ASSIGNMENT OF SERIES 1 AND SERIES 2 SENIOR SUBORDINATED SECURED CONVERTIBLE NOTES

Exhibit 10.14

ASSIGNMENT OF SERIES 1 AND SERIES 2 SENIOR SUBORDINATED SECURED

CONVERTIBLE NOTES DATED DECEMBER 30, 2005

This Assignment of Series 1 and Series 2 Senior Subordinated Secured Convertible Notes dated December 30, 2005 (“Assignment”) is entered into as of this 29th day of December, 2006 by and among the parties listed on Exhibit A hereto (“Lenders”) and Irvine Sensors Corporation (“Borrower”).

WITNESSETH:

WHEREAS, Pequot Private Equity Fund III, L.P. and Pequot Offshore Private Equity Partners III, L.P. (collectively, “Pequot”) loaned to Borrower the principal amount of $10,000,000 pursuant to (i) those certain Irvine Sensors Corporation Series 1 Senior Subordinated Secured Convertible Notes Due December 30, 2009 dated as of December 30, 2005 by Borrower in favor of Pequot and (ii) those certain Irvine Sensors Corporation Series 2 Senior Subordinated Secured Convertible Notes Due December 30, 2007 dated as of December 30, 2005 by Borrower in favor of Pequot (collectively, the “Notes”), purchased under that certain Securities Purchase Agreement dated as of December 30, 2005 between Borrower and Pequot as amended by Amendment to Securities Purchase Agreement dated March 31, 2006 between Borrower and Pequot (collectively, the “Securities Purchase Agreement”). The Notes and the other agreements and instruments between Borrower (or its subsidiaries) and Pequot identified on Exhibit B hereto shall be known as the “Subordinated Loan Documents”; and

WHEREAS, pursuant to a Subscription Agreement among Borrower and Lenders, of even date herewith, and ancillary documentation executed in connection therewith, including the Addendum to this Assignment, attached hereto as Exhibit F (“Subscription Documentation”), Lenders have agreed to assume the obligations of Pequot under the Subordinated Loan Documents; and

WHEREAS, in conjunction therewith, Pequot will assign the Subordinated Loan Documents, and its security interests in and to the Collateral to Lenders.

NOW, THEREFORE, intending to be legally bound hereby, the parties hereto agree as follows:

1. Unless otherwise defined, all capitalized terms used herein are used as defined in the Subscription Documentation. In addition, the following terms shall have the following meanings:

(a) “Capital Leases” means capital leases, conditional sales contracts and other title retention documents relating to the acquisition of capital assets (as classified in accordance with GAAP).

(b) “Indebtedness for Borrowed Money” means (i) all liabilities for borrowed money, (A) for the deferred purchase price of property or services, and (B) under leases which are or should be, under GAAP, recorded as Capital Leases, in each case in respect of which a Person is directly or indirectly, absolutely or continently liable as obligor, guarantor, endorser or otherwise, or in respect of which such Person otherwise assures a creditor against loss, and (ii) all liabilities of the type described in (i) above which are secured by (or for which the holder has an existing right, contingent or otherwise, to be secured by) any Lien upon property owned by such Person, whether or not such Person has assumed or become liable for the payment thereof.

(c) “Subordination Agreement” means the Intercreditor, Subordination and Standby Agreement of even date among the Lender, Subordinated Lender and Borrower, in form and substance satisfactory to the Lender.

(d) “Subordinated Debt” means Indebtedness of Borrower to Subordinated Lender that is subordinated to the prior payment and enforcement of the Obligations pursuant to the Subordination Agreement.

(e) “Subordinated Lender” means Longview Fund, LP and Alpha Capital Anstalt, collectively.

2. Borrower represents and warrants that all of the representations and warranties in this Assignment are true and correct as of the date hereof. Lenders hereby agree to waive ab initio any Defaults or Events of Default, as listed on Schedule C(g) hereto, outstanding as of the date hereof and rescind any outstanding Notices of Default previously delivered to Borrower. Borrower agrees that the foregoing waiver shall be limited to the precise meaning of the words as written herein and shall not be deemed (i) to be a consent to any waiver or modification of any other term or condition of the Subordinated Loan Documents or (ii) to prejudice any right or remedy that Lenders may in the future have under or in connection with the Subordinated Loan Documents with respect to other Defaults or Events of Default not referenced above.

