Document:

exhibit10-1.htm

    
 

    WATERSTONE BANK SSB

     

    SECOND
AMENDMENT AND RESTATEMENT OF THE

    EXECUTIVE DEFERRED
COMPENSATION PLAN

     

    

     

    ARTICLE
I

     

    Establishment
of Plan and Purpose

     

    1.01   Establishment of
Plan.  WaterStone Bank SSB (formerly known as Wauwatosa Savings
Bank) (the “Company”) established this Executive Deferred Compensation Plan (the
“Plan”), effective as of September 1, 2006.  The Plan is a deferred
compensation arrangement intended to comply with Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”).  Final Treasury
Regulations under Code Section 409A were issued in April 2007, and require
non-qualified deferred compensation plans to be in compliance with said Final
Treasury Regulations by no later than December 31, 2008.  Accordingly,
the Plan was amended and restated, effective September 1, 2006, to comply with
Final Treasury Regulations issued under Code Section 409A and a Form 8-K was
filed with the Securities and Exchange Commission.  This Second
Amendment and Restatement of the Plan, effective September 1, 2006, adds
specified payment dates as a new distribution feature of the Plan, in accordance
with the transition rules under Code Section 409A.

     

    1.02   Purpose of
Plan.  Under the Plan, selected senior management and highly
compensated employees are permitted to defer, until a future designated date, a
portion of the compensation which may otherwise be payable to them at an earlier
date.  By allowing key management employees to participate in the
Plan, the Company expects the Plan to benefit it and its Subsidiaries by
attracting and retaining the most capable individuals to fill its executive
positions.

     

    ARTICLE
II

     

    Definitions

     

    As used
herein, the following words shall have the following meanings:

     

    2.01   Definitions.

     

    (a) Account.  The
bookkeeping account maintained for each Participant pursuant to Article V
below.

     

    (b) Administrator.  The
person or persons selected pursuant to Article VIII below to control and manage
the operation and administration of the Plan.

     

    (c) Beneficiaries.  Those
persons or entities designated by a Participant on the Beneficiary Designation
Election Form (Exhibit A hereto) to receive his benefits under the Plan upon his
death.

     

    (d) Change of
Control.  (i) Any “person” (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) other than Lamplighter Financial, MHC (“MHC”) becomes the
beneficial owner, directly or indirectly, of a majority of the capital stock of
Waterstone Financial, Inc. (formerly known as Wauwatosa Holdings, Inc.) in a
transaction or transactions subject to either the notice provisions of the
Change in Bank Control Act of 1978 (12 U.S.C. § 1817 (j), as amended from time
to time), or approval under the Bank Holding Company Act of 1956 (12 U.S.C. §
1841, as amended from time to time); (ii) during any period of two consecutive
years, the individuals, who at the beginning of any such period constituted the
directors of Waterstone Financial, Inc., cease for any reason to constitute at
least a majority thereof; (iii) Waterstone Financial, Inc. files a report or
proxy statement with the Securities and Exchange Commission and/or the Federal
Reserve Board disclosing in response to Item 5.01 of Form 8-K or Item 5 of Part
II of Form 10-Q, each promulgated pursuant to the Exchange Act or Item 6(e) of
Schedule 14A promulgated thereunder, or successor Items, that a change in
control of Waterstone Financial, Inc. has or may have occurred pursuant to any
contract or transaction; or (iv) any person other than Waterstone Financial,
Inc. or MHC becomes the owner of more than 25% of the voting securities of the
Company.  However, notwithstanding the foregoing provisions, a
reorganization of Waterstone Financial, Inc. and MHC in which the shareholders
of Waterstone Financial, Inc. prior to such reorganization, the members of MHC
and any members of the public, which acquire shares of such entity pursuant to a
public offering of securities approved in advance by the board of directors of
MHC, together control the successor entity shall not constitute a “Change in
Control” hereunder.

     

    
      
        
        

      

      
        - 5
-

        
        

      

      
        
        

      

    

    (e) Company.  Waterstone
Bank, SSB, a Wisconsin-chartered savings bank, or a successor
thereof.

     

    (f) Compensation.  The
total of the Participant’s base salary, commissions, bonuses and other cash
incentive pay, which shall include amounts deferred by the Participant under
this Plan or any other employee benefit plan of the Company. In all cases,
Compensation shall include only compensation paid while a Participant in the
Plan and employed by the Company or a Subsidiary.  Compensation shall
not include any severance or salary continuation payments.

     

    (g) Participants.  Such
senior management and highly compensated employees of the Company or a
Subsidiary whom the Administrator has identified as eligible to defer
Compensation hereunder and who elect to participate by deferring
Compensation.

     

    (h) Plan.  The
Waterstone Bank SSB Executive Deferred Compensation Plan, as stated herein and
as amended from time to time.

     

    (i) Plan
Year.  The period beginning on September 1, 2006 and ending on
December 31, 2006, and, thereafter, each 12-month period ending on each
subsequent December 31.

     

    (j) Separation from
Service.  Separation from Service means the Participant’s retirement
or other termination of employment with the Company within the meaning of Code
Section 409A.  No Separation from Service shall be deemed to occur due
to military leave, sick leave or other bona fide leave of absence if the period
of such leave does not exceed six months or, if longer, so long as the
Participant’s right to reemployment is provided by law or
contract.  If the leave exceeds six months and the Participant’s right
to reemployment is not provided by law or by contract, then the Participant
shall have a Separation from Service on the first date immediately following
such six-month period.

     

    Whether a
Separation from Service has occurred is determined based on whether the facts
and circumstances indicate that the Company and the Participant reasonably
anticipated that no further services would be performed after a certain date or
that the level of bona fide services the Participant would perform after such
date (whether as an employee or as an independent contractor) would permanently
decrease to no more than 50% of the average level of bona fide services
performed over the immediately preceding 36 months (or such lesser period of
time in which the Participant performed services for the
Company).  The determination of whether a Participant has had a
Separation from Service shall be made by applying the presumptions set forth in
the Treasury Regulations under Code Section 409A.

     

    (k) Subsidiary.  An
entity of which the Company is the direct or indirect beneficial owner of not
less than 50% of all issued and outstanding equity interest of such
entity.

     

    (l) Unforeseeable
Emergency.  A severe financial hardship of a Participant
resulting from an illness or accident of the Participant or of the Participant’s
spouse or dependent (as defined in Code Section 152(a)), loss of the
Participant’s property due to casualty, or other similar extraordinary and
unforeseeable circumstances beyond the control of the
Participant.  The existence of an Unforeseeable Emergency shall be
determined by the Administrator in its sole discretion.

     

    ARTICLE
III

     

    Eligibility

     

    3.01   Conditions of
Eligibility.  The Administrator shall, from time to time,
specify the senior management and highly compensated employees of the Company or
a Subsidiary eligible to participate herein. Eligibility to participate in the
Plan for one Plan Year does not guarantee eligibility for a subsequent Plan
Year.

     

    3.02   Commencement of
Participation.  An individual identified as eligible to
participate in the Plan for that Plan Year shall, by electing a deferral of
Compensation on the Deferral Election Form (Exhibit B hereto) provided by the
Administrator, commence participation as of (a) the first day of such Plan Year
or (b) such later date in that Plan Year as he first becomes eligible to
participate in the Plan.

     

    3.03   Termination of
Participation.  A Participant’s right to defer Compensation
hereunder shall cease as of the earlier of the (a) termination of his employment
with the Company and all Subsidiaries or (b) failure of the Administrator to
designate him as eligible to participate herein.

