Document:

Exhibit 10.14

Exhibit 10.14

IRVINE SENSORS CORPORATION

FORM OF NON-INCENTIVE STOCK OPTION AGREEMENT

This NON-INCENTIVE STOCK OPTION AGREEMENT (the “Agreement”) is made this
 _____ 

day of
 _____,

 _____, by and between Irvine Sensors Corporation, a Delaware corporation (the “Company”) and
 _____,
an individual resident of
 _____,
 _____ 

(“Optionee”).

1. Grant of Option. The Company hereby grants Optionee the option (the “Option”) to purchase all or any part of
an aggregate of
 _____ 

shares (the “Shares”) of common stock, $0.01 par value (“Common Stock”), of
the Company at the exercise price of $___ per share according to the terms and conditions set
forth in this Agreement and in the Irvine Sensors Corporation 2010 Non-Qualified Stock Option Plan
(the “Plan”). The Option will not be treated as an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). The Option is issued
under the Plan and is subject to its terms and conditions. A copy of the Plan will be furnished
upon request of Optionee.

The Option shall terminate at the close of business ten (10) years from the date hereof.

2. Vesting of Option Rights.

(a) Except as otherwise provided in this Agreement, the Option may be exercised by Optionee in
accordance with the following schedule:

	 	 	 
	 	 	Number of Shares
	On or after each of	 	with respect to which
	the following dates	 	the Option is exercisable
	 	 	 

(b) During the lifetime of Optionee, the Option shall be exercisable only by Optionee and
shall not be assignable or transferable by Optionee, other than by will or the laws of descent and
distribution. Notwithstanding the foregoing, Optionee may transfer the Option to any Family Member
(as such term is defined in the General Instructions to Form S-8 (or successor to such Instructions
or such Form)); provided, however, that (i) Optionee may not receive any consideration for such
transfer, (ii) the Family Member must agree in writing not to make any subsequent transfers of the
Option other than by will or the laws of the descent and distribution and (iii) the Company
receives prior written notice of such transfer.

 

 

 

(c) Notwithstanding the provisions set forth above in Section 2(a), (i) in the event of
termination of Optionee’s employment with or Service to the Company as a result of Optionee’s death
or Permanent Disability while in the employ or Service of the Company prior to the vesting of the
Option under Sections 2 or 5 hereof, then the vesting of the Option, as set out in Section 2(a)
above, shall accelerate in full as of such date of death or termination; (ii) in the event of
termination by the Company of Optionee’s
employment with or Service to the Company without Cause (other than upon death or Permanent
Disability) or, if applicable under an employment agreement between the Company and Optionee, due
to the Optionee’s resignation for Good Reason (as defined below), prior to the vesting of the
Option under Sections 2 or 5 hereof, provided that within sixty (60) days following the date of
termination, the Optionnee executes and does not revoke (during any applicable revocation period)
an effective general release of all claims against the Company and its affiliates in a form
reasonably acceptable to the Company, then the vesting of the Option, as set out in Section 2(a)
above, shall accelerate in full as of such date of termination or resignation; and (iii) if, after
the earlier of the initial vesting date set forth above and the date hereof, Optionee ceases to be
an employee or provide Service by reason of Ordinary Retirement prior to the vesting of the Option
under Sections 2 or 5 hereof, then the vesting of the Option, as set out in Section 2(a) above,
shall accelerate in full as of such date of Ordinary Retirement. For purposes of this Agreement,
“Permanent Disability” shall mean a physical or mental impairment which, the Board in good faith
determines, after consideration and implementation of reasonable accommodations, precludes the
Optionee from performing his essential job functions for a period longer than three consecutive
months or a total of one hundred twenty (120) days in any twelve month period (or such longer
period as may be required to comply with the Family Medical Leave Act or other applicable law); and
“Ordinary Retirement” shall mean the retirement of the Optionee on a date upon which, if the
Optionee is an employee, the sum of the Optionee’s age and number of years of employment with the
Company equals or exceeds eighty-five (85) years or, if the Optionee is a non-employee director,
the number of years of Service to the Company exceeds five (5) years.

3. Exercise of Option after Death or Termination of Employment or Service. The Option shall terminate and may no longer be exercised if Optionee ceases to be employed
by or provide Service to the Company or its Affiliates, except that:

(a) If Optionee’s employment or Service is terminated for Cause, the Option shall be
terminated as of the date of the act giving rise to such termination.

(b) If Optionee’s employment or Service is terminated because of Optionee’s Permanent
Disability while in the employ of the Company or is terminated by the Company without Cause
(other than upon death or Permanent Disability) or, if applicable under an employment
agreement between the Company and Optionee, is terminated due to Optionee’s resignation for
Good Reason (and Optionnee executes and does not revoke the general release described
above), and Optionee shall not have fully exercised the Option, such Option may be
exercised, at any time within five (5) years after Optionee’s date of termination of
employment or Service.

