the prospectus is suspended, disqualified, outdated or defective. 
  
 (c) Indemnification by Purchasers. Each Purchaser shall, severally
and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based upon: (x) such Purchaser’s failure to
comply with the prospectus delivery requirements of the Securities Act; provided, each Purchaser, jointly and not severally with the other Purchasers, acknowledges and agrees that any of such Purchaser’s assignees that receive any Registrable
Securities upon transfer or sale from the Purchaser must also comply with the prospectus delivery requirements of the Securities Act upon resale of the Registrable Securities and accordingly, such Purchaser agrees that the indemnification provided
for hereunder shall cover resales of the Registrable Securities by its assignees; or (y) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any prospectus, or any form of prospectus, or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading (i) to
the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished by such Purchaser to the Company specifically for inclusion in the Registration Statement or such prospectus or (ii) to the
extent that such untrue statements or omissions are based solely upon information regarding such Purchaser furnished to the Company by such Purchaser expressly for use therein, or to the extent that such information relates to such Purchaser or such
Purchaser’s proposed method of distribution of Registrable Securities (it being understood that the Purchaser has approved Exhibit B hereto for this purpose), such prospectus or such form of prospectus or in any amendment or supplement
thereto; or (z) in the case of an occurrence of an event of the type specified in Section 7(c) or Section 8(c)(iv)-(vi), the use by such Purchaser of a suspended, disqualified, outdated or defective prospectus after the Company has notified such
Purchaser in writing that the prospectus is suspended, disqualified, outdated or defective. 
  
 (d) Conduct of Indemnification Proceedings. If any action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, 

  

 17 

 
such as a deposition), whether commenced or threatened (a “Proceeding”) shall be brought or asserted against any party entitled to
indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the party from whom indemnity is sought (the “Indemnifying Party”) in writing, and the
Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be determined by a court of
competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have prejudiced the Indemnifying Party. 
  
 An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such fees and expenses; (ii) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (iii) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and
the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees
and expenses of one separate counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding. 
  
 All reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating
or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten (10) trading days of written notice thereof to the Indemnifying Party; provided, that the
Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is not entitled to indemnification hereunder, determined based upon the relative
faults of the parties. 
  
 12. Notices. All communications
hereunder shall be in writing and shall be hand delivered, mailed by U.S. certified mail, couriered by next-day air courier or by facsimile and confirmed in writing (i) if to the Company, at the addresses set forth below, or (ii) if to a Purchaser,
to the address(es) set forth on the signature page hereto. 
  

 18 

 If to the Company: 
  
 Irvine Sensors Corporation 
 3001 Redhill Avenue 
 Costa Mesa, California 92650 
 Attention: Chief Financial Officer 
 Facsimile: (714) 444-8773 
  
 with a copy to: 
  
 Dorsey & Whitney LLP 
 38 Technology Drive 
 Irvine, California 92618 
 Attention: Ellen S. Bancroft, Esq. 
 Facsimile: (949) 932-3601 
  
 All
such notices and communications shall be deemed to have been duly given: (i) when delivered by hand, if personally delivered; (ii) five business days after being deposited in the U.S. mail, postage prepaid, if mailed certified mail, return receipt
requested; (iii) one business day after being timely delivered to a next-day air courier guaranteeing overnight delivery; (iv) the date of transmission if sent via facsimile to the facsimile number as set forth in this Section or the signature page
hereof prior to 6:00 p.m. on a business day, or (v) the business day following the date of transmission if sent via facsimile at a facsimile number set forth in this Section or on the signature page hereof after 6:00 p.m. or on a date that is not a
business day. Change of a party’s address or facsimile number may be designated hereunder by giving notice to all of the other parties hereto in accordance with this Section. 
  
 13. Successors. This Agreement shall inure to the benefit of and be binding upon the Purchasers and the Company and
their respective successors and legal representatives, and nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained; this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person. The Company may not
assign this Agreement or any rights or obligation hereunder without the prior written consent of each Purchaser. Any Purchaser may assign any or all of its rights under this Agreement to any person to whom such Purchaser assigns or transfers any
Securities, provided (i) the Purchaser provides prior written notice of such assignment or transfer to the Company; (ii) the transfer of any such Securities is made pursuant to an available exemption from, or is not subject to, the registration
requirements of the Securities Act or applicable state securities laws; (ii) such transferee agrees in writing to be bound with respect to the transferred Securities by the provisions hereof that apply to the “Purchasers.” 
  
 14. No Waiver; Modifications in Writing. No failure or delay on the
part of the Company or any Purchaser in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. 

  

 19 

 
The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the Company or any Purchaser at law or in
equity or otherwise. No waiver of or consent to any departure by the Company or any Purchaser from any provision of this Agreement shall be effective unless signed in writing by the party entitled to the benefit thereof, provided that notice of any
such waiver shall be given to each party hereto as set forth above. Except as otherwise provided herein, no amendment, modification or termination of any provision of this Agreement shall be effective unless signed in writing by or on behalf of each
of the Company and the Purchasers holding at least a majority of the Shares then outstanding. Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any
departure by the Company or any Purchaser from the terms of any provision of this Agreement shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this
Agreement, no notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances. 
  