     

    

    
      
        
        

      

      
        - 6
-

        
        

      

      
        
        

      

    

     

    ARTICLE
IV

     

    Compensation
Deferral and Distribution Elections

     

    4.01   Amount and Manner of
Deferral.

     

    (a) Each
Participant must make an annual election with respect to his Compensation
deferrals.  The Participant must return the Deferral Election Form to
the Administrator no later than the date specified by the Administrator, which
date shall be prior to (i) the first day of the Plan Year for which the
Compensation is to be deferred, (ii) in the case of a new Participant, the
30th
day after first becoming eligible to participate in the Plan, with respect to
Compensation earned for services performed subsequent to the election, or (iii)
in the case of the first Plan Year, September 30, 2006, with respect to
Compensation earned for services performed subsequent to the
election.  The Deferral Election Form shall become irrevocable as of
the date it is to be effective.

     

    (b) The
Participant must indicate on the Deferral Election Form the amount of his
Compensation for such Plan Year, or portion thereof, which he elects to defer
hereunder.  A Participant may defer (i) up to 80% of his salary or
commissions and/or (ii) up to 100% of his bonus or incentive pay; provided,
however, that (A) the Participant may not defer less than $5,000 in a Plan Year
(or a prorated amount for any period shorter than a full Plan Year) and (B) the
Participant’s deferral election for a Plan Year shall relate to Compensation
earned by him during such Plan Year, whether or not paid during that Plan
Year.

     

    (c) If a
Participant elects to defer a portion of his salary or commissions, the Company
shall reduce the Participant’s salary or commissions by an equal amount in each
pay period during the Plan Year of deferral. If a Participant elects to defer
all or a portion of his bonus or incentive pay, the Company shall reduce each
such Compensation payment by the percentage elected by the
Participant.

     

    (d) Effective
January 1, 2009, no deferrals with respect to Compensation earned on or after
January 1, 2009 shall be permitted under this Plan.

     

    4.02   Cessation of
Deferral.  In the event of an Unforeseeable Emergency, a
Participant may request in writing that deferrals elected by the Participant
hereunder cease for the then current Plan Year. If the Administrator determines
that such an Unforeseeable Emergency exists, the Participant’s deferrals for
such Plan Year shall cease for the remainder of the Plan Year.  In
addition, if required in order for a Participant to receive a hardship
distribution under any tax-qualified retirement plan subject to Code Section
401(k) maintained by the Company or a Subsidiary, the Participant’s deferrals
under this Plan shall cease for the remainder of the Plan Year.

     

    4.03   Distribution of
Account.

     

    (a) Each
Participant shall elect, at the time the Participant files his Deferral Election
Form, the date on which such Compensation deferrals, as well as any investment
earnings attributable to such Compensation deferrals, are to be distributed to
him.  All payments shall be made in the form of a cash lump sum in
accordance with Section 7.01.  The date of distribution must be in a
calendar year subsequent to the calendar year of
deferral.  Notwithstanding the foregoing, if the Participant fails to
elect a time for distribution, such amount will be distributed no later than 60
days after the date on which the Participant Separates from Service with the
Company and all Subsidiaries.

     

    (b) A
Participant may change the date as of which any portion of his Account is to be
distributed to him by filing a Change of Distribution Date Form (Exhibit C
hereto) with the Administrator, provided that (i) the election shall not take
effect until at least 12 months after the date on which the election is made and
(ii) the first payment with respect to which such election is made is deferred
for at least five years from the date such payment would otherwise have been
made.

     

    (c) Notwithstanding
anything in the Plan to the contrary, a Participant who previously designated
the date on which his or her Compensation deferrals shall be distributed may
elect to change the date on which the Participant receives his or her
Compensation deferrals by filing with the Company a Transition Year Election
Form (Exhibit D hereto), provided that such election is made by December 31,
2008.  For elections after December 31, 2008, please refer to Section
4.03(b).

     

    
      
        
        

      

      
        - 7
-

        
        

      

      
        
        

      

    

        
ARTICLE V

                      

    Participant
Accounts

     

    5.01   Establishment of
Account.  The Company shall credit the amounts deferred by a
Participant under Section 4.01 to the Participant’s Account.

     

    5.02   Investment
Elections.

     

    (a) A
Participant may file an Investment Election Form (Exhibit E hereto) with the
Administrator setting forth the investment alternatives used to value his
Account.  The initial investment options available to each Participant
are (i) the Moody’s A Long-Term Corporate Bond Rate, adjusted as of the first
day of each Plan Year to equal the average yield for the month of September of
the previous Plan Year and (ii) the total return of the Standard & Poor’s
500 Index for the applicable calendar quarter.

     

    (b) All
investment elections must be in increments of 10%.  If a Participant
does not file an Investment Election Form, the Account shall be deemed to be
invested in the Moody’s A Long-Term Corporate Bond Rate option, or such similar
option as designated by the Administrator.

     

    (c) The
Participant may change his investment options as of each January 1 or July 1 by
delivering to the Administrator a new Investment Election Form at least 15 days
prior to such effective date.

     

    (d) The
Company can change, add or eliminate investment options in its sole discretion
upon advance notice to each Participant, in which case the Participant shall be
given an opportunity to reallocate his investments among the available
alternatives; provided, however, that upon a Change of Control, the Company may
not change the investment choices available to Participants hereunder without
the consent of a majority of the Participants.

     

    (e) A
Participant’s Account shall reflect only the performance of such investment
options and the Participant shall have no property right or security interest in
the actual investment performance of any assets that may be invested by the
Company to provide for the payment of benefits under this Plan.

     

    5.03   Maintenance of
Account.  Not less frequently than at the end of each calendar
quarter (i.e., more frequent adjustments, such as daily or monthly are
permitted), the Administrator shall (i) increase the Account of each Participant
by (A) the amount, if any, of his Compensation deferred since the last Account
adjustment was made, (B) any income or gains resulting as if the Account were
invested pursuant to the timely-filed Investment Election Form in effect for
such period and (ii) decrease the Account by (A) any withdrawals from the
Account during that period and (B) any losses resulting from the investment
election in effect for such period.

     

    ARTICLE
VI

     

    Vesting

     

    6.01  Vesting.  Subject
to the rights of the Company’s creditors as described in Article XI, the Account
of a Participant, including all earnings and losses attributable thereto, shall
at all times be fully vested and nonforfeitable.

     

    
      
        
        

      

      
        - 8
-

        
        

      

      
        
        

      

    

    ARTICLE
VII

     

    Distributions

     

    7.01   Distribution of Account
Pursuant to Election.  Each Participant’s Account, or portion
thereof, shall be distributed to him in a lump sum cash payment on the date set
forth in the Participant’s election that was made in accordance with Section
4.03 of the Plan.  If the Participant does not have a valid election
in place, then the Participant’s Account shall be distributed to him in a lump
sum cash payment 60 days after the date of his Separation from
Service.

     

    7.02   Distribution of Account Due
to Death.

     

    (a) Upon the
Participant’s death, any balance remaining in his Account shall be paid to his
Beneficiary or Beneficiaries in a lump sum cash payment within 60 days after the
date of the Participant’s death.

     

    (b) Each
Participant may designate a Beneficiary or Beneficiaries to whom the
Participant’s Account shall be distributed in the event he dies before his
entire Account is distributed to him.  Any such designation shall be
made in writing on a form provided by the Company.  The Participant
may make or change the Beneficiary designation under this Section 7.02 at any
time prior to death.  If the Participant has not designated a
Beneficiary under the Plan, or if no designated Beneficiary is living on the
date of distribution hereunder, the Account shall be paid to the personal
representative of the Participant to be distributed in accordance with his will
or applicable intestacy law, or in the event that there shall be no such
representative within six months after the date of death, then to such persons
who, at the date of the Participant’s death, would be entitled to share in the
distribution of his personal estate under the provisions of the applicable
statute then in force governing the descent of intestate property, in the
proportions specified in such statute.