(c) If Optionee shall die while the Option is still exercisable according to its terms,
and Optionee shall not have fully exercised the Option, such Option may be exercised, at any
time within twelve (12) months after Optionee’s death, by the personal representatives, or
administrators or guardians of Optionee or the executor of Optionee’s estate,, as
applicable, or by any person or persons to whom the Option is transferred by will or the
applicable laws of descent and distribution, to the extent of the full number of Shares
Optionee was entitled to purchase under the Option on the date of death.

(d) If Optionee’s employment or Service is terminated for Ordinary Retirement, the
Option shall not be terminated and shall remain exercisable for its full term.

(e) Notwithstanding the above, in no case may the Option be exercised to any extent by
anyone after the termination date of the Option.

 

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(f) “Cause” shall mean (i) the commission of any act of fraud, embezzlement or
dishonesty by Optionee, (ii) any unauthorized use or disclosure by such person of
confidential information or trade secrets of the Company (or of any Affiliate), or (iii) any
other intentional misconduct by such person adversely affecting the business or affairs of
the Company (or any Affiliate) in a material manner. However, if the term or concept has
been defined in an employment agreement between the Company and Optionee, then Cause shall
have the definition set forth in such employment agreement. The foregoing definition shall
not in any way preclude or restrict the right of the Company (or any Affiliate) to discharge
or dismiss any Optionee or other person in the Service of the Company (or any Affiliate) for
any other acts or omissions but such other acts or omissions shall not be deemed, for
purposes of the Agreement, to constitute grounds for termination for Cause.

(g) “Good Reason” shall have such meaning as may be set forth in an employment
agreement between the Company and Optionee.

4. Method of Exercise of Option. Subject to the foregoing, the Option may be exercised in whole or in part from time to time
by serving written notice of exercise on the Company at its principal office within the Option
period. The notice shall state the number of Shares as to which the Option is being exercised and
shall be accompanied by payment of the exercise price. Payment of the exercise price shall be made
(i) in cash (including bank check, personal check or money order payable to the Company), (ii) with
the approval of the Company (which may be given in its sole discretion), by delivering to the
Company for cancellation shares of the Company’s Common Stock already owned by Optionee having a
Fair Market Value equal to the full exercise price of the Shares being acquired, (iii) with the
approval of the Company (which may be given in its sole discretion) and subject to Section 402 of
the Sarbanes-Oxley Act of 2002, by delivering to the Company the full exercise price of the Shares
being acquired in a combination of cash and Optionee’s full recourse liability promissory note with
a principal amount not to exceed eighty percent (80%) of the exercise price and a term not to
exceed five (5) years, which promissory note shall provide for interest on the unpaid balance
thereof which at all times is not less than the minimum rate required to avoid the imputation of
income, original issue discount or a below-market rate loan pursuant to Sections 483, 1274 or 7872
of the Code or any successor provisions thereto, (iv) subject to Section 402 of the Sarbanes-Oxley
Act of 2002, to the extent this Option is exercised for vested shares, through a special sale and
remittance procedure pursuant to which Optionee shall concurrently provide irrevocable instructions
(1) to Optionee’s brokerage firm to effect the immediate sale of the purchased Shares and remit to
the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover
the aggregate exercise price payable for the purchased Shares plus all applicable income and
employment taxes required to be withheld by the Company by reason of such exercise and (2) to the
Company to deliver the certificates for the purchased shares directly to such brokerage firm in
order to complete the sale, or (v) with the approval of the Company (which may be given in its sole
discretion) and subject to Section 402 of the Sarbanes-Oxley Act of 2002, by delivering to the
Company a combination of any of the forms of payment described above. This Option may be exercised
only with respect to full shares and no fractional share of stock shall be issued.

5. Change in Control.

(a) Immediately prior to the effective date of a “Change in Control” (as defined in Section
5(e)), this Option shall vest and become exercisable for all of the Shares and may be exercised for
any or all
of those Shares. However, this Option shall not vest and become exercisable on an accelerated
basis if and to the extent: (i) this Option is to be assumed by the successor corporation (or
parent thereof) or is otherwise to be continued in full force and effect pursuant to the terms of
the Change in Control transaction or (ii) this Option is to be replaced with a cash incentive
program of the successor corporation which preserves the spread existing at the time of the Change
in Control on the Shares for which this Option is not otherwise at that time exercisable (the
excess of the Fair Market Value of those Shares over the aggregate exercise price payable for such
Shares) and provides for subsequent payout of that spread no later than the time this Option would
have vested and become exercisable for those Shares.

 

3

 

(b) Immediately following the consummation of the Change in Control, this Option shall
terminate, except to the extent assumed by the successor corporation (or parent thereof) or
otherwise continued in effect pursuant to the terms of the Change in Control transaction.

(c) If this Option is assumed or otherwise continued in effect in connection with a Change in
Control, then this Option shall be appropriately adjusted, upon such Change in Control, to apply to
the number and class of securities which would have been issuable to Optionee in consummation of
such Change in Control had this Option been exercised immediately prior to such Change in Control,
and appropriate adjustments shall also be made to the exercise price, provided the aggregate
exercise price shall remain the same. To the extent that the holders of Common Stock receive cash
consideration for their Common Stock in consummation of the Change in Control, the successor
corporation (or its parent) may, in connection with the assumption of this Option, substitute one
or more shares of its own common stock with a fair market value equivalent to the cash
consideration paid per share of Common Stock in such Change in Control.

