Exhibit 10.65

LOAN AGREEMENT

THIS LOAN AGREEMENT (this “Agreement”), dated as of July 19, 2007, by and among
Irvine Sensors Corporation, a Delaware corporation (the “Borrower”), and
Longview Fund, L.P., a California limited partnership (“Lender”).

WHEREAS, the Borrower and Lender are executing and delivering this Agreement in
reliance upon an exemption from securities registration afforded by the
provisions of 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 Borrower and Lender desire that, upon the terms and subject to the
conditions contained herein, the Borrower shall issue and deliver to the Lender,
and the Lender shall advance $2,000,000 (the “Advance”) for, a promissory note
of the Borrower (“Note”) in the principal amount of $2,000,000, a form of which
is annexed hereto as Exhibit A; and

WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Borrower may issue to Lender, as provided herein, and the
Lender may receive, common stock purchase warrants (the “Class B Warrants”), in
the form attached hereto as Exhibit B, to purchase 500,000 shares of the
Borrower’s $0.01 par value common stock (“Common Stock”) (the “Class B Warrant
Shares”) and 300,000 shares of Common Stock (“Continuation Shares”) if the
Borrower does not exercise the Prepayment Option on or before August 15, 2007.
The Class B Warrants, Class B Warrant Shares and Continuation Shares are
collectively referred to herein as the “Securities.”

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

1. (a). Closing. The “Closing Date” shall be the date that the Advance is
transmitted by wire transfer or otherwise credited to or for the benefit of the
Borrower. 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 this Agreement. Subject to the satisfaction or waiver of
the terms and conditions of this Agreement, on the Closing Date, Lender shall
make the Advance to or for the benefit of the Borrower and the Borrower shall
issue and deliver the Note to the Lender.

(b) Conditions to Closing. In addition to the satisfaction of all conditions and
requirements to Closing set forth herein, the Closing shall be subject to:
(i) the delivery by Borrower to the Lender of the Omnibus Security Interest
Acknowledgement in form and substance acceptable to Lender granting to Lender a
security interest in all of the assets of the Borrower and Subsidiaries, pari
passu with the security interest presently held by Lender; (ii) the delivery by
the Borrower of an unconditional guaranty made by Optex Systems, Inc., a Texas
corporation, of all obligations owed by the Borrower to Lender pursuant to the
Transaction Documents (as defined in Section 4(c) herein); (iii) delivery of the
written consents by Alpha Capital Anstalt (“Alpha”), Barbara R. Mittman and
Jolie G. Kahn to the transaction described herein, in form and substance
acceptable to Lender; and (iv) the delivery of all other documents and
agreements reasonably requested by Lender to effect the transactions
contemplated hereby.

 

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2. Prepayment.

(a) Prepayment Option. The Borrower may, at its sole option, elect to prepay the
Note on or before August 15, 2007 on the terms and conditions set forth in
Article III of the Note (the “Prepayment”). The business day upon which the
Prepayment occurs, if any, is the Prepayment Date. In the event the Borrower
does not exercise its right to make the Prepayment, then the Borrower must issue
and deliver on or before August 21, 2007 (“Delivery Date”) the Class B Warrants
and the Continuation Shares, as described in this Agreement.

(b) Class B Warrants. The per Warrant Share exercise price to acquire a Warrant
Share upon exercise of a Class B Warrant shall be the lesser of (i) the closing
bid price of the Common Stock for the trading day preceding the Closing Date but
not less than $1.30 per share, or (ii) the average of the closing bid prices for
the five trading days preceding August 15, 2007, as reported by Bloomberg L.P.
for the Principal Market (as defined in Section 6(b)). The Class B Warrants
shall be exercisable until five (5) years after the issue date of the Class B
Warrants. All references herein to Warrants and Warrant Shares shall be deemed
to include, respectively, the Class B Warrants and Common Stock issuable upon
exercise of the Class B Warrants.

(c) Adjustments. The Warrant exercise price and number of Warrant Shares and
Continuation Shares shall be equitably adjusted to offset the effect of stock
splits, stock dividends, or pro rata distributions of property or equity
interests to the Borrower’s shareholders, and as otherwise described in the
Class B Warrant.

