SUBSCRIPTION AGREEMENT

SUBSCRIPTION AGREEMENT
(Series A-2 — Debt Exchange)

THIS SUBSCRIPTION AGREEMENT (this “ Agreement ”) dated as of March 18, 2009, by and between Irvine Sensors Corporation, a Delaware corporation (the “ Company ”) and the Purchasers identified on the signature page hereto (each a “ Purchaser ” and collectively, the “ Purchasers ”).

WHEREAS , the Company and the Purchasers are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the provisions of Section 3(a)(9), 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 ”).

WHEREAS, the Company currently has outstanding Series 1 Senior Subordinated Secured Convertible Notes dated as of December 30, 2005 in favor of the Purchasers (the “ Series 1 Notes ”).

WHEREAS, in connection herewith, the Purchasers desire to purchase shares of Series A-2 10% Cumulative Convertible Preferred Stock (the “ Series A-2 Stock ”) as described in a Certificate of Designations of Rights, Preferences, Privileges and Limitations attached hereto as Exhibit A (“ Certificate of Designations ”) in exchange solely for a portion of the Series 1 Notes through the cancellation of part of the principal and interest under the Series 1 Notes, as more fully described herein. Each share of Series A-2 Stock issuable hereunder is initially convertible into 100 shares of the Company’s Common Stock (the “ Common Shares ”). The Series A-2 Stock being sold to the Purchasers hereunder and the Common Shares that are issuable upon conversion of such Series A-2 Stock hereunder shall be referred to hereunder as the “ Securities .”

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

1.  The Closing.

(a)  Closing Date.   The “ Closing Date ” shall be the date on which the Company issues the Series A-2 Stock to the Purchasers pursuant to Section 1(c) below. The consummation of the transactions contemplated herein shall take place at the offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, upon the satisfaction or waiver of all conditions to closing set forth in Section 1(c) below.

(b)  Closing.   Subject only to the satisfaction or waiver of the conditions set forth in Section 1(c) below, on the Closing Date, each Purchaser shall purchase at a purchase price per share of $40.00 (the “ Purchase Price ”) that number of shares of Series A-2 Stock determined by multiplying such Purchaser’s Pro Rata Portion (as defined below) by the quotient obtained by dividing $1,000,000 by the Purchase Price. The aggregate Purchase Price shall be paid solely by surrendering such Purchaser’s evidence of the Series 1 Notes in exchange for such shares of Series A-2 Stock by cancelling the applicable portion of the principal and interest under such Purchaser’s evidence of the Series 1 Notes. For purposes of this Agreement, Longview’s “ Pro Rata Portion ” shall equal 90.1627% and Alpha Capital’s “ Pro Rata Portion ” shall equal 9.8373%.

(c)  Conditions to Closing.   The obligation of the Company to issue, and the obligation of the Purchasers to accept, the Series A-2 Stock in exchange for a portion of the Series 1 Notes shall be conditioned upon (i) the earlier to occur of either (1) the determination by the Supreme Court of the State of New York that Optex Systems, Inc. is the substantially prevailing party in its Complaint filed January 22, 2009 against TWL Group, LP for declaratory relief that the October 14, 2008 public foreclosure sale of the collateral conducted by Optex Systems, Inc. (the “ Foreclosure Sale ”) was commercially reasonable and in compliance with New York law, or (2) it being otherwise determined by a court of law that Optex Systems, Inc. is the substantially prevailing party in any Complaint filed by Timothy Looney, TWL Group, LP or their Affiliates related to the revocability of the Foreclosure Sale, or (3) Timothy Looney, TWL Group, LP or their Affiliates entering into an irrevocable settlement agreement with Purchasers related to the Foreclosure Sale, or (4) any Complaint filed by Timothy Looney, TWL Group, LP or their Affiliates related to the Foreclosure Sale is abandoned or dismissed, in either case with prejudice against the reinstitution of any claim in connection with the Foreclosure Sale; (ii) approval by the Company’s