3. This Assignment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

4. At the Closing, Pequot is concurrently irrevocably selling and assigning to Lenders in full Pequot’s rights and obligations under the Subordinated Loan Documents, and Lenders are irrevocably purchasing and assuming in full Pequot’s rights and obligations thereunder, and as of such time Pequot shall cease to have any rights and/or obligations under the Subordinated Loan Documents. This sale and assignment is set forth in the Addendum. From and after the Closing, the term “Pequot” as set forth in the Subordinated Loan Documents shall refer to the “Lenders”.

5. For purposes of the Subordinated Loan Documents and the Subscription Documents, at any time the term “Obligations” shall include the then outstanding principal amounts due under the Notes and all accrued and unpaid interest thereon and any fees and penalties owed by Borrower to Lenders including those arising in connection with the Class A Warrants, Subscription Agreement or Registration Rights Agreement, including any and all indemnification rights.

6. a. Borrower acknowledges that as of the date of execution of this Assignment the term “Conversion Price” shall mean $1.30, subject to adjustment from time to time pursuant to Section 10 of the Notes. Borrower further acknowledges that as of the Closing, the principal balance on the Notes is $10 million, and no interest shall be accrued and unpaid under the Notes as of the Closing.

b. Notwithstanding anything to the contrary set forth in Section 6.(b) or otherwise in the Notes, the term “Issuable Maximum” shall mean an amount not to exceed “4.99% of the outstanding shares of Common Stock immediately preceding the Closing Date, which 4.99% limitation may be waived, in whole or in part, upon sixty-one (61) days prior written notice from Lenders to Borrower, up to an amount not to exceed 9.99% of the outstanding shares of Common stock immediately preceding the Closing Date. Lenders may allocate which

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of the equity of Borrower deemed beneficially owned by Lenders shall be included in the 4.99% amount described above and which shall be allocated to the excess above 4.99% provided such allocations are consistent with applicable law. For purposes of this paragraph, “Closing Date” shall mean the date of execution of the Assignment.

c. An Event of Default shall occur under the Notes if there is an Event of Default under any other agreement entered into between the Borrower and the Lenders.

d. Lenders agree that in accordance with the existing terms of Section 2(b) of the Series 2 Senior Subordinated Secured Convertible Notes due December 30, 2007 dated December 30, 2005 (the “Series 2 Notes”), the Maturity Date of the Series 2 Notes shall be extended from December 30, 2007 to December 30, 2009.

7. a. Borrower hereby covenants to file a prospectus supplement to its currently effective Registration Statement on Form S-3 (File No. 333-131770) with regard to the Notes describing the transactions contemplated by this Assignment and adding Lenders as Selling Stockholders to such Registration Statement as well as filing a Form 8-K describing such transactions, which Form 8-K shall be filed within four (4) business days after the date of execution of this Assignment and prior to filing the prospectus supplement, which prospectus supplement must be filed within five (5) business days after the date of execution of this Assignment; provided that each Lender shall have provided Borrower with a Selling Stockholder Questionnaire, in the form attached to the Registration Rights Agreement of even date herewith between the Borrower and Lenders. Borrower represents and warrants that the prospectus supplement shall be automatically effective upon filing. Borrower agrees that the failure to comply with this Section 7 shall be deemed an automatic Event of Default under the Notes without an opportunity to cure.

b. Borrower hereby covenants that any shares of Common Stock issuable upon conversion of the Notes which are not registered pursuant to the Registration Statement on Form S-3 above (“Additional Note Shares”) shall be included on the registration statement registering the Class A Warrant Shares pursuant to the Registration Registration Rights Agreement being executed and delivered as part of the Subscription Documentation, which shall be filed within 45 days from Closing and effective within 90 days from Closing and with respect to any failure to meet either deadline, all of the rights and remedies available in Sections 4.1 - 4.5 (other than Section 4.5(c)), 4.7, 4.16 - 4.18 and 4.20, and Article VI of the Securities Purchase Agreement shall apply.

c. Borrower hereby covenants to file appropriate liens with the U.S. Patent and Trademark Office in favor of Lenders within five (5) business days after the date of execution of this Assignment with respect to each and every patent listed on Schedule D(i) hereto. Borrower further covenants to complete and deliver, within fifteen (15) business days after the date of execution of this Assignment, appropriate documentation regarding the assignment of the Government Contracts set forth on Schedule 4.33 to the Term Loan and Security Agreement. Borrower further consents to the electronic filing of the UCC-3 and UCC-1 forms delivered to Lenders.

