Exhibit 10.68

UNCONDITIONAL GUARANTY

For and in consideration of the loan made by LONGVIEW FUND, LP (“Lender”) to
IRVINE SENSORS CORPORATION (“Borrower”), which loan is made pursuant to a
Secured Promissory Note issued by Borrower in favor of Lender dated as of
July 19, 2007, as amended from time to time (the “Agreement”), and acknowledging
that Lender would not enter into the Agreement without the benefit of this
Guaranty, the undersigned guarantor (“Guarantor”) hereby unconditionally and
irrevocably guarantees the prompt and complete payment of all amounts that
Borrower owes to Lender under the Agreement or the Loan Agreement (as defined in
the Agreement) and performance by Borrower of the Agreement and Loan Agreement
between Borrower and Lender, as amended from time to time, as well any other
amounts or obligations by Borrower to Lender for any reason whatsoever, direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising (all such amounts due or to be due and obligations to be
performed and any and all documentation executed in connection therewith,
collectively referred to as the “Agreements”). All terms used without definition
in this Guaranty shall have the meaning assigned to them in the Agreement.

1. If Borrower does not pay any amount or perform its obligations in strict
accordance with the Agreements, Guarantor shall immediately pay all amounts due
thereunder (including, without limitation, all principal, interest, and fees)
and otherwise to proceed to complete the same and satisfy all of Borrower’s
obligations under the Agreements.

2. If there is more than one guarantor, the obligations hereunder are joint and
several, and whether or not there is more than one guarantor, the obligations
hereunder are independent of the obligations of Borrower and any other person or
entity, and a separate action or actions may be brought and prosecuted against
Guarantor whether action is brought against Borrower or whether Borrower be
joined in any such action or actions. Guarantor waives the benefit of any
statute of limitations affecting its liability hereunder or the enforcement
thereof, to the extent permitted by law. Guarantor’s liability under this
Guaranty is not conditioned or contingent upon the genuineness, validity,
regularity or enforceability of the Agreements.

3. Guarantor authorizes Lender, without notice or demand and without affecting
its liability hereunder, from time to time to (a) renew, extend, or otherwise
change the terms of the Agreements or any part thereof; (b) take and hold
security for the payment of this Guaranty or the Agreements, and exchange,
enforce, waive and release any such security; and (c) apply such security and
direct the order or manner of sale thereof as Lender in its sole discretion may
determine.

4. Guarantor waives any right to require Lender to (a) proceed against Borrower
, any guarantor or any other person; (b) proceed against or exhaust any security
held from Borrower; or (c) pursue any other remedy in Lender’s power whatsoever.
Lender may, at its election, exercise or decline or fail to exercise any right
or remedy it may have against Borrower or any security held by Lender, including
without limitation the right to foreclose upon any such security by judicial or
nonjudicial sale, without affecting or impairing in any way the liability of
Guarantor hereunder. Guarantor waives any defense arising by reason of any
disability or other defense of Borrower or by reason of the cessation from any
cause whatsoever of the liability of Borrower. Guarantor waives any setoff,
defense or counterclaim that Borrower may have against Lender. Guarantor waives
any defense arising out of the absence, impairment or loss of any right of
reimbursement or subrogation or any other rights against Borrower. Until all of
the amounts that Borrower owes to Lender have been paid in full, Guarantor shall
have no right of subrogation or reimbursement, contribution or other rights
against Borrower, and Guarantor waives any right to enforce any remedy that
Lender now has or may hereafter have against Borrower. Guarantor waives all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance of this
Guaranty and of the existence, creation, or incurring of new or additional
indebtedness. Guarantor assumes the responsibility for being and keeping itself
informed of the financial condition of Borrower and of all other circumstances
bearing upon the risk of nonpayment of any indebtedness or nonperformance of any
obligation of Borrower, warrants to Lender that it will keep so informed, and
agrees that absent a request for particular information by Guarantor, Lender
shall not have any duty to advise Guarantor of information known to Lender
regarding such condition or any such circumstances. Guarantor acknowledges that,
to the extent Guarantor has or may have certain rights of subrogation or
reimbursement against Borrower for claims arising out of this Guaranty, those
rights may be impaired or destroyed if Lender elects to proceed against any real

 

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property security of Borrower by non-judicial foreclosure. That impairment or
destruction could, under certain judicial cases and based on equitable
principles of estoppel, give rise to a defense by Guarantor against its
obligations under this Guaranty. Guarantor waives that defense and any others
arising from Lender’s election to pursue non-judicial foreclosure.

5. If Borrower becomes insolvent or is adjudicated bankrupt or files a petition
for reorganization, arrangement, composition or similar relief under any present
or future provision of the United States Bankruptcy Code, or if such a petition
is filed against Borrower, and in any such proceeding some or all of any
indebtedness or obligations under the Agreements are terminated or rejected or
any obligation of Borrower is modified or abrogated, or if Borrower’s
obligations are otherwise avoided for any reason, Guarantor agrees that
Guarantor’s liability hereunder shall not thereby be affected or modified and
such liability shall continue in full force and effect as if no such action or
proceeding had occurred. This Guaranty shall continue to be effective or be
reinstated, as the case may be, if any payment must be returned by Lender upon
the insolvency, bankruptcy or reorganization of Borrower, Guarantor, any other
guarantor, or otherwise, as though such payment had not been made.