     

    7.03   Unforeseeable
Emergency.  In the event of an Unforeseeable Emergency, a
Participant may request in writing, using the Hardship Distribution Form
(Exhibit F hereto), that all or any portion of his Account be paid prior to the
normal time for payment of such amount. The Administrator shall, in its
reasonable judgment, determine whether the Participant could not satisfy the
emergency through reimbursement or compensation by insurance or otherwise, by
liquidation of other assets (provided such liquidation, in itself, would not
create a financial hardship) or by ceasing deferrals hereunder. Only if the
Administrator determines that such an Unforeseeable Emergency exists, the
Company shall pay to the Participant an amount equal to the lesser of (a) the
amount requested or (b) the amount reasonably necessary to alleviate the
hardship, which in each case may include amounts necessary to pay federal, state
or local income taxes and penalties reasonably anticipated to result from the
distribution.

     

    7.04   Delay of
Distribution.  Notwithstanding the foregoing:

     

    (a) If any
Account or portion thereof is distributable in connection with the Participant’s
Separation from Service with the Company or a Subsidiary, and if at the time of
such Separation from Service the Participant is a “Key Employee” as defined in
Code Section 416(i) (without reference to paragraph 5 thereof), payment of such
amounts shall not be made until the first day of the seventh month following the
Participant’s Separation from Service.

     

    (b) If the
Company reasonably anticipates that any distribution to a Participant of any
portion of his Account would result in a limitation of the Company’s deduction
with respect to such payment under Code Section 162(m), the Company shall direct
the Administrator to delay the payment of such amount until the earliest date at
which the Company reasonably anticipates that its deduction under Code Section
162(m) will not be limited because of such payment, or the calendar year in
which the Participant Separates from Service with the Company and its
Subsidiaries.

     

     

    
      
         

      

      
        - 9
-

        
        

      

      
         

      

    

    ARTICLE
VIII

     

    Administration
of the Plan

     

    8.01   Appointment of
Administrator.  The Company shall, in writing, appoint one or
more persons to serve as the Plan Administrator.  Any person,
including an employee of the Company or a Subsidiary, shall be eligible to serve
as Administrator. Persons serving as Administrator may resign by written notice
to the Company and the Company may appoint or remove such persons by written
notice.  An Administrator consisting of more than one person shall act
by a majority of its members at the time in office and may authorize any one or
more of its members to execute any document or documents on behalf of the
Administrator, in which event the Administrator shall notify the Company of the
member or members so designated.  No person serving as Administrator
shall vote or decide upon any matter relating solely to himself or solely to any
of his rights or benefits pursuant to the Plan.

     

    8.02   Powers and Duties of
Administrator.  The Administrator shall administer the Plan in
accordance with its terms and shall have all powers necessary to carry out the
provisions of the Plan.  The Administrator shall interpret the Plan
and shall determine all questions arising in the administration, interpretation,
and application of the Plan, including, but not limited to, questions of
eligibility and the status and rights of employees, Participants and other
persons.  Any such determination by the Administrator shall be
conclusive and binding on all persons.  The regularly kept records of
the Company shall be conclusive and binding upon all persons with respect to a
Participant’s date and length of employment, time and amount of Compensation and
the manner of payment thereof, type and length of any absence from work and all
other matters contained therein relating to Participants.

     

    8.03   Plan
Expenses.  The expenses incurred by the Administrator in the
proper administration of the Plan shall be paid by the Company.

     

    8.04   Limitation of
Authority.  The Administrator shall not add to, subtract from,
or modify any of the terms of the Plan, change or add to any benefits prescribed
by the Plan, or waive or fail to apply any Plan requirement for benefit
eligibility.

     

    

    
      
        
        

      

      
        - 10
-

        
        

      

      
        
        

      

    

     

    ARTICLE
IX

     

    Claims
Procedures

     

    9.01   Procedure for Denial of
Benefits.  In the event that a claim for benefits under the
Plan of a Participant or Beneficiary (the “Claimant”) is denied in whole or in
part by the Administrator, the Administrator will notify the Claimant of the
denial.  Such notification will be in writing within 90 days of the
date the claim is received by the Administrator and will include:  (i)
the specific reason for the denial;  (ii) specific references to
pertinent Plan provisions on which denial is based;  (iii) a
description of any additional material and information necessary for the
Claimant to perfect his claim and an explanation of why the material or
information is necessary; and (iv) an explanation of the appeals
process.

     

    9.02   Appeal.  The
Claimant has 60 days from the date he receives notice of a claim denial to file
a written request for review of the denial with the
Administrator.  The Administrator will review the claim denial and
inform the Claimant in writing of its decision within 60 days of the date the
review request is received by the Administrator.  This decision will
be final.

     

    

     

    ARTICLE
X

     

    Amendment
or Termination of Plan

     

    10.01
Partial
Termination.  The board of directors of the Company may
partially terminate the Plan by freezing future accruals if, in its judgment,
the tax, accounting, or other effects of the continuance of the Plan, or
potential payments thereunder, would not be in the best interests of the
Company.

     

    10.02
Complete
Termination.  Subject to the requirements of Code Section 409A,
in the event of complete termination of the Plan, the Plan shall cease to
operate and the Company shall pay out to the Participant his or her benefit as
if the Participant had terminated employment as of the effective date of the
complete termination.  Such complete termination of the Plan shall
occur only under the following circumstances and conditions:

     

    (i) The
Administrator may terminate the Plan within 12 months of a corporate dissolution
taxed under Code Section 331, or with approval of a bankruptcy court pursuant to
11 U.S.C. §503(b)(1)(A), provided that the amounts deferred under the Plan are
included in the Participant’s gross income in the latest of (i) the calendar
year in which the Plan terminates; (ii) the calendar year in which the amount is
no longer subject to a substantial risk of forfeiture; or (iii) the first
calendar year in which the payment is administratively practicable.

     

    (ii) The board
of directors of the Company may terminate the Plan within the 30 days preceding
a Change in Control (but not following a Change in Control), provided that the
Plan shall only be treated as terminated if all substantially similar
arrangements sponsored by the Company are terminated so that the Participant and
all participants under substantially similar arrangements are required to
receive all amounts of compensation deferred under the terminated arrangements
within 12 months of the date of the termination of the
arrangements.  For these purposes, “Change in Control” shall be
defined in accordance with the Treasury Regulations under Code Section
409A.

     

    (iii) The board
of directors of the Company may terminate the Plan provided that (i) the
termination and liquidation does not occur proximate to a downturn in the
financial health of the Company; (ii) all arrangements sponsored by the Company
that would be aggregated with this Plan under Treasury Regulations Section
1.409A-1(c) if the Participant covered by this Plan was also covered by any of
those other arrangements are also terminated; (iii) no payments other than
payments that would be payable under the terms of the arrangement if the
termination had not occurred are made within 12 months of the termination of the
arrangement; (iv) all payments are made within 24 months of the termination of
the arrangements; and (v) the Company does not adopt a new arrangement that
would be aggregated with any terminated arrangement under Treasury Regulations
Section 1.409A-1(c) if the Participant participated in both arrangements, at any
time within three years following the date of termination of the
arrangement.

     

    

    
      
        
        

      

      
        - 11
-

        
        

      

      
        
        

      

    

     

    ARTICLE
XI

     

    Plan
Funding

     

    11.01   Unfunded
Plan.  The Plan is intended to be an unfunded plan maintained
solely for the purpose of providing deferred compensation for a select group of
management or highly compensated employees for purposes of Title I of the
Employee Retirement Income Security Act of 1974.

     

    11.02   Unsecured
Rights.  The right of the Participant or his Beneficiary to
receive a distribution under the Plan will be an unsecured claim against the
general assets of the Company, and neither the Participant nor his Beneficiary
nor any other person will have any rights in or against any amount credited to
the Account or any other specific assets of the Company.  All amounts
credited to the Accounts will constitute general assets of the
Company.