8. a. Borrower hereby represents and warrants for the express benefit of the Lenders that for purposes of Rule 144 promulgated under the Securities Act of 1933, as amended, the holding period for any shares to be issued or issuable to the Lenders in

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connection with the Notes and for the Notes tacks back to the date of execution of the Notes, which date is December 30, 2005, so that the holding period for the Lenders is deemed to have commenced on December 30, 2005. Borrower acknowledges that if for any reason whatsoever Rule 144 is not available as a method by which the Lenders could resell their shares under the Notes, an automatic Event of Default shall occur with respect to the Notes.

b. Borrower hereby represents and warrants that the requisite approval has been obtained from Nasdaq to enter into the transactions contemplated hereby.

9. Notwithstanding anything to the contrary in the foregoing, Borrower and Lenders agree that Article I, Sections 4.1 - 4.5 (other than Section 4.5(c)), 4.7, 4.16 - 4.18 and 4.20, Article VI and Article VII (other than Section 7.2) of the Securities Purchase Agreement are incorporated herein by reference. For the avoidance of doubt, however, it is understood that the Securities Purchase Agreement has been otherwise terminated as of the date hereof and Borrower and Lenders shall have no further rights or obligations under the Securities Purchase Agreement. In addition, Borrower and Lenders agree that Section 10(a) of the Subscription Agreement (including Schedules 4(f) and 10(a) thereto) is incorporated herein by reference.

10. Borrower makes the representations and warranties set forth hereto on Exhibit C to Lenders as of December 30, 2005 and as of the date of this Assignment.

11. Borrower makes the representations and warranties set forth hereto on Exhibit D to Lenders as of the date of this Assignment.

12. Lenders make the representations and warranties set forth hereto on Exhibit E to Borrower as of the date of this Assignment.

13. Each of the parties hereto agrees that (a) all repayments of the Notes (including any accrued interest thereon) by Borrower (other than by conversion of the Notes) will be paid pro rata to the holders thereof based upon the principal amount then outstanding to each of such holders, and (b) except as otherwise set forth herein, all payments on the Notes shall be applied to the payment of accrued but unpaid interest before being applied to the payment of the principal.

14. At all times after the date hereof, Borrower will not take or permit any action, or cause or permit any Subsidiary to take or permit any action that impairs or adversely affects the rights of Lenders under any Subordinated Loan Document.

15. Indebtedness; Liens.

(a) At any time after the date of this Assignment, neither Borrower nor any Subsidiary shall create, incur, assume or suffer to exist any Indebtedness, other than: (i) trade Indebtedness incurred to finance the purchase of equipment, components and other similar property and operating assets, in each case, in the ordinary course of

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business consistent with past practice; (ii) U.S. government accounts receivable financing of up to $2,000,000 to fund works-in-progress; (iii) inter-company Indebtedness between Borrower and any Significant Subsidiary incurred in the ordinary course of business and consistent with past practice; (iv) Indebtedness owing to or held by Lender; (v) Indebtedness owing to or held by Subordinated Lender; (vi) unsecured Indebtedness of Borrower existing on the Closing Date and disclosed in the financial statements most recently delivered to the Lender, provided that none of such Indebtedness shall be renewed, extended or otherwise modified in any material respect; (vii) unsecured current liabilities (not the result of borrowing) incurred in the ordinary course of business and not overdue; (viii) Capital Leases and other purchase money financing of capital assets; (ix) Subordinated Debt; (x) up to $400,000 pursuant to a promissory note payable to Looney in connection with Borrower’s exercise of its right to purchase from Looney the remaining outstanding shares of capital stock of Optex or such additional loans from Looney as may be approved in writing by the Lenders, provided however, that any note payable to Looney shall be subordinated to the Notes and shall expressly be subject to the condition that any Looney transaction shall not be consummated without the simultaneous execution and delivery by Looney of an Intercreditor agreement to Lender, acceptable to Lender in its sole discretion; (xi) other Indebtedness incurred after the Closing Date with prior notice to and the consent of Lender (except that Lender consents to the incurring by Borrower of additional Indebtedness of $100,000 outstanding in the aggregate at any one time and incurred in the ordinary course of business); and (xii) extensions, refinancings and renewals of any items above (other than items in (vi) above), provided that the principal amount is not increased or the terms modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be.