(d) This Agreement shall not in any way affect the right of the Company to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or assets.

(e) For purposes of this Agreement, “Change in Control” shall mean a change in ownership or
control of the Company effected through any of the following transactions: (i) a merger,
consolidation or other reorganization unless securities representing more than 50% of the total
combined voting power of the voting securities of the successor corporation are immediately
thereafter beneficially owned, directly or indirectly and in substantially the same proportion, by
the persons who beneficially owned the Company’s outstanding voting securities immediately prior to
such transaction; (ii) the sale, transfer or other disposition of all or substantially all of the
Company’s assets; or (iii) the acquisition, directly or indirectly by any person or related group
of persons (other than the Company or a person that directly or indirectly controls, is controlled
by, or is under common control with, the Company), of beneficial ownership (within the meaning of
Rule 13d-3 of the Exchange Act) of securities possessing more than 50% of the total combined voting
power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly
to the Company’s stockholders.

6. Capital Adjustments and Reorganization. Should any change be made to the Common Stock by reason of any stock split, reverse stock
split, stock dividend, recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Company’s receipt of consideration,
appropriate adjustments shall be made to (a) the number and/or class of securities subject to this
Option and (b) the exercise price in order to reflect such change and thereby preclude a dilution
or enlargement of benefits hereunder.

7. Miscellaneous.

(a) Entire Agreement; Plan Provisions Control. This Agreement (and any addendum
hereto) and the Plan constitute the entire agreement between the parties hereto with regard to the
subject matter hereof. In the event that any provision of the Agreement conflicts with or is
inconsistent in any respect with the terms of the Plan, the terms of the Plan shall control. All
decisions of the Committee with respect to any question or issue arising under the Plan or this
Agreement shall be and binding on all persons having an interest in this Option. All capitalized
terms used in this Agreement and not otherwise defined in this Agreement shall have the meaning
assigned to them in the Plan.

(b) No Rights of Stockholders. Neither Optionee, Optionee’s legal representative nor
a permissible assignee of this Option shall have any of the rights and privileges of a stockholder
of the Company with respect to the Shares, unless and until such Shares have been issued in the
name of Optionee, Optionee’s legal representative or permissible assignee, as applicable, without
restrictions thereto.

 

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(c) No Right to Employment. The grant of the Option shall not be construed as giving
Optionee the right to be retained in the employ of, or if Optionee is a director of the Company or
an Affiliate as giving the Optionee the right to continue as a director of, the Company or an
Affiliate, nor will it affect in any way the right of the Company or an Affiliate to terminate such
employment or position at any time, with or without cause. In addition, the Company or an
Affiliate may at any time dismiss Optionee from employment, or terminate the term of a director of
the Company or an Affiliate, free from any liability or any claim under the Plan or the Agreement.
Nothing in the Agreement shall confer on any person any legal or equitable right against the
Company or any Affiliate, directly or indirectly, or give rise to any cause of action at law or in
equity against the Company or an Affiliate. The Option granted hereunder shall not form any part
of the wages or salary of Optionee for purposes of severance pay or termination indemnities,
irrespective of the reason for termination of employment. Under no circumstances shall any person
ceasing to be an employee of the Company or any Affiliate be entitled to any compensation for any
loss of any right or benefit under the Agreement or Plan which such employee might otherwise have
enjoyed but for termination of employment, whether such compensation is claimed by way of damages
for wrongful or unfair dismissal, breach of contract or otherwise. By participating in the Plan,
Optionee shall be deemed to have accepted all the conditions of the Plan and the Agreement and the
terms and conditions of any rules and regulations adopted by the Committee and shall be fully bound
thereby.

(d) Governing Law. The validity, construction and effect of the Plan and the
Agreement, and any rules and regulations relating to the Plan and the Agreement, shall be
determined in accordance with the internal laws, and not the law of conflicts, of the State of
Delaware.

(e) Severability. If any provision of the Agreement is or becomes or is deemed to be
invalid, illegal or unenforceable in any jurisdiction or would disqualify the Agreement under any
law deemed applicable by the Committee, such provision shall be construed or deemed amended to
conform to applicable laws, or if it cannot be so construed or deemed amended without, in the
determination of the Committee, materially altering the purpose or intent of the Plan or the
Agreement, such provision shall be stricken as to such jurisdiction or the Agreement, and the
remainder of the Agreement shall remain in full force and effect.

(f) No Trust or Fund Created. Neither the Plan nor the Agreement shall create or be
construed to create a trust or separate fund of any kind or a fiduciary relationship between the
Company or any Affiliate and Optionee or any other person.

(g) Headings. Headings are given to the Sections and subsections of the Agreement
solely as a convenience to facilitate reference. Such headings shall not be deemed in any way
material or relevant to the construction or interpretation of the Agreement or any provision
thereof.