     

    11.03   Trust
Agreement.  Notwithstanding the provisions of Section 11.02,
the Company may enter into a trust agreement whereby the Company will agree to
contribute amounts to a trust for the purpose of accumulating assets to fund
benefit payments to the Participants.  The Company has the sole
discretion to determine the amounts to contribute to the trust.  Such
trust agreement will be substantially in the form of a model trust agreement set
forth in Internal Revenue Service Revenue Procedure 92-64, or any subsequent
Revenue Procedure, and will include provisions required in such model trust
agreement that all assets of the trust will be subject to the creditors of the
Company in the event of insolvency.  The obligations of the Company to
the Participant thereunder may be satisfied in all or in part with the assets of
the trust.  Any assets of the trust remaining after all obligations
hereunder with respect to the Participant have been satisfied will be paid to
the Company.

     

    

     

    ARTICLE
XII

     

    General
Provisions

     

    12.01   Nontransferability.  No
Participant or Beneficiary may sell, assign, transfer encumber or otherwise
dispose of the right to receive payments hereunder. A Participant’s rights to
benefit payments under the Plan are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment or
garnishment by creditors of a Participant or a Beneficiary.

     

    12.02   Employment Not Guaranteed
Plan.  The establishment of this Plan and the designation of an
employee as a Participant shall not give any Participant the right to continued
employment with the Company or any Subsidiary or limit the right of the Company
or any Subsidiary to dismiss the Participant or modify the terms of employment
of any Participant.

     

    12.03   Notice.  Any
and all notices, designations or forms provided for herein shall be in writing
and delivered personally or by certified mail, return receipt requested,
addressed, in the case of the Company, to the Corporate Secretary at 11200 West
Plank Court, Suite 100, Wauwatosa, Wisconsin 53226 and, in the case of a
Participant or Beneficiary, to his home address as shown on the records of the
Company. The addresses referenced herein may be changed by a notice delivered in
accordance with the requirement of this Section 12.03.

     

    12.04   Limitation on
Liability.  In no event shall the Company, Administrator or any
employee, officer or director of the Company be liable to any Participant,
former Participant or Beneficiary or other person for any claim, loss, liability
or expense incurred with respect to the Plan, other than the payment of benefits
hereunder.

     

    12.05   Special Distribution
Provision.  Notwithstanding anything to the contrary contained
herein, in the event that (a) the Internal Revenue Service prevails in a claim
that all or any portion of the Participant’s Account constitutes taxable income
to the Participant or his Beneficiary for any taxable year of such Participant
prior to the taxable year in which such amount is distributed to him, or (b)
legal counsel satisfactory to the Company and the Participant renders an opinion
that the Internal Revenue Service would likely prevail in such a claim, the
affected portion of the Participant’s Account shall be immediately distributed
to the Participant (or his Beneficiary).  For purposes of this Section
12.05, the Internal Revenue Service shall be deemed to have prevailed in a claim
if such claim is upheld by a court of final jurisdiction, or if the Company or
the Participant, based upon an opinion of legal counsel satisfactory to the
Company and the Participant, fails to appeal a decision of the Internal Revenue
Service, or a court of applicable jurisdiction, with respect to such claim, to
an appropriate Internal Revenue Service appeals authority or to a court of
higher jurisdiction within the appropriate time period.

     

    
      
        
        

      

      
        - 12
-

        
        

      

      
        
        

      

    

    12.06   Taxes.  The
Company shall have the right to deduct from all amounts paid pursuant to the
Plan any amount required by law to be withheld to satisfy a tax
obligation.  The Participant, his Beneficiary or his estate shall be
solely liable for the payment of any tax obligation that arises from a payment
under the Plan.

     

    12.07   Incapacity of
Recipient.  Subject to applicable state law, if any person
entitled to a payment under the Plan is deemed by the Administrator to be
incapable of personally receiving and giving a valid receipt for such payment,
then, unless and until claim therefor shall have been made by a duly appointed
guardian or other legal representative of such person, the Administrator may
provide for such payment or any part thereof to be made to any other person or
institution then contributing toward or providing for the care and maintenance
of such person.  Any such payment shall be a payment for the account
of such person and a complete discharge of any liability of the Administrator,
the Company and the Plan therefor.

     

    12.08   Severability.  Any
provision of this Plan prohibited by law shall be ineffective to the extent of
any such prohibition, without invalidating the remaining provisions hereof. The
illegal or invalid provisions shall be fully severable and this Plan shall be
construed and enforced as if the illegal or invalid provisions had never been
inserted in this Plan.

     

    12.09   Headings.  All
articles and headings under this Plan are intended merely for convenience and
shall in no way be deemed to modify or supplement the actual terms and
provisions stated thereunder.

     

    12.10
Applicable
Law.  The Plan shall be construed and administered under the
laws of the State of Wisconsin except to the extent preempted by federal
law.

     

    12.11  Acceleration of
Payments.  Except as specifically permitted herein or in other
sections of this Plan, no acceleration of the time or schedule of any payment
may be made hereunder.  Notwithstanding the foregoing, payments may be
accelerated hereunder by the Company, in accordance with the provisions of
Treasury Regulation Section 1.409A-3(j)(4) and any subsequent guidance issued by
the United States Treasury Department.  Accordingly, payments may be
accelerated, in accordance with requirements and conditions of the Treasury
Regulations (or subsequent guidance) in the following circumstances: (i) as a
result of certain domestic relations orders; (ii) in compliance with ethics
agreements with the Federal government; (iii) in compliance with ethics laws or
conflicts of interest laws; (iv) in limited cash-outs (but not in excess of the
limit under Code Section 402(g)(1)(B)); (v) in the case of certain distributions
to avoid a non-allocation year under Code Section 409(p); (vi) to apply certain
offsets in satisfaction of a debt of the Participant to the Company; (vii) in
satisfaction of certain bona fide disputes between the Participant and the
Company; or (viii) for any other purpose set forth in the Treasury Regulations
and subsequent guidance.

     

    
      
        
           

           

        

         

      

      
        - 13
-

         

      

      
         

      

    

    

     

    IN WITNESS WHEREOF, the
Company has amended and restated this Plan, effective September 1, 2006, by
signing on the date set forth below

     

    

     

    
      	 
      	
                                      
      WATERSTONE BANK SSB

            
	 
      	 
      
	
              Date:
      December 16, 2008

            	
              By:
      Richard C. Larson

            
	 
      	
              Its:
      Chief Financial Officer

            

    

    

     

    

    
      
        
        

      

      
        - 14
-Filed by Bowne Pure Compliance

 Exhibit 10.1

FORM OF SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT (this “Agreement”), dated as of                     , 2008, by and among
Irvine Sensors Corporation, a Delaware corporation (the “Company”), and the subscriber identified
on the signature page hereto (“Subscriber”).

WHEREAS, the Company is offering secured promissory notes in the aggregate principal amount of
$1,000,000 in such denominations as the Company deems advisable (the “Notes”) and, as additional
consideration for the Notes, the Company shall issue shares of its $0.01 par value common stock
(“Common Stock”) to each Subscriber with a value equal to 25% of the principal amount of the Notes
purchased by such Subscriber, based on the fair market value of the Common Stock (as determined in
accordance with Nasdaq’s rules) (the “Market Value”) as of the date of issuance of the Notes (the
“Initial Shares”) and the Company may also issue an additional number of shares of its common stock
to each investor equal to 12.5% or 25% of the principal amount of the Notes purchased by such
Subscriber, based on the Market Value of the Common Stock (determined as described below) (together
with the Initial Shares, the “Shares”). The Company will issue the Initial Shares to the investors
upon the earlier of (i) the closing of a Qualified Financing (as defined herein), or (ii) seven
months following the issuance date of the Notes or as soon as practicable thereafter as permitted
by The NASDAQ Stock Market, LLC (“Nasdaq”). The Notes and Shares will only be offered and sold to
a limited number of subscribers who are “Accredited Investors,” as such term is defined
hereinafter, in accordance with the terms and conditions set forth in the confidential private
placement memorandum dated August 29, 2008 (the “Confidential Placement Memorandum” or the
“Memorandum”) that was furnished by the Company to the Subscriber. Capitalized terms used but not
otherwise defined in this Agreement shall have the meanings ascribed to such terms in the
Memorandum.

