8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) March 30, 2006

Irvine Sensors Corporation

(Exact name of registrant as specified in its charter)

Delaware	001-08402	33-0280334
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

3001 Red Hill Avenue, Costa Mesa, California	92626
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (714) 549-8211

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

1. Amendment to Loan and Security Agreement with Square 1 Bank

On March 30, 2006, Irvine Sensors Corporation (the “Company”) entered into an Amendment to Loan and Security Agreement (the “Loan Amendment”) with Square 1 Bank amending the Loan and Security Agreement dated December 30, 2005 between the Company and Square 1 Bank (the “Loan Agreement”).

This Loan Amendment revises certain financial covenants that the Company must comply with by: (i) changing the commencement date of the profitability measurement covenant from March 31, 2006 to August 31, 2006; (ii) changing the commencement date of the debt service coverage ratio measurement covenant to June 30, 2006 and changing the frequency of the rolling three-month measurement from quarterly to monthly; and (iii) reducing the tangible net worth plus subordinated debt requirement from $6 million to $3.85 million commencing with the reporting period ending February 28, 2006, and providing that such number shall increase quarterly by 50% of net profit (but not decreasing for losses) and by 100% of any favorable accounting adjustments to a component of tangible net worth. The Loan Amendment also adds a requirement that the Company deliver to Square 1 Bank by Friday of each week the Company’s weekly cash flow forecast for the following week, and requires the Company to pay an amendment fee of $10,000 plus reasonable expenses to Square 1 Bank. The Loan Amendment also waives the Company’s existing noncompliance with the original tangible net worth covenant for the time period ended January 29, 2006, and lifts a restriction on additional advances under the revolving credit facility (the “Credit Facility”) that was imposed by Square 1 Bank in connection with that noncompliance. All other terms and conditions not amended by the Loan Amendment remain as stated in the Loan Agreement.

2. Amendment to Securities Purchase Agreement with Pequot

On March 31, 2006, the Company entered into an Amendment to Securities Purchase Agreement (the “Purchase Amendment”) with Pequot Private Equity Fund III, L.P. and Pequot Offshore Private Equity Partners III, L.P. (collectively, “Pequot”), amending the Securities Purchase Agreement dated December 30, 2005 between the Company and Pequot (the “Securities Purchase Agreement”).

This Purchase Amendment eliminates the provision requiring the Company to pay Pequot liquidated damages in the event of the Company’s failure to perform certain obligations relating to the registration for resale of shares of common stock issued or issuable to Pequot pursuant to the Securities Purchase Agreement, as amended. All other terms and conditions not amended by the Purchase Amendment remain as stated in the Securities Purchase Agreement.

Item 2.03. Creation of a Direct Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information relating to the Loan Amendment and Loan Agreement disclosed in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.

Not applicable.

(b) Pro Forma Financial Information.

Not applicable.

(c) Shell Company Transactions.

Not applicable.

(d) Exhibits.

Exhibit No.	Description of Exhibit
10.1	Amendment to Loan and Security Agreement dated March 30, 2006 by and between the Company and Square 1 Bank.
10.2	Amendment to Securities Purchase Agreement dated March 31, 2006 by and between the Company and Pequot Private Equity Fund III, L.P. and Pequot Offshore Private Equity Partners III, L.P.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	IRVINE SENSORS CORPORATION
	(Registrant)
Dated: April 4, 2006	/s/ JOHN J. STUART, JR.
	John J. Stuart, Jr. Senior Vice President and Chief Financial Officer

EX-10.1

Exhibit 10.1

AMENDMENT TO LOAN AND SECURITY AGREEMENT

This Amendment to Loan and Security Agreement (this “Amendment”) is entered into as of March 30, 2006, by and between SQUARE 1 BANK (“Bank”) and IRVINE SENSORS CORPORATION (“Borrower”).

RECITALS

Borrower and Bank are parties to that certain Loan and Security Agreement dated as of December 30, 2005, as amended from time to time (the “Agreement”). On March 8, 2006, Bank delivered to Borrower a Notice of Default (the “NOD”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.

NOW, THEREFORE, the parties agree as follows:

1. Bank hereby waives Borrower’s failure to comply with Section 6.7(c) of the Agreement as in effect prior to this Amendment, solely for the period ended January 29, 2006.

2. The restriction on Advances set forth in the NOD hereby is lifted and of no further force or effect.

3. Section 6.7(a) of the Agreement hereby is amended and restated in its entirety to read as follows:

“(a) Profitability. As of the last day of each calendar month commencing August 31, 2006, Profitability of not less than $1.00 for such month, on a rolling 3-month basis.”