(h) Notices. Any notice required to be given or delivered to the Company under the
terms of this Agreement shall be addressed to the Company at its principal corporate offices. Any
notice required to be given or delivered to Optionee shall be addressed to Optionee at the address
indicated below Optionee’s signature line at the end of this Agreement or at such other address as
Optionee may designate by ten (10) days’ advance written notice to the Company. Any notice
required to be given under this Agreement shall be in writing and shall be deemed effective upon
personal delivery or upon the third (3rd) day following deposit in the U.S. mail, registered or
certified, postage prepaid and properly addressed to the party entitled to such notice.

 

5

 

(i) Conditions Precedent to Issuance of Shares. Shares shall not be issued pursuant
to the exercise of the Option unless such exercise and the issuance and delivery of the applicable
Shares pursuant thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the rules
and regulations promulgated thereunder, state blue sky laws, the requirements of any applicable
securities exchange and the Delaware General Corporation Law. As a condition to the exercise of
the purchase price relating to the Option, the Company may require that the person exercising or
paying the purchase price represent and warrant that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares if, in the opinion
of counsel for the Company, such a representation and warranty is required by law.

(j) Withholding. In order to provide the Company with the opportunity to claim the
benefit of any income tax deduction which may be available to it upon the exercise of the Option
and in order to comply with all applicable federal or state income tax laws or regulations, the
Company may take such action as it deems appropriate to insure that, if necessary, all applicable
federal or state payroll, withholding, income or other taxes are withheld or collected from
Optionee.

(k) Consultation With Professional Tax and Investment Advisors. Optionee acknowledges
that the grant, exercise and vesting with respect to this Option, and the sale or other taxable
disposition of the Shares, may have tax consequences pursuant to the Code or under local, state or
international tax laws. Optionee further acknowledges that Optionee is relying solely and
exclusively on Optionee’s own professional tax and investment advisors with respect to any and all
such matters (and is not relying, in any manner, on the Company or any of its employees or
representatives). Optionee understands and agrees that any and all tax consequences resulting from
the Option and its grant, exercise and vesting, and the sale or other taxable disposition of the
Shares, is solely and exclusively the responsibility of Optionee without any expectation or
understanding that the Company or any of its employees or representatives will pay or reimburse
Optionee for such taxes or other items.

IN WITNESS WHEREOF, the Company and Optionee have executed this Agreement on the date set
forth in the first paragraph.

	 	 	 	 	 	 	 	 	 
	 	 	IRVINE SENSORS CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 

	 	 	 	 	 	 	 	 	 
	 	 	OPTIONEE:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 	 	 
	 

	 	Address:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Facsimile:	 	 	 	 	 	 
	 	 	 	 	 	 	 

 

6Exhibit 10.17

Exhibit 10.17

FORM OF AGENT WARRANT

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY THE HOLDER HEREOF FOR ITS OWN ACCOUNT FOR
INVESTMENT WITH NO INTENTION OF MAKING OR CAUSING TO BE MADE A PUBLIC DISTRIBUTION OF ALL OR ANY
PORTION THEREOF. SUCH SECURITIES HAVE 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, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IRVINE SENSORS CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

			
	 	 	 
	No.
 _____ 

	 	                    , 2010

IRVINE SENSORS CORPORATION

WARRANT TO PURCHASE COMMON STOCK

Void after                     , 2015

IRVINE SENSORS CORPORATION, a Delaware corporation (the “Company”), hereby
certifies that, for value received,                                          (including any permitted successors and
assigns, the “Holder”), is entitled, subject to the terms set forth below, to purchase from
the Company at any time or from time to time during the Exercise Period, defined below, and prior
to 5:00 PM Central time, on                     , 2015 (the “Expiration Date”), fully paid and
nonassessable shares of Common Stock (the “Warrant Shares”) under the terms set forth
herein.

1. Number of Warrant Shares; Exercise Price. This Warrant shall evidence the right of
the Holder to purchase up to                      Warrant Shares at an exercise price per Warrant Share of
$  per share, subject to adjustment as provided in Section 6 below (the “Exercise
Price”).

2. Definitions. As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:

(a) The term “Common Stock” shall mean the common stock, $0.01 par value per share, of
the Company.

(b) The term “Company” shall include any company which shall succeed to or assume the
obligations of the Company hereunder.

 

 

 

(c) The term “Corporate Transaction” shall mean (i) a sale, transfer or conveyance of
all or substantially all of the assets of the Company; (ii) a consolidation of the Company with, or
merger of the Company with or into, another corporation or other business entity in which the
stockholders of the Company immediately prior to such consolidation or merger own less than 50% of
the voting power of the surviving entity immediately after such consolidation or merger; or
(iii) any transaction or series of related transactions to which the Company is a party in which in
excess of 50% of the Company’s voting power is transferred, excluding any consolidation or merger
effected exclusively to change the domicile of the Company and excluding any transaction for the
primary purpose of raising capital.

(d) The term “Stock” shall mean (i) Common Stock or (ii) any other class of stock
resulting from successive changes or reclassifications of such Common Stock consisting solely of
changes in par value, or from par value to no par value, or from no par value to par value.