WHEREAS, the Company and the Subscriber are executing and delivering this Agreement in
reliance upon an exemption from securities registration afforded by the provisions of Section 4(2)
and/or Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange
Commission (the “Commission”) under the Securities Act of 1933, as amended (the “1933 Act”), and
similar exemptions under applicable state securities laws.

WHEREAS, the parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Subscriber, as provided herein, and the Subscriber,
shall purchase the Note, in the form attached hereto as Exhibit A, and the Shares. The Subscriber
desires to acquire Note in the original principal amount set forth on the signature page hereto
pursuant to the Confidential Placement Memorandum and the terms and conditions of this Agreement.
The Note and the Shares are collectively referred to herein as the “Securities.”

NOW, THEREFORE, in consideration of the mutual covenants and other agreements contained in
this Agreement the Company and the Subscriber hereby agree as follows:

1. (a) Subscription. In accordance with the terms and conditions of the Confidential
Placement Memorandum, the Subscriber, intending to be legally bound, hereby irrevocably subscribes
for and agrees to purchase Note in the original principal amount set forth on the signature page
hereto and to pay the original principal amount in immediately available funds contemporaneously
with the execution and delivery of this Subscription Agreement. The execution and delivery of this
Agreement by the Subscriber will not constitute an agreement between the Subscriber and the Company
until this Agreement has been accepted by the Company evidenced by receipt by the Subscriber of an
acceptance page of this Agreement signed by the Company, and then subject to the terms and
conditions of this Agreement. The Subscriber understands that acceptance or rejection, in whole or
in part, by the Company and/or the Placement Agent (as defined herein) of the subscription and
agreement of the Subscriber to purchase the Note is within the sole and absolute discretion of the
Company and/or the Placement Agent. Likewise, the Subscriber understands acknowledges and agrees
that acceptance by the Company and/or the Placement Agent of any subscription of a Subscriber, in
whole or in part, is predicated upon the representations and warranties of the Subscriber as set
forth hereinafter and that SUBSCRIPTIONS, ONCE
RECEIVED BY THE COMPANY AND/OR THE PLACEMENT AGENT, ARE IRREVOCABLE BY THE SUBSCRIBER, AND,
THEREFORE, MAY NOT BE WITHDRAWN.

 

 

 

(b) Closing Date. The closing of the purchase and sale of the Notes hereunder and
under other Subscription Agreements (the “Closing”) shall be held at the offices of Dorsey &
Whitney LLP, 38 Technology Drive, Suite 100, Irvine, California 92618 after subscriptions for the
Securities have been accepted by the Company (the date of the Closing being hereinafter referred
to as the “Closing Date”). Subscriptions will not be refunded unless the Company rejects
Subscriber’s subscription, in whole or in part.

(c) Deliveries. The Subscriber shall deliver at the Closing the Omnibus Signature Page
which the Company shall be authorized, upon satisfaction of the conditions set forth in Section 7
hereof, to attach to an execution version of the Secured Promissory Note, the Intercreditor
Agreement, and the Collateral Agent Agreement, all in substantially the form attached to the
Confidential Placement Memorandum with such minor modifications thereto, if any, as the Company
deems are necessary and appropriate and are approved by the Placement Agent.

2. Shares. As consideration for the Notes, the Company shall issue the Initial Shares
of the Common Stock to Subscriber with a value equal to 25% of the principal amount of the Note,
based on the Market Value of the Common Stock as of the date of issuance of the Note. The Initial
Shares will be issued to Subscriber upon the earlier of (i) the closing of a Qualified Financing or
(ii) seven months following the issuance date of the Note or as soon as practicable thereafter as
permitted by the Nasdaq. In the event that the Note has not been paid in full on or before the six
month anniversary of the issuance date of the Note (the “Six Month Anniversary Date”), the Company
shall issue an additional number of shares of the Common Stock to Subscriber with a value equal to
12.5% of the principal amount of the Note, based on the greater of (i) the Market Value of the
Common Stock as of the first business day immediately following the Six Month Anniversary Date or
(ii) the Market Value of the Common Stock as of the date of issuance of the Note (the “Six Month
Shares”). In the event a Qualified Financing has closed prior to the Six Month Anniversary Date,
the Six Month Shares will be issued to Subscriber upon the first business day immediately following
the Six Month Anniversary Date or as soon as practicable thereafter as permitted by Nasdaq. In the
event that a Qualified Financing has not closed prior to the Six Month Anniversary Date, the Six
Month Shares will be issued to Subscriber upon the earlier of (i) the closing of a Qualified
Financing or (ii) seven months following the issuance date of the Notes or as soon as practicable
thereafter as permitted by Nasdaq. In the event that the Note has not been paid in full on or
before the twelve month anniversary of the issuance date of the Note (the “Twelve Month Anniversary
Date”), the Company shall issue an additional number of shares of the Common Stock to Subscriber
with a value equal to 12.5% of the principal amount of the Note, based on the greater of (i) the
Market Value of the Company’s Common Stock as of the first business day immediately following the
Twelve Month Anniversary Date or (ii) the Market Value of the Common Stock as of the date of
issuance of the Note. The Twelve Month Shares will be issued to such investors upon the first
business day immediately following the date of the Twelve Month Anniversary Issuance or as soon as
practicable thereafter as permitted by Nasdaq. For purposes of this Agreement, a “Qualified
Financing” shall mean the closing of an equity private placement to be conducted by J.P. Turner &
Company, L.L.C. with gross proceeds of at least $2.0 million.  

3. Subscriber’s Representations and Warranties. The Subscriber hereby represents and
warrants to and agrees with the Company that:

(a) Information on Company. The Subscriber acknowledges receipt of the Confidential
Placement Memorandum. The Subscriber has had access at the EDGAR Website of the Commission to the
Company’s Annual Report on Form 10-K for the year ended September 30, 2007, and all periodic and
current reports filed with the Commission thereafter (hereinafter referred to as the “Reports”).
The Subscriber has had the opportunity to review information regarding the Company, its business,
operations, financial condition and the terms and conditions of the Securities, and considered all
factors Subscriber deems material in deciding on the advisability of investing in the Securities.
The offer to sell the Securities to the Subscriber was communicated to the Subscriber by the
Company in such manner that the Subscriber was able to ask questions of and received answers from
the Company or a person acting on the Company’s behalf concerning the terms and conditions of this
transaction as well as to obtain any information requested by the Subscriber. Any questions raised
by the Subscriber or its representatives concerning the transactions contemplated by this Agreement
have been answered to the satisfaction of the Subscriber and its representatives. The Subscriber
can fend for itself, can bear the economic risk of its
investment and has such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Securities. Except as set
forth in the Confidential Placement Memorandum or this Agreement, no representations or warranties
have been made to the Subscriber by the Company or any agent, employee or affiliate of the Company
and in entering into this Agreement, the Subscriber is not relying on any information, other than
that which is contained in the Confidential Placement Memorandum and the results of any independent
investigation by the Subscriber.

 

Page 2

 

(b) Information on Subscriber. The Subscriber is, and will be at the time of issuance
of the Securities, an “accredited investor”, as such term is defined in Regulation D promulgated by
the Commission under the 1933 Act, is experienced in investments and business matters, has made
investments of a speculative nature and has purchased securities of United States publicly-owned
companies in private placements in the past and has such knowledge and experience in financial, tax
and other business matters as to enable the Subscriber to utilize the information made available by
the Company to evaluate the merits and risks of and to make an informed investment decision with
respect to the proposed purchase, which represents a speculative investment. The Subscriber is not
a broker-dealer under Section 15 of the Exchange Act or an officer, director or affiliate of the
Company. The Subscriber has the authority and is duly and legally qualified to purchase and own
the Securities. The Subscriber is able to bear the risk of such investment for an indefinite
period and to afford a complete loss thereof. The information set forth on the signature page
hereto regarding the Subscriber is accurate. The information set forth in Schedule 1 hereto is
correct in all respects.