stockholders of the issuance of the Series A-2 Stock prior to December 31, 2009; (iii) the filing of the Certificate of Designations with the Secretary of State of the State of Delaware; (iv) the issuance to the Purchasers of a certificate representing the number of shares of Series A-2 Stock calculated pursuant to Section 1(b) above; and (v) the truth and accuracy of the representations and warranties of the Company set forth in Section 3 of this Agreement and the continuing truth and accuracy of such representations and warranties as of the Closing Date, except for such changes as would not have a Material Adverse Effect (as defined below). In the event that the condition set forth in clause (ii) above has not been satisfied by December 31, 2009, then Lenders shall no longer have any obligation to purchase from the Company, and the Company shall no longer have any obligation to issue to Lenders, any preferred stock described in this Agreement.

2.  Purchasers’ Representations and Warranties.   Each Purchaser hereby represents and warrants to and agrees with the Company only as to such Purchaser that:

(a)  Information on Company.   The Purchaser has been furnished with or has had access at the EDGAR Website of the Commission to the Company’s Form 10-K for the year ended September 28, 2008, and all periodic reports filed with the Commission thereafter, but not later than five days before the date of this Agreement (hereinafter referred to as the “ Reports ”). In addition, the Purchaser has received in writing from the Company such other information concerning its operations, financial condition and other matters as the Purchaser has requested in writing (such other information is collectively, the “ Other Written Information ”), and considered all factors such Purchaser deems material in deciding on the advisability of investing in the Series A-2 Stock.

(b)  Information on Purchaser.   The Purchaser is, and will be at the time of issuance of the Series A-2 Stock, 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, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable the Purchaser 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 Purchaser is not a broker-dealer under Section 15 of the Exchange Act. The Purchaser has the authority and is duly and legally qualified to purchase and own the Securities. The Purchaser 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 Purchaser is accurate.

(c)  Purchase of Securities.   The Purchaser is acquiring the Securities in the ordinary course of its business as principal for its own account for investment only and not with a view toward, or for resale in connection with, the public sale or any distribution thereof. Such Purchaser does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities. The Purchaser acquired the Series 1 Notes for purposes of investment only in order to earn a profit in the form of interest. The Purchaser is not providing any consideration other than the Series 1 Notes in connection with the exchange of such Series 1 Notes for the Series A-2 Stock.

(d)  Compliance with Securities Act.   The Purchaser 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 in part on the accuracy of the representations and warranties of Purchaser contained herein), and that such Securities must be held indefinitely unless a subsequent disposition is registered under the 1933 Act or any applicable state securities laws or is exempt from such registration. Notwithstanding anything to the contrary contained in this Agreement, such Purchaser may transfer (without restriction and without the need for an opinion of counsel) the Securities to its Affiliates (as defined below) provided that each such Affiliate is an “accredited investor” under Regulation D and such Affiliate agrees to be bound by the terms and conditions of this Agreement. For the purposes of this Agreement, an “ Affiliate ” of any person or entity means any other person or entity directly or indirectly controlling, controlled by or under direct or indirect common control with such person or entity. The term “Affiliate” when employed in connection with the Company includes each Subsidiary (as defined in Section 3(a)) of the Company. For purposes of this definition, “ control ” means the power to direct the management and policies of such person or firm, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

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(e)  Restrictive Legend.    The shares of Series A-2 Stock issuable hereunder shall bear the following or similar legend:

(f)  Communication of Offer.   The offer to sell the Securities was directly communicated to the Purchaser by the Company. At no time was the Purchaser presented with or solicited by any leaflet, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicited or invited to attend a promotional meeting otherwise than in connection and concurrently with such communicated offer.

(g)  Authority; Enforceability.   If the Purchaser 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 otherwise to carry out its obligations hereunder and thereunder. This Agreement and other agreements delivered together with this Agreement or in connection herewith have been duly authorized, executed and delivered by the Purchaser 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 Purchaser has full corporate power and authority necessary to enter into this Agreement and such other agreements and to perform its obligations hereunder and under all other agreements entered into by the Purchaser relating hereto.