3. Exercise Date; Expiration. Subject to the terms hereof, this Warrant may be
exercised by the Holder at any time (i) after stockholder authority has been obtained to increase
the Company’s authorized shares of Common Stock to a number adequate to reserve for both the shares
of Common Stock to be issued in the Blair Financing and for this Warrant, as well as any other
known issuances of Common Stock for which the Company must reserve shares for issuance, and (ii)
before the Expiration Date (the “Exercise Period”). For purposes hereof, the term
“Blair Financing” shall mean the closing of a private placement to be conducted by William
Blair & Company with gross proceeds of at least $8.0 million to the Company.

4. Exercise of Warrant; Partial Exercise.

(a) Subject to Section 3 above and Section 4(b) below, this Warrant may be exercised in full
by the Holder by surrender of this Warrant, together with the Holder’s duly executed form of
subscription attached hereto as Exhibit A, to the Company at its principal office,
accompanied by payment, in cash or by certified or official bank check payable to the order of the
Company, of the aggregate exercise price (as determined above) of the number of Warrant Shares to
be purchased hereunder. The exercise of this Warrant pursuant to this Section 4 shall be deemed to
have been effected immediately prior to the close of business on the business day on which this
Warrant is surrendered to the Company as provided in this Section 4, and at such time the person in
whose name any certificate for Warrant Shares shall be issuable upon such exercise shall be deemed
to be the record holder of such Warrant Shares for all purposes. No later than seven (7) business
days after the exercise of this Warrant, the Company at its expense will cause to be issued in the
name of and delivered to the Holder, or as the Holder may direct, a certificate or certificates for
the number of fully paid and nonassessable full shares of Warrant Shares to which the Holder shall
be entitled on such exercise, together with cash, in lieu of any fraction of a share, equal to such
fraction of the fair market value (as defined in Section 5(c) below) of one full Warrant Share as
of the close of business on the business day on which this Warrant is surrendered, and, if
applicable, a new warrant evidencing the balance of the shares remaining subject to the Warrant.

(b) The Holder may not exercise that portion of the Warrant on the deemed exercise date (the
“Exercise Amount”) in amounts that would result in the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates on such deemed exercise date, and (ii)
the number of shares of Common Stock issuable upon the exercise of the Exercise Amount with respect
to which the determination of this Section 4(b) is being made on such deemed exercise date
resulting in beneficial ownership by the Holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock of the Company. For the purposes of this Section 4(b),
beneficial ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the
Holder shall not be limited to successive exercises which would result in the aggregate issuance of
more than 4.99%. The Holder may revoke the exercise limitation described in this Section 4(b), in
whole or in part, upon 61 days prior notice to the
Company. The Holder may allocate which of the equity of the Company deemed beneficially owned
by the Holder shall be included in the 4.99% amount described above and which shall be allocated to
the excess above 4.99%. The Holder may waive the exercise limitation described in this Section
4(b) in whole or in part, upon and effective after 61 days prior written notice to the Company to
increase such percentage to up to 9.99%.

 

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5. Net Issuance.

(a) Cashless Exercise. The Holder shall have the right to convert this Warrant (the
“Conversion Right”) into Warrant Shares as provided in this Section 5 from time to time
durimg the Exercise Period. Subject to Section 4(b), upon exercise of the Conversion Right with
respect to shares subject to the Warrant (the “Converted Warrant Shares”), the Company
shall deliver to the Holder (without payment by the Holder of any exercise price or any cash or
other consideration) that number of fully paid and nonassessable Warrant Shares computed using the
following formula:

X = Y (A - B)

A

	 	 	 	 	 
	Where:

	 	X =
	 	the number of Warrant Shares to be delivered to the Holder;
	 
	 	 	 	 
	 

	 	Y =
	 	the number of Converted Warrant Shares;
	 
	 	 	 	 
	 

	 	A =
	 	the fair market value of one Warrant Share on the Conversion Date (as defined below); and
	 
	 	 	 	 
	 

	 	B =
	 	the Exercise Price (as adjusted on the Conversion Date).

No fractional shares shall be issuable upon exercise of the Conversion Right, and if the
number of shares to be issued (determined in accordance with the foregoing formula) is other than a
whole number, the Company shall pay to the Holder an amount in cash equal to the fair market value
of the resulting fractional share on the Conversion Date (as defined below). Shares issued
pursuant to the Conversion Right shall be treated as if they were issued upon the exercise of the
Warrant.

(b) Method of Exercise. The Conversion Right may be exercised by the Holder by the
surrender of the Warrant at the principal office of the Company together with a written statement
specifying that the Holder thereby intends to exercise the Conversion Right and indicating the
total number of shares under the Warrant that the Holder is exercising through the Conversion
Right. Such conversion shall be effective upon receipt by the Company of the Warrant together with
the aforesaid written statement, or on such later date as is specified therein (the “Conversion
Date”). Certificates for the shares issuable upon exercise of the Conversion Right shall be
delivered to the Holder within seven (7) business days following the Conversion Date and, if
applicable, a new warrant evidencing the balance of the shares remaining subject to the Warrant
shall also be delivered to the Holder.