 15. Specific Enforcement, Consent to Jurisdiction. The Company and Purchasers acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.

  
 16. Entire Agreement. This Agreement, together with
Transaction Documents constitutes the entire agreement among the parties hereto and supersedes all prior agreements, understandings and arrangements, oral or written, among the parties hereto with respect to the subject matter hereof and thereof.

  
 17. Severability. If any provision of this Agreement is
held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby. 
  
 18. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT,
AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO PROVISIONS RELATING TO CONFLICTS OF LAW TO THE EXTENT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 
  
 19.
Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The delivery of an executed counterpart signature
page by facsimile is as effective as executing and delivering this Agreement in the presence of the other parties to this Agreement, and such signature shall create a valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile signature page were an original thereof. 
  

 20 

 20. Attorney’s Fees. If either party to this Agreement shall bring any action, suit,
counterclaim, appeal, arbitration, or mediation for any relief against the other, declaratory or otherwise, to enforce the terms hereof or to declare rights hereunder, the losing party shall pay to the prevailing party a reasonable sum for
attorneys’ fees and costs incurred in bringing and prosecuting such action and/or enforcing any judgment, order, ruling or award. 
  
 21. Wire Transfer Instructions of the Company. The Purchaser Price payable to the Company by each Purchaser shall be wire transferred as follows: .

  
 U.S. Bank of California 
 4100 Newport Place 
 Newport Beach, CA 92660 
 ABA Routing # 122235821 
 Acct Name: Irvine Sensors Corporation 
 Account # 1 638 0054 0060 
 Bank Contact: Karen Randazzo, (949) 863-2327 
  

 21 

 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

  

	Company:	 	IRVINE SENSORS CORPORATION
			
	 	 	 By:
	 	 /s/ John J. Stuart, Jr.

	 	 	 	 	 John J. Stuart, Jr.

	 	 	 	 	 Chief Financial Officer

  
 [SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT] 

 [ IRSN’S PURCHASER SIGNATURE PAGE] 
  

	Purchaser:	 	LONGVIEW FUND, L.P.
			
	 	 	 By:
	 	 /s/ S. Michael Rudolph

	 	 	 	 	 Name: S. Michael Rudolph

		
	 	 	 Aggregate Purchase Price: $700,000.00

	 	 	 Number of Shares Purchased: 400,000

  
 Address for Notice: 

1325 Howard Avenue #422 
 Burlingame, CA 94010 
 Attention: S. Michael Rudolph 
 Tel: (650) 340-1074 
 Fax: (650) 343-2506 
  

	  

	Exact Name as to Appear on Stock Certificate
	Evidencing the Shares

  
 Address for Delivery of the Shares
and the Warrants 
 (if different than above) 
  

	  

	  

	 Attention:

	 Facsimile:

  
 with a copy to: 
 Grushko & Mittman, P.C. 
 551 Fifth Avenue, Suite 601 
 New York, N.Y. 10176 
 Attention: Edward Grushko 
 Facsimile: (212) 697-3575 
  
 [SIGNATURE PAGE CONTINUES ] 

 [ IRSN’S PURCHASER SIGNATURE PAGE ] 
  

	Purchaser:	 	LONGVIEW EQUITY FUND, LP
			
	 	 	 By:
	 	 /s/ Wayne H. Coleson

	 	 	 	 	 Name: Wayne H. Coleson, Investment Manager

		
	 	 	 Aggregate Purchase Price: $497,000.00

	 	 	 Number of Shares Purchased: 284,000

  
 Address for Notice: 

25 Longview Ct. 
 Hillsborough, CA 94010 
 Attention: S. Michael Rudolph 
 Tel: (650) 340-1074 
 Fax: (650) 343-2506 
  

	 LONGVIEW EQUITY FUND, LP

	Exact Name as to Appear on Stock Certificate
	Evidencing the Shares

  
 Address for Delivery of the Shares
and the Warrants 
 (if different than above) 
  

	  

	  

	 Attention:

	 Facsimile:

  
 with a copy to: 
 Grushko & Mittman, P.C. 
 551 Fifth Avenue, Suite 601 
 New York, N.Y. 10176 
 Attention: Edward Grushko 
 Facsimile: (212) 697-3575 
  
 [SIGNATURE PAGE CONTINUES ] 

 [ IRSN’S PURCHASER SIGNATURE PAGE ] 
  

	Purchaser:	 	LONGVIEW INTERNATIONAL EQUITY FUND, LP
			
	 	 	 By:
	 	 /s/ Wayne H. Coleson

	 	 	 	 	 Name: Wayne H. Coleson, Investment

		
	 	 	 Aggregate Purchase Price: $203,000.00

	 	 	 Number of Shares Purchased: 116,000

  
 Address for Notice: 

25 Longview Ct. 
 Hillsborough, CA 94010 
 Attention: S. Michael Rudolph 
 Tel: (650) 340-1074 
 Fax: (650) 343-2506 
  

	 LONGVIEW INTERNATIONAL EQUITY FUND, LP

	Exact Name as to Appear on Stock Certificate
	Evidencing the Shares

  
 Address for Delivery of the Shares
and the Warrants 
 (if different than above) 
  