(h)  No Governmental Review.   Each Purchaser 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 suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

(i)  Correctness of Representations.   Each Purchaser represents as to such Purchaser that the foregoing representations and warranties are true and correct as of the date hereof and, unless a Purchaser otherwise notifies the Company prior to the Closing Date shall be true and correct as of the Closing Date.

(j)  Survival.   The foregoing representations and warranties shall survive the Closing Date.

3.  Company Representations and Warranties.   Except as set forth in a disclosure schedule delivered to the Purchasers on the date hereof (the “ Disclosure Schedule ”), the Company represents and warrants to and agrees with each Purchaser that:

(a)  Due Incorporation.   The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation 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 each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have a Material Adverse Effect. 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 taken individually, or in the aggregate, 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

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time of determination, owned or controlled directly or indirectly through one or more intermediaries, by such entity. All the Company’s Subsidiaries as of the date hereof are set forth on Schedule 3(a) hereto.

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

(c)  Authority; Enforceability.   This Agreement and any other agreements delivered to Purchasers together with this Agreement or in connection herewith to which the Company is a party (collectively “ Transaction Documents ”) have been duly authorized, executed and delivered by the Company and are valid and binding agreements enforceable against the Company 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 and Subsidiaries have full corporate power and authority necessary to enter into and deliver the Transaction Documents and to perform their obligations thereunder.

(d)  Additional Issuances.   There are no outstanding agreements or preemptive or similar rights affecting the Company’s common stock or equity and no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of any shares of common stock or equity of the Company or Subsidiaries or other equity interest in any of the Subsidiaries of the Company except as described on Schedule 3(d) . The Common Stock of the Company on a fully diluted basis outstanding as of the last Business Day preceding the date hereof is set forth on Schedule 3(d) . “ Business Day ” and “ trading day ” shall mean any day that the New York Stock Exchange is open for trading for three or more hours. On February 3, 2009, the Company completed its bridge offering of $1,000,000 through the issuance of secured promissory notes. Prior to the Closing Date, the Purchasers may convert the Series 1 Notes into shares of the Company’s Common Stock, or the Company may repay the Series 1 Notes in cash, in accordance with the terms of such Series 1 Notes. The first two sentences of Section 5.4 of that certain Memorandum of Understanding for Settlement and Debt Conversion, dated as of September 19, 2008 among the Company and the Purchasers, are deleted.

(e)  Consents.   No consent, approval, authorization or order of any court, governmental agency or body or arbitrator having jurisdiction over the Company or any of its Affiliates 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, except for 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, stockholder approval, the notice by the Company to NCM regarding listing of additional shares, and applicable Blue Sky filings. The Transaction Documents and the Company’s performance of its obligations thereunder have been approved unanimously by the Company’s directors.

(f)  No Violation or Conflict.   Except as set forth on Schedule 3(f) or in the Other Written Information, 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:

(i) violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would be reasonably likely to constitute a default) under (A) the certificate of incorporation, charter or bylaws of the Company, (B) to the Company’s knowledge, any decree, judgment, order, law, treaty, rule, regulation or determination applicable to the Company of any court, governmental agency or body, or arbitrator having jurisdiction over the Company or any of its Subsidiaries or over the properties or assets of the Company or any of its Subsidiaries, (C) the terms of any bond, debenture, note or any other evidence of indebtedness, or any agreement, stock option or other similar plan, indenture, lease, mortgage, deed of trust or other instrument to which the Company or any of its Subsidiaries is a party, by which the Company or any of its Subsidiaries is bound, or to which any of the properties of the Company or any of its Subsidiaries is subject, or (D) the terms of any “lock-up” or similar provision of any underwriting or similar agreement to which the Company, or any of its Subsidiaries is a party except the violation, conflict, breach, or default of which would not have a Material Adverse Effect on the Company; or

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