(c) Determination of Fair Market Value. For purposes of this Section 5, fair market
value of a Warrant Share on the Conversion Date shall be determined as follows:

(i) If the Common Stock is traded on a national securities exchange or the Nasdaq Capital
Market, the fair market value of a Warrant Share shall be deemed to be the closing sales price of
the Common Stock on the stock exchange or market determined by the Board to be the primary
market for the Common Stock as of the trading day immediately prior to the Conversion Date, as
such prices are officially quoted in the composite tape of transactions on such exchange or market;

 

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(ii) If the Common Stock is traded over-the-counter or in the “pink sheets”, the fair market
value of a Warrant Share shall be deemed to be the closing bid price (or, if such information is
available, the closing selling price, or, in the case of the “pink sheets,” the most recent bid
price) of the Common Stock as of the trading day immediately prior to the Conversion Date; and

(iii) If there is no public market for the Common Stock, then the fair market value of a
Warrant Share shall be determined by the Board of Directors of the Company in good faith and, upon
request of the Holder, the Board (or a representative thereof) shall, as promptly as reasonably
practicable, but in any event not later than 15 days after such request, notify the Holder of the
Fair Market Value per share of Common Stock.

6. Adjustments to Exercise Price and Number of Warrant Shares. The number and kind of
Warrant Shares (or any shares of stock or other securities which may be) issuable upon the exercise
of this Warrant and the Exercise Price hereunder shall be subject to adjustment from time to time
upon the happening of certain events, as follows:

(a) Splits and Subdivisions. In the event the Company should at any time or from time
to time fix a record date for the effectuation of a split or subdivision of the outstanding shares
of Common Stock into a greater number of shares, then, as of such record date (or the date of such
split or subdivision if no record date is fixed), the Exercise Price shall be appropriately
decreased and the number of Warrant Shares for which this Warrant is exercisable shall be
appropriately increased in accordance with Section 6(f) hereof.

(b) Combination of Shares. If the number of shares of Common Stock outstanding at any
time after the date hereof is decreased by a combination of the outstanding shares of Common Stock,
the Exercise Price shall be appropriately increased and the number of Warrant Shares for which this
Warrant is exercisable shall be appropriately decreased in accordance with Section 6(f) hereof.

(c) Dividends in Common Stock or Common Stock Equivalents. In the event the Company
should at any time or from time to time fix a record date for the determination of the holders of
Common Stock entitled to receive a dividend or other distribution payable in additional shares of
Common Stock or other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as the
“Common Stock Equivalents”) without payment of any consideration by such holder for the
additional shares of Common Stock or Common Stock Equivalents, then, as of such record date (or the
date of such distribution if no record date is fixed), the Holder hereof shall, upon the exercise
of this Warrant, be entitled to receive, in addition to the number of shares of Common Stock
receivable thereupon, and without payment of any additional consideration therefor, the amount of
Common Stock and Common Stock Equivalents which such Holder would hold on the date of such exercise
had such Holder been the holder of record of such Common Stock as of the date on which holders of
Common Stock received or became entitled to receive such shares of Common Stock or Common Stock
Equivalents.

(d) Reclassification or Reorganization. If the Warrant Shares issuable upon the
exercise of this Warrant shall be changed into the same or different number of shares of any class
or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a
split or subdivision provided for in Section 6(a) above or stock dividend provided for in Section
6(c) above or a combination of shares provided for in Section 6(b) above, or a reorganization,
merger or consolidation
provided for in Section 6(e) below), then and in each such event the Holder shall be entitled
to receive upon the exercise of this Warrant the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification or other change, to
which a holder of the number of Warrant Shares issuable upon the exercise of this Warrant would
have received if this Warrant had been exercised immediately prior to such reorganization,
reclassification or other change, all subject to further adjustment as provided herein.

 

4

 

(e) Merger or Consolidation. If at any time there shall be a capital reclassification
or reorganization of the Warrant Shares or a Corporate Transaction (other than a subdivision,
combination, reclassification or exchange of shares provided for elsewhere in this Section 6) of
the Company, then as a part of such reorganization or Corporate Transaction, lawful and adequate
provision shall be made so that the Holder shall thereafter be entitled to receive upon the
exercise of this Warrant, the number of shares of stock or other securities or property of the
Company, resulting from such reorganization, recapitalization or Corporate Transaction to which a
holder of the number of Warrant Shares issuable upon the exercise of this Warrant would have
received if this Warrant had been exercised immediately prior to such reorganization or Corporate
Transaction. In any such case, the Company will make lawful and appropriate provision to insure
that the provisions of this Section 6(e) hereof will thereafter be applicable as nearly as may be
in relation to any shares of stock or securities thereafter deliverable upon the exercise of this
Warrant. The Company shall not effect any such Corporate Transaction unless prior to or
simultaneously with the consummation thereof the successor corporation (if other than the Company)
resulting from such Corporate Transaction or the corporation purchasing or acquiring such assets or
other appropriate corporation or entity shall assume the obligation to deliver to the Holder, at
the last address of the Holder appearing on the books of the Company, such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to
purchase, and the other obligations under this Warrant. The provisions of this Section 6(e) shall
similarly apply to successive reorganizations, reclassifications, or Corporate Transactions.