(c) Purchase of Securities. The Subscriber is acquiring the Securities in the
ordinary course of its business as principal for its own account, and not as nominee, for
investment only and not with a view toward, or for resale in connection with, the public sale or
any distribution thereof. The Subscriber does not have any contract, undertaking, agreement,
understanding or arrangement, directly or indirectly, with any Person to distribute, sell, transfer
or pledge to such Person, or anyone else, all or any part of the Securities, and the Subscriber has
no present plan to enter into any such contract, undertaking, agreement, understanding or
arrangement. The Subscriber further agrees to execute and deliver any further investment
certificates as counsel to the Company deems necessary or advisable to comply with state or federal
securities laws. The Subscriber understands that it shall not have any of the rights of a
stockholder with respect to the Shares until the Shares are issued as provided herein.

(d) Compliance with Securities Act. The Subscriber understands and agrees that the
Securities have not been registered under the 1933 Act or any applicable state securities laws, by
reason of their issuance in a transaction that does not require registration under the 1933 Act
(based on the accuracy of the representations and warranties of the Subscriber contained herein),
and that such Securities may not be sold, assigned or transferred and must be held indefinitely in
the absence of (i) an effective registration statement under the Act and applicable state
securities laws with respect thereto or (ii) an opinion of counsel satisfactory to the Company that
such registration is not required. The Subscriber understands that the Company is under no
obligation to register the Securities.

(e) Notes Legend. The Notes shall bear the following or similar legend (in addition
to such other restrictive legends as are required or deemed advisable under any applicable law or
any other agreement to which the Company is a party):

“THE TRANSFER OF THIS NOTE IS SUBJECT TO RESTRICTIONS CONTAINED
HEREIN. THIS NOTE HAS BEEN ISSUED IN RELIANCE UPON THE
REPRESENTATION OF PAYEE THAT IT HAS BEEN ACQUIRED FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TOWARDS THE RESALE OR OTHER
DISTRIBUTION THEREOF. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
OR AN OPINION
OF COUNSEL SATISFACTORY TO COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED.”

 

Page 3

 

(f) Shares Legend. The stock certificates for the Shares shall bear the following or
similar legend (in addition to such other restrictive legends as are required or deemed advisable
under any applicable law or any other agreement to which the Company is a party):

“THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT, AND APPLICABLE STATE SECURITIES LAWS, COVERING ANY
SUCH TRANSACTION INVOLVING SAID SECURITIES OR (B) THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY STATING
THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.”

(g) Communication of Offer. The offer to sell the Securities was directly
communicated to the Subscriber by the Company. At no time was the Subscriber presented with or
solicited by any leaflet, advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio, or any other form of
general advertising, or solicited or invited to attend a promotional meeting or any seminar or
meeting by any general solicitation or general advertising.

(h) Authority; Enforceability. If the Subscriber is an entity, it is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its organization with
the requisite corporate, limited liability company or partnership power and authority to enter into
and to consummate the transactions contemplated by this Agreement and the Notes and otherwise to
carry out its obligations hereunder. This Agreement, the Notes and other agreements delivered
together with this Agreement or in connection herewith have been duly authorized, executed and
delivered by the Subscriber and are valid and binding agreements enforceable in accordance with
their 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 principles of equity; and Subscriber has full corporate power and authority necessary to
enter into this Agreement, the Notes and such other agreements and to perform its obligations
hereunder, thereunder and under all other agreements entered into by the Subscriber relating hereto
and thereto.

(i) No Governmental Review. The Subscriber understands that no United States
federal or state agency or any other governmental or state agency has passed on or made
recommendations or endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits of the offering of
the Securities. The Subscriber understands that neither legal counsel to the Company, the
Placement Agent, nor its counsel has independently verified the information concerning the Company
included in the Memorandum or herein, all of which has been provided by the Company, nor has such
legal counsel passed upon the adequacy or accuracy of the Memorandum. No independent third party,
such as an investment banking firm, the Placement Agent, or other expert in evaluating businesses
or securities, has made an evaluation of the economic potential of the Company.

(j) Certain Trading Activities. The Subscriber has not directly or indirectly, nor
has any Person acting at the direction of the Subscriber, engaged in any transactions in the
securities of the Company (including, without limitation, any Short Sales involving the Company’s
securities) since the earlier to occur of (i) the time the Subscriber was first contacted by the
Company or any other Person regarding the investment in the Company and (ii) the 30th
day prior to the date of this Agreement. The Subscriber covenants that neither it nor any Person
acting at the direction of the Subscriber will engage in any transactions in the securities of the
Company (including Short Sales) after the date hereof and prior to the date that the transactions
contemplated by this Agreement are publicly disclosed.

 

Page 4

 

(k) Correctness of Representations. The Subscriber represents as to the Subscriber
that the foregoing representations and warranties are true and correct as of the date hereof and,
unless the Subscriber otherwise notifies the Company prior to the Closing Date shall be true and
correct as of the Closing Date and as of the issuance of the Shares.

4. Company Representations and Warranties. The Company represents and warrants to and
agrees with the Subscriber that:

(a) Due Incorporation. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has the requisite
corporate power to own its properties and to carry on its business as disclosed in the Reports.
The Company is duly qualified as a foreign corporation to do business and is in good standing in
California.

(b) Outstanding Stock. All issued and outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and nonassessable.

(c) Authority; Enforceability. This Agreement, the Notes, and any other agreements
delivered together with this Agreement or in connection herewith (collectively “Transaction
Documents”) have been duly authorized, executed and delivered by the Company and are valid and
binding agreements enforceable in accordance with their 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 principles of equity. The Company has
full corporate power and authority necessary to enter into and deliver the Transaction Documents
and to perform its obligations thereunder.

(d) Consents. No consent, approval, authorization or order of any court,
governmental agency or body or arbitrator having jurisdiction over the Company is required for the
execution by the Company of the Transaction Documents and compliance and performance by the Company
of its obligations under the Transaction Documents, including, without limitation, the issuance and
sale of the Securities, other than the filing by the Company of a Notice of Sale of Securities on
Form D with the Commission under Regulation D of the Securities Act, applicable Blue Sky filings,
or otherwise as may be required by Nasdaq. The Transaction Documents and the Company’s performance
of its obligations thereunder have been approved by the Company’s board of directors.

(e) No Violation or Conflict. Neither the issuance and sale of the Securities nor the
performance of the Company’s obligations under this Agreement and all other agreements entered into
by the Company relating thereto by the Company will violate, conflict with, result in a breach of,
or constitute a default under (A) the certificate of incorporation or bylaws of the Company, (B) to
the Company’s knowledge, any decree, judgment, order, law, treaty or regulation applicable to the
Company of any court, governmental agency or body, or arbitrator having jurisdiction over the
Company, or (C) the terms of any material bond, debenture, note or other evidence of indebtedness,
agreement, stock option or other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Company is a party or by which it is bound, except the violation, conflict,
breach, or default of which would not have a Material Adverse Effect on the Company. For purpose
of this Agreement, a “Material Adverse Effect” shall mean a material adverse effect on the
financial condition, results of operations, properties or business of the Company and its
Subsidiaries taken as a whole. For purposes of this Agreement, “Subsidiary” means, with respect to
any entity at any date, any corporation, limited or general partnership, limited liability company,
trust, estate, association, joint venture or other business entity) of which more than 50% of (i)
the outstanding capital stock having (in the absence of contingencies) ordinary voting power to
elect a majority of the board of directors or other managing body of such entity, (ii) in the case
of a partnership or limited liability company, the interest in the capital or profits of such
partnership or limited liability company or (iii) in the case of a trust, estate, association,
joint venture or other entity, the beneficial interest in such trust, estate, association or other
entity business is, at the time of determination, owned or controlled directly or indirectly
through one or more intermediaries, by such entity.

