FORM OF LIEN RELEASE AGREEMENT

FORM OF LIEN RELEASE AGREEMENT

THIS LIEN RELEASE AGREEMENT (this “ Agreement ”) is made and entered into this 18th day of March, 2009 by and between Irvine Sensors Corporation, a Delaware corporation (the “ Company ”), and the undersigned investor (the “ Investor ”). Each of the Company and the Investor is sometimes referred to herein as a “ Party ,” and collectively as the “ Parties .”

RECITALS

A.  WHEREAS, the Company owes the Investor principal and interest totaling approximately $           as of          , 2009 pursuant to that certain Secured Promissory Note dated as of           in favor of the Investor (the “ Note ”);

B.  WHEREAS, the Investor is a party to, and the Company’s assets are secured by liens (the “ Liens ”) pursuant to, that certain Security Agreement dated as of November 5, 2008 and Intercreditor Agreement dated as of November 5, 2008;

C.  WHEREAS , the Company has entered into an agreement to sell most of its patent portfolio and related assets (“ Patent Assets ”) to a patent acquisition company (the “ Patent Buyer ”) for up to a $9.5 million cash payment and it is anticipated that the Company will be granted a perpetual, worldwide, royalty-free, non-exclusive license to use the sold patents in its business (the “ Patent Sale and License ”), a condition to which is a requirement that the Investor agrees to release its Liens relating to the Patent Assets pursuant to the terms of this Agreement;

D.  WHEREAS, the parties desire to effect such a release of the Investor’s Liens relating to the Patent Assets; and

E.  WHEREAS, the Company, U.S. Bank National Association (the “ Escrow Agent ”) and certain holders of the bridge notes issued by the Company pursuant to that certain Private Placement Memorandum, dated as of September 29, 2008 and as supplemented on January 26, 2009, (the “ Bridge Notes ”) have entered into an Escrow Agreement, pursuant to which the Company has agreed to deposit out of the proceeds of the Patent Sale and License an amount equal to $1,040,000 (the “ Escrow Deposit ”).

AGREEMENT

NOW THEREFORE, in consideration of the foregoing and the agreements and covenants contained herein, the Parties agree as follows:

1.  Release of Liens .   As consideration for the Investor’s release of Liens relating to the Patent Assets, the Investor agrees as follows ( Please Initial One ):

a.          (Initials)   Investor agrees to (i) upon receipt of the outstanding principal and accrued interest owing under the Note, such amount to be paid to Investor out of the Escrow Deposit promptly after the closing of the Patent Sale and License, surrender the Note to the Company for cancellation and (ii) upon the Escrow Agent’s receipt of the Escrow Deposit, execute and deliver the release of Liens relating to the Patent Assets attached hereto as Exhibit A ; or

b.          (Initials)   Investor agrees to (i) upon receipt of the number of shares of the Company’s common stock (the “ Shares ”) set forth in this Section 1(b), surrender the Note to the Company for cancellation in exchange for the Company’s agreement to issue to Investor, subject to approval of the Company’s stockholders, the number of Shares equal to 125% of the value of the outstanding principal and accrued interest under the Note, based on the greater of (a) $0.40, (b) the last reported closing sale price of the Company’s common stock on the Nasdaq Capital Market immediately prior to the closing of the Patent Sale and License and (c) the consolidated closing bid price of the Company’s common stock on the Nasdaq Capital Market immediately prior to the closing of the Patent

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Sale and License and (ii) upon the Escrow Agent’s receipt of the Escrow Deposit, execute and deliver the release of Liens relating to the Patent Assets attached hereto as Exhibit A ; or

c.          (Initials)   Investor agrees to (i) upon receipt of the number of Shares set forth in this Section 1(c) and the amount of principal and accrued interest set forth in this Section 1(c), surrender the Note to the Company for cancellation in exchange for the Company’s agreement to (y) pay Investor $           of the outstanding principal and accrued interest under the Note in cash out of the proceeds of the Patent Sale and License, such amount to be paid to Investor out of the Escrow Deposit promptly after the closing of the Patent Sale and License and (z) issue to Investor, subject to approval of the Company’s stockholders, the number of Shares equal to 125% of the value of the remaining $           of the outstanding principal and accrued interest under the Note, based on the greater of (1) $0.40, (2) the last reported closing sale price of the Company’s Common Stock on the Nasdaq Capital Market immediately prior to the closing of the Patent Sale and License and (3) the consolidated closing bid price of the Company’s Common Stock on the Nasdaq Capital Market immediately prior to the closing of the Patent Sale and License and (ii) upon the Escrow Agent’s receipt of the Escrow Deposit, execute and deliver the release of Liens relating to the Patent Assets attached hereto as Exhibit A .