3. Lender’s Representations and Warranties and Covenants. Lender hereby
represents and warrants to and covenants and agrees with the Borrower that:

(a) Information on Borrower. The Lender has been furnished with or has had
access at the EDGAR Website of the Commission to the Borrower’s Form 10-K for
the year ended October 1, 2006, and all periodic reports filed with the
Commission thereafter, but not later than five days before the Closing Date
(hereinafter referred to as the “Reports”). In addition, the Lender has received
in writing from the Borrower such other information concerning its operations,
financial condition and other matters as the Lender has requested in writing
identified thereon as OTHER WRITTEN INFORMATION (such other information is
collectively, the “Other Written Information”), and considered all factors the
Lender deems material in deciding on the advisability of investing in the
Securities.

(b) Information on Lender. The Lender is, and will be at the time of issuance
and/or exercise of the Warrants and issuance of the Continuation Shares, (i) an
“accredited investor”, as such term is defined in Regulation D promulgated by
the Commission under the 1933 Act, experienced in investments and business
matters, a Person that 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, a Person that has such
knowledge and experience in financial, tax and other business matters as to
enable the Lender to utilize the information made available by the Borrower 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; (ii) not a broker-dealer under Section 15 of the Exchange Act;
(iii) a Person that has the authority and is duly and legally qualified to
purchase and own the Securities; and (iv) 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 Lender is, and
will be at the time of issuance and/or exercise of the Warrants and issuance of
the Continuation Shares, accurate.

 

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(c) Purchase of Securities. The Lender is, and will be at the time of issuance
and/or exercise of the Warrants and issuance of the Continuation Shares,
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 Lender does
not and will not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities.

(d) Compliance with Securities Act. The Lender understands and agrees that the
Securities have not been and will not be 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 Lender 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 Lender 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. Affiliate when employed in connection with the Borrower
includes each Subsidiary (as defined in Section 5(a)) of the Borrower. 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.

(e) Warrant Shares and Continuation Shares Legend. The Warrant Shares and
Continuation Shares shall bear the following or similar legend:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS OR BLUE SKY
LAWS. SUCH SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS, OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO IRVINE SENSORS CORPORATION THAT
SUCH REGISTRATION IS NOT REQUIRED.”

(f) Warrants Legend. The Warrants shall bear the following or similar legend:

“THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS OR BLUE SKY LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE
UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE

 

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REGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS
OR BLUE SKY LAWS, OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IRVINE
SENSORS CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.”

(g) Communication of Offer. At no time was the Lender 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.

(h) Authority; Enforceability. Lender is, and will be at the time of issuance
and/or exercise of the Warrants and issuance of the Continuation Shares, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite partnership power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Agreements and otherwise to carry out its obligations hereunder and
thereunder. This Agreement and other agreements delivered or deliverable
together with this Agreement or in connection herewith have been, and will be at
the time of issuance and/or exercise of the Warrants and issuance of the
Continuation Shares, duly authorized, executed and delivered by the Lender and
are, and will be at the time of issuance and/or exercise of the Warrants and
issuance of the Continuation Shares, 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 Lender has, and will have at the time of issuance and/or exercise
of the Warrants and issuance of the Continuation Shares, 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 Lender relating hereto.

(i) No Governmental Review. Lender 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.

(j) Correctness of Representations. Lender represents that the foregoing
representations and warranties and the representations made by Lender to
Borrower in a Selling Securityholder Notice and Questionnaire delivered to
Borrower at or about December 29, 2006 are true and correct as of the date
hereof and, unless a Lender otherwise notifies the Borrower prior to the Closing
Date shall be true and correct as of the Closing Date and as of the issuance of
the Class B Warrants and Continuation Shares.