 

Page 5

 

(f) The Securities. The Securities upon issuance:

(i) will be, free and clear of any security interests, liens, claims or other encumbrances,
subject to restrictions upon transfer set forth herein, under the 1933 Act and any applicable state
securities laws;

(ii) have been, or will be, duly and validly authorized and on the date of issuance of the
Shares against payment therefor will be duly and validly issued, fully paid and nonassessable;

(iii) will not have been issued or sold in violation of any preemptive or other similar rights
of the holders of any securities of the Company;

(iv) will not subject the holders thereof to personal liability by reason of being such
holders; and

(v) will have been issued in reliance upon an exemption from the registration requirements of
and will not result in a violation of Section 5 under the 1933 Act.

(g) Reporting Company. The Company is a publicly-held company subject to reporting
obligations pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the “1934
Act”) and has a class of common shares registered pursuant to Section 12(g) of the 1934 Act.
Pursuant to the provisions of the 1934 Act, the Company has timely filed all reports and other
materials required to be filed thereunder with the Commission during the preceding twelve months.

(h) No General Solicitation. Neither the Company, nor any of its Affiliates, nor to
its knowledge, any person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under the 1933 Act) in
connection with the offer or sale of the Securities.

(i) Correctness of Representations. The Company represents that the foregoing
representations and warranties are true and correct as of the date hereof in all material respects,
and, unless the Company otherwise notifies the Subscribers prior to the Closing Date, shall be true
and correct in all material respects as of the Closing Date.

5. Escrow and Use of Purchase Price. The subscription payments made pursuant hereto
prior to the Closing of the Offering will be deposited by the Placement Agent in an escrow account
at a commercial bank or trust company of the Placement Agent’s choosing and agreeable to the
Company. No interest will be earned by the Subscriber on subscription payments held in any escrow
account. If for any reason the Closing of the purchase and sale of the Notes does not take place,
the subscription payment will be returned to the Subscriber without interest and without deduction.
Upon receipt of the Agreement and the subscription payment, and upon acceptance of the
subscription by the Company, the subscription payments shall belong to the Company. If the
subscription is not accepted by the Company then this Agreement will be null and void and the
subscription payment will be returned to the Subscriber without interest and without deduction.

6. Securities Law Disclosures. The Company may in its sole discretion, following the
Closing Date, (i) issue a press release and/or file a Current Report on Form 8-K disclosing the
transactions contemplated hereby and (ii) make such other disclosures, filings and notices in the
manner and time required by the Commission, any state securities commission, any national
securities exchange or Nasdaq.

 

Page 6

 

7. Conditions to Subscriber’s Obligations. The obligations of the Subscriber under
Section 1(b) of this Agreement are subject to the fulfillment at or before the Closing of each of
the following conditions, any of which may be waived in writing by the Subscriber:

(a) Representations and Warranties. The representations and warranties of the Company
contained in Section 4 shall be true and correct in all material respects on and as of the Closing
with the same effect as if made on and as of the Closing.

(b) Performance. The Company shall have performed or fulfilled in all material
respects all agreements, obligations and conditions contained herein required to be performed or
fulfilled by the Company at or prior to the Closing.

(c) Regulatory Matters. 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 against the Company or against the Subscriber
relating to the issuance of the Securities or the Subscriber’s activities in connection therewith
or any other transactions contemplated by this Agreement or the other Transaction Documents.

(d) Consents. 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.

7.1 Conditions to the Company’s Obligations. The obligations of the Company under
Section 1(b) of this Agreement are subject to the fulfillment at or before the Closing of each of
the following conditions, any of which may be waived in writing by the Company:

(a) Representations and Warranties. The representations and warranties of the
Subscriber contained in Section 3 shall be true and correct in all material respects on and as of
the Closing with the same effect as if made on and as of the Closing.

(b) Performance. The Subscriber shall have performed or fulfilled in all material
respects all agreements, obligations and conditions contained herein required to be performed or
fulfilled by the Subscriber at or prior to the Closing.

(c) Subscription Payments. The Subscriber shall have delivered the aggregate
subscription payment for the Notes in the amount specified for the Subscriber on the signature page
hereto.

(d) Regulatory Matters. 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 against the Company or against the Subscriber
relating to the issuance of the Securities or the Subscriber’s activities in connection therewith
or any other transactions contemplated by this Agreement or the other Transaction Documents.

(e) Consents. 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.

8. Covenants of Subscriber Not to Short Stock. The Subscriber and its Affiliates and
assigns agree not to make any short sale of, or grant any option for the purchase of or enter into
any hedging or similar transaction with the same economic effect as a short sale, the Shares until
one-hundred eighty (180) days following the issuance of the Shares.

 

Page 7

 

9. Miscellaneous.

(a) Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless otherwise specified
herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable overnight courier service with
charges prepaid, or (iv) transmitted by hand delivery, electronic mail, or facsimile, addressed as
set forth below or to such other address as such party shall have specified most recently by
written notice. Any notice or other communication required or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by electronic mail or facsimile, with
accurate
confirmation generated by the transmitting facsimile machine, at the address or number
designated below (if delivered on a business day during normal business hours where such notice is
to be received), (b) the first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received) or (c) on the second
business day following the date of mailing by express courier service, fully prepaid, addressed to
such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses
for such communications shall be: (i) if to the Company, to: Irvine Sensors Corporation, 3001 Red
Hill Avenue, Costa Mesa, CA 92650, Attn: Chief Financial Officer, telecopier: (714) 444-8773, with
a copy by telecopier only to: Dorsey & Whitney LLP, 38 Technology Drive, Suite 100, Irvine, CA
92618, Attn: Ellen S. Bancroft, Esq., telecopier: (949) 932-3601, and (ii) if to the Subscriber,
to: the address and telecopier number indicated on the signature pages hereto.

(b) Entire Agreement; Assignment. This Agreement and other documents delivered in
connection herewith represent the entire agreement between the parties hereto with respect to the
subject matter hereof and may be amended only by a writing executed by both parties. Neither the
Company nor the Subscriber have relied on any representations not contained or referred to in this
Agreement and the documents delivered herewith. No right or obligation of the Company shall be
assigned without prior notice to and the written consent of the Subscriber.

(c) Counterparts/Execution. This Agreement may be executed in any number of
counterparts and by the different signatories hereto on separate counterparts, each of which, when
so executed, shall be deemed an original, but all such counterparts shall constitute but one and
the same instrument. This Agreement may be executed by facsimile signature and delivered by
facsimile transmission.

(d) Law Governing this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without regard to principles of conflicts of
laws. Any action brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state courts of California or in the
federal courts located in the state of California. The parties and the individuals executing this
Agreement and other agreements referred to herein or delivered in connection herewith on behalf of
the Company agree to submit to the jurisdiction of such courts. The prevailing party shall be
entitled to recover from the other party its reasonable attorney’s fees and costs. In the event
that any provision of this Agreement or any other agreement delivered in connection herewith is
invalid or unenforceable under any applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to
conform with such statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of any other provision
of any agreement.

(e) Specific Enforcement, Consent to Jurisdiction. The Company and the Subscriber
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, this being in addition to any other remedy to which
any of them may be entitled by law or equity. Subject to Section 9(d) hereof, each of the Company,
the Subscriber and any signatory hereto in his personal capacity hereby waives, and agrees not to
assert in any such suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction in California of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is improper. Nothing in
this Section shall affect or limit any right to serve process in any other manner permitted by law.