2.  Equity Consideration .   In the event the Investor agrees to either Section 1(b) or 1(c) of this Agreement, the Company shall use commercially reasonable efforts to obtain stockholder approval for the issuance of the Shares no later than the Company’s 2009 Annual Meeting of Stockholders. The Company shall issue the Shares to the Investor as soon as practicable after such issuance has been approved by the Company’s stockholders. If the Company is unable to obtain stockholder approval for the issuance of the Shares, the Note shall remain outstanding in accordance with its terms.

3.  Governing Law .  This Agreement shall be governed by, and construed in accordance with, the laws of the State of California without regard to conflicts of laws that would result in the application of the substantive laws of another jurisdiction.

4.  Attorneys’ Fees .  If any action or proceeding in contract or tort arising out of or relating to this Agreement is commenced by any party to this Agreement, the prevailing party shall be entitled to receive from the other party, in addition to any other relief that may be granted, the reasonable attorneys’ fees, costs and expenses incurred in the action or proceeding by the prevailing party, along with any reasonable attorneys’ fees, costs and expenses incurred to collect any amount awarded in connection with any such action or proceeding.

5.  Waiver of Jury Trial and Setoff; Consent to Jurisdiction; Etc.   In any litigation in any court with respect to, in connection with, or arising out of this Agreement or any instrument or document delivered pursuant to this Agreement, or the validity, protection, interpretation, collection or enforcement hereof or thereof, or any other claim or dispute howsoever arising, between the parties hereto WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION AND ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH INVESTOR AGREES THAT THIS SECTION 5 IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGE THAT THE OTHER PARTY WOULD NOT ENTER THIS AGREEMENT IF THIS SECTION 5 WERE NOT PART OF THIS AGREEMENT. Each party irrevocably consents to the exclusive jurisdiction of any State or Federal Court located within the County of Orange, State of California, in connection with any action or proceeding arising out of or relating to this Agreement or any document or instrument delivered pursuant to this Agreement or otherwise. In any such litigation, each party waives, to the fullest extent it may effectively do so, personal service of any summons, complaint or other process and agree that the service thereof may be made by certified or registered mail directed to such party at its address for notice determined in accordance with this Section 5. Each party hereby waives, to the fullest extent it may effectively do so, the defenses of forum non conveniens and improper venue.

6.  Representation by Counsel .  The Parties acknowledge and agree that they have been represented or have had the opportunity to be represented by counsel of their own choice in the negotiations leading to their execution of this Agreement and that they have read this Agreement. The Parties further acknowledge that the waivers they made herein are knowing, conscious and with full appreciation that they are forever foreclosed from pursuing any of the rights so waived and that they understand this Agreement and are signing it voluntarily and without coercion.

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7.  Admissibility of this Agreement .  Each of the parties agrees that any copy of this Agreement signed by it and transmitted by facsimile for delivery to the other party shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence.

8.  Notices .  All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable overnight courier service with charges prepaid, or (iv) transmitted by hand delivery, electronic mail, or facsimile, addressed as set forth on the signature page hereto or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by electronic mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.

9.  Amendments and Modification.   No provision hereof shall be modified, altered, waived or limited except by written instrument expressly referring to this Agreement and to such provision, and executed by the parties hereto.

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

11.  Successors and Assigns .  Whenever in this Agreement reference is made to any party, such reference shall be deemed to include the successors, assigns, heirs and legal representatives of such party. No party hereto may transfer any rights under this Agreement, unless the transferee agrees to be bound by, and comply with all of the terms and provisions of this Agreement, as if an original signatory hereto on the date hereof.

12.  Severability .  In the event that any term or provision of this Agreement shall be finally determined to be superseded, invalid, illegal or otherwise unenforceable pursuant to applicable law by an authority having jurisdiction and venue, that determination shall not impair or otherwise affect the validity, legality or enforceability (i) by or before that authority of the remaining terms and provisions of this Agreement, which shall be enforced as if the unenforceable term or provision were deleted, or (ii) by or before any other authority of any of the terms and provisions of this Agreement provided each party is able to receive the substantial benefit of this Agreement.

13.  Entire Agreement .  This Agreement contains the entire agreement of the parties and supersedes all other agreements and understandings, oral or written, with respect to the matters contained herein.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF , this Agreement has been executed to be effective as of the date and year first above written. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be executed by facsimile signature, which signature shall be deemed of the same legal effect as an original hard copy signature.

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