(f) Adjustment in Number of Warrant Shares. Upon each adjustment of the Exercise
Price pursuant to the provisions of this Section 6, the number of Warrant Shares issuable upon the
exercise of this Warrant shall be adjusted to the nearest full amount by multiplying a number equal
to the Exercise Price in effect immediately prior to such adjustment by the number of Warrant
Shares issuable upon exercise of the Warrants immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.

(g) Notice of Record Dates; Adjustments. In the event of a Corporate Transaction, the
Company shall provide to the Holder ten (10) days advance written notice of such Corporate
Transaction. The Company shall promptly notify the Holder in writing of each adjustment or
readjustment of the Exercise Price and the number of Warrant Shares issuable upon the exercise of
this Warrant. Such notice shall state the adjustment or readjustment and show in reasonable detail
the facts on which that adjustment or readjustment is based.

7. Replacement of Warrants. On receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its expense will execute
and deliver to the Holder, in lieu thereof, a new Warrant of like tenor.

8. No Rights or Liability as a Stockholder. This Warrant does not entitle the Holder
to any voting rights or other rights as a stockholder of the Company. No provisions, in the
absence of
affirmative action by the Holder to purchase Warrant Shares, and no enumeration of the rights
or privileges of the Holder contained herein, shall give rise to any liability of the Holder as a
stockholder of the Company.

 

5

 

9. Miscellaneous.

(a) Transfer of Warrant; Permitted Designees. The Holder agrees not to make any
disposition of this Warrant, the Warrant Shares or any rights hereunder without the prior written
consent of the Company. Any such permitted transfer must be made by the Holder in person or by
duly authorized attorney, upon delivery of this Warrant and the form of assignment attached hereto
as Exhibit B to any such permitted transferee. As a condition precedent to such transfer,
the transferee shall sign an investment letter in form and substance satisfactory to the Company.
Subject to the foregoing, the provisions of this Warrant shall inure to the benefit of and be
binding upon any successor to the Company and shall extend to any holder hereof. Notwithstanding
anything contained herein, the Company shall, upon written instructions to be delivered to the
Company within fifteen (15) business days following the date hereof, transfer all or a portion of
this Warrant to officers, directors, employees and other registered agents or associated persons of
the Holder (collectively, “Permitted Designees”) in accordance with this Section 9;
provided, however, the Company shall not be required to issue such Warrants to any person who is
not an “accredited investor” within the meaning of Regulation D promulgated under the Securities
Act of 1933, as amended, and provided, further, that Holder provides an opinion of counsel
reasonably satisfactory to the Company that such transfer complies with applicable Federal and
state securities laws. Each Permitted Designee shall be required to execute fully and completely
the Investor Representation Letter in the form attached hereto as Exhibit C prior to the
issuance of the Warrant to such person.

(b) Restrictive Legend. Each certificate for Warrant Shares shall bear a restrictive
legend in substantially the form as follows, together with any additional legend required by (i)
any applicable state securities laws and (ii) any securities exchange upon which such Warrant
Shares may, at the time of such exercise, be listed:

“THE SHARES 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 OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IRVINE SENSORS CORPORATION
THAT SUCH REGISTRATION IS NOT REQUIRED.”

(c) Titles and Subtitles. The titles and subtitles used in this Warrant are for
convenience only and are not to be considered in construing or interpreting this Warrant.

(d) Notices. Any notice required or permitted to be given to a party pursuant to the
provisions of this Warrant shall be in writing and shall be effective and deemed given to such
party under this Warrant on the earliest of the following: (i) the date of personal delivery; (ii)
the date of transmission by facsimile, addressed to the other party at its facsimile number, with
confirmation of transmission; (iii) the next business day after deposit with an overnight courier
for United States deliveries; or (iv) five (5) business days after deposit in the United States
mail by registered or certified mail (return receipt requested) for United States deliveries. All
notices not delivered personally or by facsimile will be sent with postage and/or other charges
prepaid and properly addressed to such party at the address set forth on
the signature page hereto, or at such other address as such party may designate by ten (10)
days advance written notice to the other party hereto. Notices to the Company will be marked
“Attention: Chief Financial Officer.”

 

6

 

(e) Attorneys’ Fees. If any action at law or in equity is necessary to enforce or
interpret the terms of this Warrant, the prevailing party shall be entitled to reasonable
attorneys’ fees, costs and disbursements in addition to any other relief to which such party may be
entitled.

(f) Amendments and Waivers. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a particular instance
and either retroactively or prospectively) with the written consent of the Holder and the Company.
Any amendment or waiver effected in accordance with this Section 9(f) shall be binding upon the
Holder of this Warrant (and of any securities into which this Warrant is convertible), each future
holder of all such securities, and the Company.

(g) Severability. If one or more provisions of this Warrant are held to be
unenforceable under applicable law, such provision shall be excluded from this Warrant and the
balance of the Warrant shall be interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms.

(h) Governing Law. This Warrant shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware, without giving effect to its conflicts of laws
principles.