 

Page 8

 

(f) Independent Nature of Subscribers. The Company acknowledges that the obligations
of the Subscriber under the Transaction Documents are several and not joint with the obligations
of any other Subscriber who is also purchasing Securities in the transaction (collectively, with
the Subscriber, referred to as the “Subscribers”), and none of the Subscribers shall be responsible
in any way for the performance of the obligations of any of the other Subscribers under the
Transaction Documents. The Company acknowledges that the decision of each of the Subscribers to
purchase Securities has been made by each of such Subscribers independently of any of the other
Subscribers and independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or
prospects of the Company which may have been made or given by any of the other Subscribers or
by any agent or employee of any of the other Subscribers, and none of the Subscribers or any of its
agents or employees shall have any liability to any of the Subscribers (or any other person)
relating to or arising from any such information, materials, statements or opinions. The Company
acknowledges that nothing contained in any Transaction Document, and no action taken by any of the
Subscribers pursuant hereto or thereto shall be deemed to constitute the Subscribers as a
partnership, an association, a joint venture or any other kind of entity, or create a presumption
that the Subscribers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. The Company
acknowledges that each of the Subscribers shall be entitled to independently protect and enforce
its rights, including without limitation, the rights arising out of the Transaction Documents, and
it shall not be necessary for any of the other Subscribers to be joined as an additional party in
any proceeding for such purpose. The Company acknowledges that it has elected to provide all of
the Subscribers with the same terms and Transaction Documents for the convenience of the Company
and not because Company was required or requested to do so by the Subscribers. The Company
acknowledges that such procedure with respect to the Transaction Documents in no way creates a
presumption that the Subscribers are in any way acting in concert or as a group with respect to the
Transaction Documents or the transactions contemplated thereby.

(g) Consent. As used in the Agreement, “consent of the Subscribers” or similar
language means the consent of holders of not less than a majority of the outstanding principal
amount of the Notes owned by Subscribers on the date consent is requested.

(h) Omnibus Signature Page. This Agreement is intended to be read and construed in
conjunction with the Secured Promissory Note, the Intercreditor Agreement and the Collateral Agent
Agreement pertaining to the issuance by the Company of the Securities pursuant to the Memorandum.
Accordingly, pursuant to the terms and conditions of this Agreement it is hereby agreed that the
execution by the Subscriber of this Agreement, in the place set forth herein shall constitute
agreement to be bound by the terms and conditions of the Secured Promissory Note, the Intercreditor
Agreement and the Collateral Agent Agreement, with the same effect as if each such separate, but
related agreement, was separately signed.

10. Wire Instructions

 For wiring the funds directly to the Escrow Account please use the following instructions:

	 	 	 
	Account Name:

	 	US National Bank as Escrow Agent
	 
	 	 
	 

	 	for Irvine Sensors Corp.
	 
	 	 
	ABA Number:

	 	091000022
	 
	 	 
	A/C Number:

	 	180121167365
	 
	 	 
	FBO:

	 	[Investor Name]
	 
	 	 
	 

	 	[Investor’s Social Security Number]
	 
	 	 
	 

	 	[Investor’s Address]

[THIS SPACE INTENTIONALLY LEFT BLANK]

 

Page 9

 

OMNIBUS SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT,

SECURED PROMISSORY NOTE, INTERCREDITOR AGREEMENT AND COLLATERAL

AGENT AGREEMENT

IN WITNESS WHEREOF, the Subscriber hereby represents and warrants that the Subscriber has read
this entire Agreement and the Confidential Placement Memorandum and hereby executes and delivers
this Agreement as of the                      day of                       , 2008.

	 	 	 	 	 	 	 	 	 
	SUBSCRIBER	 	 	 	 	 	NOTE PRINCIPAL	 
	 
	 	 	 	 	 	 	 	 
	Name:
	 	 	 	 	 	$	 	 
	 
	 	 	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Fax:
	 	 	 	 	 	 	 	 
	                                                            
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	(Signature)
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 

ACCEPTANCE

IN WITNESS WHEREOF, the Company has duly executed and delivered this Agreement as of the                     
day of                     , 2008.

	 	 	 	 	 
	 	

IRVINE SENSORS CORPORATION

a Delaware corporation

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

Page 10

 

	 	 	 	 	 

Schedule 1 to Subscription Agreement

Name:                                         

INVESTOR QUESTIONNAIRE

Purpose of this Questionnaire

The secured promissory notes and the shares of Common Stock to be issued in connection with
such secured promissory notes (collectively, the “Securities”) of Irvine Sensors Corporation, a
Delaware corporation (the “Company”), will be offered without registration under the Securities Act
of 1933, as amended (the “Act”), or the securities laws of any state, in reliance on the exemptions
contained in Section 4(2) of the Act and Regulation D promulgated thereunder and on similar
exemptions under applicable state laws. Under Section 4(2) of the Act and/or certain state
securities laws, the Company may be required to determine that an individual, or an individual
together with a “purchaser representative,” or each individual equity owner of an investing entity
meets certain suitability requirements before offering to sell the Securities to such individual or
entity. THE COMPANY MAY, IN ITS DISCRETION, EXCLUDE ANY INDIVIDUAL FROM THE OFFERING TO THE EXTENT
NECESSARY TO COMPLY WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS. This Investor Questionnaire
does not constitute an offer to sell or a solicitation of an offer to buy the Securities or any
other security.

Instructions. Please complete this questionnaire by filling in the information called for,
checking the appropriate boxes, and signing below. Please fax and mail the completed questionnaire
to J. P. Turner & Company, LLC.

Representations

The undersigned hereby represents to the Company as follows:

1. Accredited Investor Status. The undersigned has read the definition of “accredited
investor” as defined in Rule 501 of Regulation D attached hereto as Attachment 1, and
certifies that either (check one):

o
     The undersigned is an “accredited investor;” or

o
     The undersigned is not an “accredited investor.”

2. Domicile/State of Organization. The undersigned’s state of domicile/organization is:
                    .

The foregoing representations are true and accurate as of the date hereof. The undersigned
undertakes to notify the Company regarding any material change in the information set forth above
prior to the purchase by the undersigned of any Securities of the Company.

	 	 	 	 	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Address:	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Signature of Investor(s)	 	 	 	Telephone:	 	 	 	 
	 

	 	 	 	 	 	Facsimile:
	 	 

	 	 
	 

	 	 	 	 	 	Email:
	 	 

	 	 
	 

	 	 	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Print Name of Investor(s)	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Print Title (if applicable)	 	 	 	 	 	 	 	 

 

Page 11

 

ATTACHMENT 1

Rule 501. Definitions and Terms Used in Regulation D under the Act.

As used in Regulation D, the term “accredited investor” shall mean any person who comes within
any of the following categories, or who the issuer reasonably believes comes within any of the
following categories, at the time of the sale of the securities to that person:

(1) Any bank as defined in Section 3(a)(2) of the Act or any savings and loan association or
other institution as defined in Section 3(a)(5)(A) of the Act whether acting in its individual or
fiduciary capacity; any broker dealer registered pursuant to Section 15 of the Securities Exchange
Act of 1934; insurance company as defined in Section 2(13) of the Act; investment company
registered under the Investment Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958;
any plan established and maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions for the benefit of its employees, if such
plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of
Title I of the Employee Retirement Income Security Act of 1974, if the investment decision is made
by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and
loan association, insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000; or, if a self-directed plan, with investment
decisions made solely by persons that are accredited investors;

(2) Any private business development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940;

(3) Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation,
Massachusetts or similar business trust, or partnership, not formed for the specific purpose of
acquiring the securities offered, with total assets in excess of $5,000,000;

(4) Any director, executive officer, or general partner of the issuer of the securities being
offered or sold, or any director, executive officer, or general partner of a general partner of
that issuer;

(5) Any natural person whose individual net worth, or joint net worth with that person’s
spouse, at the time of his purchase exceeds $1,000,000;

(6) Any natural person who had an individual income in excess of $200,000 in each of the two
most recent years or joint income with that person’s spouse in excess of $300,000 in each of those
years and has a reasonable expectation of reaching the same income level in the current year;

(7) Any trust with total assets in excess of $5,000,000, not formed for the specific purpose
of acquiring the securities offered, whose purchase is directed by a sophisticated person as
described in Rule 506(b)(2)(ii); and

(8) Any entity in which all of the equity owners are accredited investors.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00150-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00150-of-00352.parquet"}]]