4. Section 6.7(b) of the Agreement hereby is amended and restated in its entirety to read as follows:

“(b) Debt Service Coverage Ratio. A ratio of EBITDA plus non-cash employee retirement plan contributions, less cash taxes and cash unfinanced Capitalized Expenditures, to the principal and interest payments due on the Credit Extensions during the period, plus any cash principal and interest payments due on account of Subordinated Debt during the period; all as of the last day of each month for the rolling three (3) months ending on that date, of not less than (i) 1.20 to 1.00 from June 30, 2006 through the first anniversary of the Closing Date; and (ii) 1.25 to 1.00 thereafter.”

5. Section 6.7(c) of the Agreement hereby is amended and restated in its entirety to read as follows:

“(c) Tangible Net Worth Plus Subordinated Debt. Commencing with the reporting period ending February 28, 2006, a Tangible Net Worth plus Subordinated Debt at all times of not less than $3,850,000, increasing quarterly by 50% of net profit (but not decreasing for losses) and by 100% of any favorable accounting adjustments to a component of Tangible Net Worth.”

6. New Section 6.2(e) hereby is added to the Agreement to read as follows:

“(e) By Friday of each week, a weekly cash flow forecast, in form and content reasonably acceptable to Bank, for the following week.”

7. Exhibit E to the Agreement hereby is replaced with Exhibit E attached hereto.

8. No course of dealing on the part of Bank or its officers, nor any failure or delay in the exercise of any right by Bank, shall operate as a waiver thereof, and any single or partial exercise of any such right shall not preclude any later exercise of any such right. Bank’s failure at any time to require strict performance by Borrower of any provision shall not affect any right of Bank thereafter to demand strict compliance and performance. Any suspension or waiver of a right must be in writing signed by an officer of Bank.

9. Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the

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execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof.

10. Borrower represents and warrants that the Representations and Warranties contained in the Agreement (except as are made as of an earlier date) are true and correct as of the date of this Amendment, and that, except as waived hereby, no Event of Default has occurred and is continuing.

11. As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:

(a) this Amendment, duly executed by Borrower;

(b) a Certificate of the Secretary of Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Amendment;

(c) an amendment fee in the amount of $10,000, which may be debited from any of Borrower’s accounts;

(d) all reasonable Bank Expenses incurred through the date of this Amendment, which may be debited from any of Borrower’s accounts; and

(e) such other documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate.

12. This Amendment 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.

[Balance of Page Intentionally Left Blank]

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

IRVINE SENSORS CORPORATION
By:	/s/ JOHN J. STUART, JR.
Title:	Sr. VP & CFO
SQUARE 1 BANK
By:	/s/ MICHAEL BERRIER
Title:	SVP

[Signature Page to Amendment to Loan & Security Agreement]

EXHIBIT E

COMPLIANCE CERTIFICATE

TO:         SQUARE 1 BANK

FROM:   IRVINE SENSORS CORPORATION

The undersigned authorized officer of IRVINE SENSORS CORPORATION hereby certifies that in accordance with the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”), (i) Borrower is in complete compliance for the period ending                      with all required covenants except as noted below and (ii) all representations and warranties of Borrower stated in the Agreement are true and correct as of the date hereof. Attached herewith are the required documents supporting the above certification. The Officer further certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes.

Please indicate compliance status by circling Yes/No under “Complies” column.

Reporting Covenant	Required		Complies
Monthly financial statements	Monthly within 30 days		Yes	No
Annual (CPA Audited)	FYE within 150 days		Yes	No
10K and 10Q	(as applicable)		Yes	No
A/R & A/P Agings, Borrowing Base Cert.	Monthly within 10 days		Yes	No
Cash flow forecasts	Weekly by Friday of each week		Yes	No
A/R Audit	Initial and Semi-Annual		Yes	No
IP Report	Quarterly within 30 days		Yes	No
Total amount of Borrower’s cash and investments	Amount: $
Total amount of Borrower’s cash and investments maintained with Bank	Amount: $
Financial Covenant	Required	Actual	Complies
Minimum Profitability (Rolling 3-Month basis; commencing 8/06)	$1.00	$	Yes	No
Minimum Debt Service Coverage Ratio (Rolling 3-Month basis; commencing 6/06)	1.20:1.001	:1.00	Yes	No
Minimum Tangible Net Worth (from 2/28/06)	$3,850,0002	$	Yes	No

¹ Increasing to 1.25:1.00 from and after the 13th month following the Closing Date