6. Any indebtedness, other than indebtedness incurred in the ordinary course of
business, of Borrower now or hereafter held by Guarantor is hereby subordinated
to any indebtedness of Borrower to Lender; and such indebtedness of Borrower to
Guarantor shall be collected, enforced and received by Guarantor as trustee for
Lender and be paid over to Lender on account of the indebtedness of Borrower to
Lender but without reducing or affecting in any manner the liability of
Guarantor under the other provisions of this Guaranty.

7. Guarantor agrees to pay reasonable attorneys’ fees and all other costs and
expenses which may be incurred by Lender in the enforcement of this Guaranty. No
terms or provisions of this Guaranty may be changed, waived, revoked or amended
without Lender’s prior written consent. Should any provision of this Guaranty be
determined by a court of competent jurisdiction to be unenforceable, all of the
other provisions shall remain effective. This Guaranty, together with any
agreements (including without limitation any security agreements or any pledge
agreements) executed in connection with this Guaranty, embodies the entire
agreement among the parties hereto with respect to the matters set forth herein,
and supersedes all prior agreements among the parties with respect to the
matters set forth herein. No course of prior dealing among the parties, no usage
of trade, and no parol or extrinsic evidence of any nature shall be used to
supplement, modify or vary any of the terms hereof. There are no conditions to
the full effectiveness of this Guaranty. Lender may assign this Guaranty without
in any way affecting Guarantor’s liability under it. This Guaranty shall inure
to the benefit of Lender and its successors and assigns. This Guaranty is in
addition to the guaranties of any other guarantors and any and all other
guaranties of Borrower’s indebtedness or liabilities to Lender.

8. Guarantor represents and warrants to Lender that (i) Guarantor has taken all
necessary and appropriate action to authorize the execution, delivery and
performance of this Guaranty, (ii) execution, delivery and performance of this
Guaranty do not conflict with or result in a breach of or constitute a default
under Guarantor’s Articles or Certificate of Incorporation or Bylaws or other
organizational documents or agreements to which it is party or by which it is
bound, and (iii) this Guaranty constitutes a valid and binding obligation,
enforceable against Guarantor in accordance with its terms.

9. Guarantor covenants and agrees that Guarantor shall do all of the following:

9.1 Guarantor shall maintain its corporate existence, remain in good standing in
its jurisdiction of organization, and continue to qualify in each jurisdiction
in which the failure to so qualify could have a material adverse effect on the
financial condition, operations or business of Guarantor. Guarantor shall
maintain in force all licenses, approvals and agreements, the loss of which
could have a material adverse effect on its financial condition, operations or
business.

9.2 Guarantor shall comply with all statutes, laws, ordinances, directives,
orders, and government rules and regulations to which it is subject if
non-compliance with such laws could adversely affect the financial condition,
operations or business of Guarantor.

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9.3 At any time and from time to time Guarantor shall execute and deliver such
further instruments and take such further action as may reasonably be requested
by Lender to effect the purposes of this Guaranty.

10. This Guaranty shall be governed by the laws of the State of New York,
without regard to conflicts of laws principles. GUARANTOR WAIVES ANY RIGHT TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
GUARANTY OR ANY TRANSACTION CONTEMPLATED THEREIN, INCLUDING CLAIMS BASED ON
CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER COMMON LAW OR STATUTORY BASES.
Guarantor submits to the exclusive jurisdiction of the state and federal courts
located in the County of New York, New York. If the jury waiver set forth in
this Section is not enforceable, then any dispute, controversy or claim arising
out of or relating to this Guaranty or any of the transactions contemplated
herein will be finally settled by binding arbitration in New York, NY in
accordance with the then-current Commercial Arbitration Rules of the American
Arbitration Association by one arbitrator appointed in accordance with said
rules. The arbitrator shall apply New York law to the resolution of any dispute,
without reference to rules of conflicts of law or rules of statutory
arbitration. Judgment on the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof. Notwithstanding the foregoing, the
parties may apply to any court of competent jurisdiction for preliminary or
interim equitable relief, or to compel arbitration in accordance with this
paragraph. The expenses of the arbitration, including the arbitrator’s fees and
expert witness fees, incurred by the parties to the arbitration, may be awarded
to the prevailing party, in the discretion of the arbitrator, or may be
apportioned between the parties in any manner deemed appropriate by the
arbitrator. Unless and until the arbitrator decides that one party is to pay for
all (or a share) of such expenses, both parties shall share equally in the
payment of the arbitrator’s fees as and when billed by the arbitrator

IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty as of
July 19, 2007.

 

OPTEX SYSTEMS, INC.   By:  

/s/ Timothy W. Looney

  Title:   President  

[SIGNATURE PAGE TO OPTEX UNCONDITIONAL GUARANTY]