(b) At any time after the date of this Assignment, neither Borrower nor any Subsidiary shall create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than: (i) Liens incurred by Borrower or the Subsidiaries, pursuant to the financings permitted under Section 15(a)(iv) above; (ii) Liens pursuant to the Security Agreements; (iii) Liens arising from taxes, assessments, charges or claims that are not yet due or that remain payable without penalty; and (iv) Liens on real property that do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by Borrower and the Subsidiaries.

(c) The provisions of this Section 15 shall terminate and be of no further force or effect upon the conversion or indefeasible repayment in full of the Notes and all accrued interest thereon and any and all expenses or liabilities relating thereto.

16. Fundamental Changes. In addition to any other rights provided by law or set forth herein, from and after the date of this Assignment and for so long as any Note remains outstanding, neither Borrower nor any Subsidiary shall, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of a majority of the outstanding principal face amount of the Notes:

(a) dissolve, liquidate or merge or consolidate with or into another Person, or dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person;

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(b) purchase, redeem (other than repurchases of stock from former employees or directors of Borrower under the terms of applicable repurchase agreements (i) in an aggregate amount not to exceed $100,000 in any fiscal year, provided that no Event of Default has occurred, is continuing or would exist after giving effect to the repurchases, or (ii) in any amount where the consideration for the repurchase is the cancellation of indebtedness owed by such former employees to Borrower regardless of whether an Event of Default exists) or set aside any sums for the purchase or redemption of, or declare or pay any dividend (including a dividend payable in stock of Borrower) or make any other distribution with respect to, any shares of capital stock or any other securities that are convertible into or exercisable for such stock;

(c) sell, dispose or otherwise transfer any assets or property with a value equal to or greater than $500,000, except in the ordinary course of business consistent with past practice;

(d) make any material change to its accounting or tax methods;

(e) fail to maintain its corporate existence, or change the nature of Borrower’s principal business to any business which is fundamentally distinct and separate from the business currently conducted by Borrower;

(f) cause or permit any Subsidiary of Borrower directly or indirectly to take any actions described in clauses (a) through (e) above; or

(g) enter into any agreement to do any of the foregoing.

17. If any Lender or any of its Affiliates or any officer, director, partner, controlling person, employee or agent of a Lender or any of its Affiliates (a “Related Person”) becomes involved in any capacity in any Proceeding brought by or against any Person in connection with or as a result of any breach or failure to comply by Borrower or any officer, director, employee or agent of Borrower or any of its Affiliates with any representation, warranty or covenant in the Subordinated Loan Documents, Borrower will indemnify and hold harmless such Lender or Related Person for its reasonable legal and other expenses (including the costs of any investigation, preparation and travel) and for any Losses incurred in connection therewith, as such expenses or Losses are incurred, excluding only Losses that result directly from such Lender’s or Related Person’s gross negligence or willful misconduct. In addition, Borrower shall indemnify and hold harmless each Lender and Related Person from and against any and all Losses, as incurred, arising out of or relating to any breach by Borrower of any of the representations, warranties or covenants made by Borrower in this Assignment or any other Subordinated Loan Document, or any allegation by a third party that, if true, would constitute such a breach. The conduct of any Proceedings for which indemnification is available under this paragraph shall be governed by Article VI of the Securities Purchase Agreement. The indemnification obligations of Borrower under this paragraph shall be in addition to any liability that Borrower may otherwise have and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of Lenders and any such Related Persons. If Borrower breaches its obligations under any Subordinated Loan Document, then, in addition to any other liabilities Borrower may have under any Subordinated Loan Document or applicable law, Borrower shall pay or reimburse Lenders on demand for all costs of collection and enforcement (including reasonable attorneys fees and expenses). Without limiting the generality of the foregoing, Borrower specifically agrees to reimburse Lenders on demand for all costs of enforcing the indemnification obligations in this paragraph.

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18. Borrower expressly waives for the benefit of Lenders any rights it may have to offset, defense, counterclaim or right of rescission as to the Subordinated Loans which it may have had against Pequot.

19. Borrower expressly agrees that each and every representation and warranty made under any of the Subscription Documents, the Subordinated Loan Documents or any other agreement between the Borrower and Lenders is deemed to have been made with respect to all agreements entered into between the parties as of the date of execution of this Assignment.

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IN WITNESS WHEREOF, the undersigned have executed this Assignment as of the date first above written.

IRVINE SENSORS CORPORATION
By:		/s/ JOHN C. CARSON
Name:		John C. Carson
Title:		President & CEO
LENDERS:
LONGVIEW FUND, LP
By:		/s/ S. MICHAEL RUDOLPH
Name:		S. Michael Rudolph