² Plus 50% of quarterly net income (but not decreasing for losses) and 100% of favorable accounting adjustments to a component of Tangible Net Worth

Comments Regarding Exceptions: See Attached.	BANK USE ONLY
	Received by:
Sincerely,	AUTHORIZED SIGNER
	Date:
	Verified:
SIGNATURE	AUTHORIZED SIGNER
	Date:
TITLE
	Compliance Status                    Yes             No
DATE

EX-10.2

Exhibit 10.2

AMENDMENT TO

SECURITIES PURCHASE AGREEMENT

This Amendment (this “Amendment”) to the Securities Purchase Agreement by and among the Company and the Purchasers dated as of December 30, 2005 (the “Agreement”), is made as of March 31, 2006 by and among Irvine Sensors Corporation, a Delaware corporation (the “Company”) and each of the purchasers identified on the signature pages hereto (each, a “Purchaser” and, collectively, the “Purchasers”). Capitalized terms used but not defined herein shall have the meaning given to them in the Agreement.

WHEREAS, the Company is obligated to file a Registration Statement and to cause it to be declared effective by the Commission pursuant to the Agreement;

WHEREAS, the Company acknowledges that a failure to comply with its obligations relating to the Registration Statement described in Section 6.1(d) of the Agreement, and without limitation, the failure of the Registration Statement to be declared effective by the Commission by the Required Effectiveness Date, would be a default in the performance of a material obligation of the Company under the Agreement;

WHEREAS, pursuant to Section 6.1(d) of the Agreement the parties had agreed that, in addition to all other available remedies, the Company would pay certain payments (the “Event Payments”) for failure to perform the Events described in Section 6.1(d) of the Agreement; and

WHEREAS, the parties wish to amend the Agreement to eliminate any and all obligations of the Company to pay any Event Payments.

NOW, THEREFORE, the parties agree that Section 6.1(d) of the Agreement shall be amended and restated in its entirety to read as follows:

“(d) The Company shall: (i) file a Registration Statement on or prior to the Filing Date (if the Company files such Registration Statement without affording the Purchasers the opportunity to review and comment on the same as required by Section 6.2(a) hereof, the Company shall not be deemed to have satisfied this clause (i)); (ii) file with the Commission a request for acceleration in accordance with Rule 461 promulgated under the Securities Act, within five Trading Days after the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that a Registration Statement will not be “reviewed,” or will not be subject to further review; (iii) respond to any comments made by the Commission within 10 Trading Days after the receipt of such comments; (iv) cause a Registration Statement filed hereunder to be declared effective by the Commission by the Required Effectiveness Date; (v) after a Registration Statement is filed with and declared effective by the Commission, if such Registration Statement ceases to be effective as to all Registrable Securities to which it is required to relate at any time prior to the expiration of the Effectiveness Period, file within 10 Trading Days an amendment to such Registration Statement or a subsequent Registration Statement and cause it to be

declared effective by the Commission; (vi) file an amendment to a Registration Statement with the Commission within ten Trading Days after the Commission’s having notified the Company that such amendment is required in order for such Registration Statement to be declared effective; and (vii) cause the Common Stock to be listed or quoted, and not to be suspended from trading on an Eligible Market for a period of three consecutive Trading Days or five Trading Days (which need not be consecutive) in any 180 day period. The Company shall not be in breach of this Section 6.1(d) to the extent any delays hereunder are caused by (i) the Purchasers or (ii) the Company’s independent auditors, if such delay is outside the control of the Company and not related to any action or inaction on the part of the Company, the Subsidiaries or any of their respective officers or directors.”

Except as specifically set forth in this Amendment, all terms and conditions of the Agreement shall remain in full force and effect. This Amendment shall be part of the Agreement as if contained therein.

[Remainder of page intentionally left blank.

Signature page follows.]

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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

IRVINE SENSORS CORPORATION
By:	/s/ JOHN J. STUART, JR.
	Name: John J. Stuart, Jr.
	Title: Sr. VP & Chief Financial Officer
PURCHASERS: PEQUOT PRIVATE EQUITY FUND III, L.P.
By:	Pequot Capital Management, Inc., its Investment Manager
By:	/s/ ARYEH DAVIS
	Name: Aryeh Davis
	Title: COO/General Counsel
PEQUOT OFFSHORE PRIVATE EQUITY PARTNERS III, L.P.
By:	Pequot Capital Management, Inc., its Investment Manager
By:	/s/ ARYEH DAVIS
	Name: Aryeh Davis
	Title: COO/General Counsel