	  

	  

	 Attention:

	 Facsimile:

  
 with a copy to: 
 Grushko & Mittman, P.C. 
 551 Fifth Avenue, Suite 601 
 New York, N.Y. 10176 
 Attention: Edward Grushko 
 Facsimile: (212) 697-3575 
  
 [SIGNATURE PAGE CONTINUES ] 

 [ IRSN’S PURCHASER SIGNATURE PAGE ] 
  

	Purchaser:	 	ALPHA CAPITAL AKTIENGESELLSCHAFT
			
	 	 	 By:
	 	 /s/ Konrad Ackerman

	 	 	 	 	 Name: Konrad Ackerman

	 	 	 	 	 Title: Director

		
	 	 	 Aggregate Purchase Price: $175,000.00

	 	 	 Number of Shares Purchased: 100,000

  
 Address for Notice: 

Pradafant 7 
 9490 Furstentums 
 Vaduz, Lichtenstein 
 Fax: 011-42-32323196 
  

	 Alpha Capital AG

	Exact Name as to Appear on Stock Certificate
	Evidencing the Shares

  
 Address for Delivery of the Shares
and the Warrants 
 (if different than above) 
  

	  

	  

	 Attention:

	 Facsimile:

  
 with a copy to: 
 Grushko & Mittman, P.C. 
 551 Fifth Avenue, Suite 601 
 New York, N.Y. 10176 
 Attention: Edward Grushko 
 Facsimile: (212) 697-3575 
  
 [SIGNATURE PAGE CONTINUES ] 

 [ IRSN’S PURCHASER SIGNATURE PAGE ] 
  

	Purchaser:	 	GAMMA OPPORTUNITY CAPITAL PARTNERS, LP
			
	 	 	 By:
	 	 /s/ Christopher Rossman

	 	 	 	 	 Name: Christopher Rossman

	 	 	 	 	 Title: Managing Director

		
	 	 	 Aggregate Purchase Price: $175,000.00

	 	 	 Number of Shares Purchased: 100,000

  
 Address for Notice: 

British Colonial Centre of Commerce 
 One Bay Street, Suite 401 

Nassau (NP), The Bahamas 
 Fax: (242) 322-6657 
  

	 GAMMA OPPORTUNITY CAPITAL PARTNERS, LP

	 Exact Name as to Appear on Stock Certificate

	 Evidencing the Shares

  
 Address for Delivery of the Shares
and the Warrants 
 (if different than above) 
 c/o LH
Financial Services 
 Central Park South, Suite 2701, NY, NY 10019 
 Attention: C. Rossman 
 Facsimile: 212 586 5244 
  
 with a copy to: 
 Grushko & Mittman, P.C. 
 551 Fifth Avenue, Suite 601 
 New York, N.Y. 10176 
 Attention: Edward Grushko 
 Facsimile: (212) 697-3575 
  
 [SIGNATURE PAGE CONTINUES] 

 Schedule A 
  
 Schedule of Purchasers 
  

	 Name of Purchaser

	  	Aggregate
No. of
Shares
Purchased
at Closing

	  	Purchase
Price per
Share

	  	Aggregate
Purchase Price

	  	Purchase
Price
Delivered to
Company at
Closing

	  	 Purchase Price
Delivered to
Escrow Agent
 at Closing

	  	No. of
Shares
Delivered
to
Purchaser
at Closing

	  	 No. of
Shares
Delivered
to
Escrow
Agent at
 Closing

	  	Agg. No.
of
Warrants
Issued at
Closing
and
Delivered
to Escrow
Agent

	  	No. of
Replacement
Warrants
Issauble upon
Cancellation
of Warrants,
assuming Full
Exercise of
Rescission
Right

	 Longview Equity Fund, LP
	  	284,000	  	$	1.75	  	$	497,000.00	  	$	198,800.00	  	$	298,200.00	  	113,600	  	170,400	  	71,000	  	28,400
	 Longview International Equity Fund, LP
	  	116,000	  	$	1.75	  	$	203,000.00	  	$	81,200.00	  	$	121,800.00	  	46,400	  	69,600	  	29,000	  	11,600
	 Longview Fund, LP
	  	400,000	  	$	1.75	  	$	700,000.00	  	$	280,000.00	  	$	420,000.00	  	160,000	  	240,000	  	100,000	  	40,000
	 Alpha Capital Aktiengesellschaft
	  	100,000	  	$	1.75	  	$	175,000.00	  	$	70,000.00	  	$	105,000.00	  	40,000	  	60,000	  	25,000	  	10,000
	 Gamma Opportunity Capital
Partners, LP
	  	100,000	  	$	1.75	  	$	175,000.00	  	$	70,000.00	  	$	105,000.00	  	40,000	  	60,000	  	25,000	  	10,000
										
	 Total
	  	1,000,000	  	 	 	  	$	1,750,000.00	  	$	700,000.00	  	$	1,050,000.00	  	400,000	  	600,000	  	250,000	  	100,000

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