(i) Counterparts. This Warrant may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

7

 

In Witness Whereof, the Company has caused this Warrant to be executed by its duly
authorized officer as of the date first written above.

	 	 	 	 	 	 	 	 	 
	 	 	IRVINE SENSORS CORPORATION	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	John J. Stuart, Jr.	 	 
	 

	 	 	 	Title:
	 	Sr. Vice President & Chief Financial Officer	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Address:	 	3001 Red Hill Avenue	 	 
	 

	 	 	 	 	 	Building 4, Suite 108	 	 
	 

	 	 	 	 	 	Costa Mesa, CA 92626	 	 

ACKNOWLEDGED AND AGREED:

Holder:

 

8

 

EXHIBIT A TO AGENT WARRANT

FORM OF SUBSCRIPTION

(To be signed only on exercise of Warrant)

	 	 	 
	To:

	 	IRVINE SENSORS CORPORATION

The undersigned, pursuant to the provisions set forth in the attached Warrant, hereby
irrevocably elects to (a) purchase
 _____ 
shares of the Common Stock covered by such Warrant and
herewith makes payment of $                    , representing the full purchase price for such shares at the
price per share provided for in such Warrant, or (b) exercise such Warrant for the issuance of
                     shares of Common Stock in exchange for the surrender of the right to purchase                     
shares of Common Stock under the Warrant pursuant to the Net Issue Exercise provisions of Section 5
of such Warrant.

Please issue a certificate or certificates representing                      shares of Common Stock in the
name of the undersigned or in such other name or names as are specified below:

 

(Name)

 

 

(Address)

The undersigned represents that the undersigned is an “accredited investor” as defined in
Regulation D promulgated under the Securities Act of 1933, as amended, and that the aforesaid
shares are being acquired for the account of the undersigned for investment and not with a view to,
or for resale in connection with, the distribution thereof and that the undersigned has no present
intention of distributing or reselling such shares, all except as in compliance with applicable
securities laws. The undersigned further represents that the aforesaid exercise complies with
Section 4(b) of the Warrant.

	 	 	 	 	 
	 

	 	 

(Signature must conform in all respects to name of
the Holder as specified on the face of the Warrant)
	 	 
	 
	 	 	 	 
	 

	 	 

(Print Name)
	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 

	 	 

(Address)
	 	 

Dated:                                         

 

1

 

EXHIBIT B TO AGENT WARRANT

FORM OF ASSIGNMENT

(To assign the foregoing Warrant, execute this form
and supply required information. Do not use this
form to purchase shares.)

For Value Received, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to:

	 	 	 
	Name:
	 	 
	 

	 	 
	 

	 	(Please Print)
	 
	 	 
	Address:
	 	 
	 

	 	 
	 

	 	(Please Print)

Dated:                     , 20__

	 	 	 	 	 
	Holder’s

Signature:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Holder’s

Address:
	 	 	 	 
	 

	 	 

	 	 

NOTE: The signature to this Assignment must correspond with the name as it appears on the face of
the Warrant, without alteration or enlargement or any change whatever. Officers of corporations
and those acting in a fiduciary or other representative capacity should file proper evidence of
authority to assign the foregoing Warrant.

 

2

 

EXHIBIT C TO AGENT WARRANT

FORM OF INVESTOR REPRESENTATION LETTER

DATE:                     

Irvine Sensors Corporation

3001 Red Hill Avenue

Building 4, Suite 108

Costa Mesa, CA 92626

Gentlemen:

In connection with my receipt of warrants (“Warrants”) to purchase the number of shares of
common stock referred to below, I hereby represent, warrant and covenant as follows:

	1.	 	Check each one which is applicable:

	 
	 	 	
 _____ 
I am an “accredited investor” within the meaning of Regulation D promulgated
under the Securities Act of 1933, as amended (the “Act”);

	 
	 	 	
 _____ 
I am able to fend for myself, can bear the economic risk of my investment and
have such knowledge and experience in financial, tax, and business matters so as to utilize
information made available to me in order to evaluate the merits and risks of an investment
decision with respect thereto, or I have a preexisting personal or business relationship with the
Company or one or more of the officers or directors of the Company;

	 
	2.	 	
 _____ 
I have had the opportunity to ask questions and receive and review such answers
and information concerning Irvine Sensors Corporation (the “Issuer”) as I have deemed
pertinent;

	 
	3.	 	
 _____ 
I am not relying on the Issuer or J.P. Turner & Company, L.L.C. respecting the
tax and other economic considerations of an investment in the Issuer;

	 
	4.	 	
 _____ 
I am acquiring the Warrants and the underlying securities related thereto
solely for my own account for investment and not with a view to resale or distribution. I
acknowledge that neither the Warrants nor the underlying securities have been registered under
the Act or any state securities laws and may not be resold except pursuant to an effective
registration statement thereunder or an exemption therefrom;

	 	 	 
	 

	 	 
	 

	 	Name:
	 
	 	 
	 

	 	Holder of Warrants to purchase                     
shares of common stock of Irvine Sensors
Corporation pursuant to the terms of the Common Stock
Purchase Warrant of even date herewith

 

3

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