(k) Consent and Waiver. Lender (i) waives the restrictions set forth in
Section 6.1(i) of the Subscription Agreement dated December 29, 2006 (the
“Subscription Agreement”) with respect to the Note and, if and when issued, the
Continuation Shares and the Class B Warrant (and the common stock issuable upon
exercise thereof); (ii) waives the rights set forth in Section 3(c) of those
certain Irvine Sensors Corporation Series 1 and Series 2 Senior Subordinated
Secured Convertible Notes due December 30, 2009 dated as of December 30, 2005
assigned by Pequot Private Equity Fund III, L.P. and Pequot Offshore Private
Equity Partners III, L.P. to the Lender and Alpha (the “Subordinated Debt
Notes”) with respect to the Note and, if and when issued, the issuance of the
Continuation Shares and the Class B Warrants (and the Common Stock issuable upon
exercise thereof); and (iii) waives the rights set forth in Section 10(d) of the
Subordinated Debt Notes and the rights set forth in Section 3.4 of the Class A
Warrants dated December 29, 2006 (the “Class A Warrants”) with respect to the
issuance of the Continuation Shares, the Class B Warrants and Class B Warrant
Shares, if and when issued.

 

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(l) Survival. The foregoing representations and warranties shall survive the
Closing Date for a period of three years.

4. Borrower Representations and Warranties. Except as set forth in a disclosure
schedule delivered to Lender on the date hereof (the “Schedules”), the Borrower
represents and warrants to and agrees with Lender that:

(a) Due Incorporation. The Borrower 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 Borrower 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 Borrower 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 30% 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
time of determination, owned or controlled directly or indirectly through one or
more intermediaries, by such entity. All the Borrower’s Subsidiaries as of the
Closing Date are set forth on Schedule 4(a).

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

(c) Authority; Enforceability. This Agreement, the Warrants, and any other
agreements delivered together with this Agreement or in connection herewith, or
in connection with the agreements set forth in Section 1(b) of this Agreement to
which the Borrower is a party (collectively “Transaction Documents”) have been
duly authorized, executed and delivered by the Borrower and are valid and
binding agreements enforceable against the Borrower 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 Borrower
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 Borrower’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 Borrower or
Subsidiaries or other equity interest in any of the Subsidiaries of the Borrower
except as described on Schedule 4(d). The Common Stock of the Borrower on a
fully diluted basis outstanding as of the last Business Day preceding the
Closing Date is set forth on Schedule 4(d).

 

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(e) Consents. Except as set forth on Schedule 4(e), no consent, approval,
authorization or order of any court, governmental agency or body or arbitrator
having jurisdiction over the Borrower or any of its Affiliates, the Nasdaq
Capital Market (“NCM”), nor the Borrower’s shareholders is required for the
execution by the Borrower of the Transaction Documents and compliance and
performance by the Borrower of its obligations under the Transaction Documents,
including, without limitation, the issuance and sale of the Securities, except
the filing by the Borrower of a Notice of Sale of Securities on Form D with the
Commission under Regulation D of the Securities Act and applicable Blue Sky
filings. The Transaction Documents and the Borrower’s performance of its
obligations thereunder have been approved unanimously by the Borrower’s
directors.

(f) No Violation or Conflict. Except as set forth on Schedule 4(f), neither the
sale and issuance of the Securities nor the performance of the Borrower’s
obligations under this Agreement and all other agreements entered into by the
Borrower relating thereto by the Borrower 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 articles or certificate
of incorporation, charter or bylaws of the Borrower, (B) to the Borrower’s
knowledge, any decree, judgment, order, law, treaty, rule, regulation or
determination applicable to the Borrower of any court, governmental agency or
body, or arbitrator having jurisdiction over the Borrower or any of its
Subsidiaries or over the properties or assets of the Borrower 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
Borrower or any of its Subsidiaries is a party, by which the Borrower or any of
its Subsidiaries is bound, or to which any of the properties of the Borrower 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 Borrower, 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 Borrower; or

(ii) result in the creation or imposition of any lien, charge or encumbrance
upon the Securities or any of the assets of the Borrower or any of its
Subsidiaries; or

(iii) result in the activation of any anti-dilution rights or a reset or
repricing of any debt or security instrument of any other creditor or equity
holder of the Borrower, nor result in the acceleration of the due date of any
obligation of the Borrower; or

(iv) result in the activation of any piggy-back or other registration rights of
any person or entity holding securities of the Borrower or having the right to
receive securities of the Borrower.

(g) The Securities. If and when issued, the Securities upon issuance:

(i) are, or will be, free and clear of any security interests, liens, claims or
other encumbrances, subject to restrictions upon transfer under the 1933 Act and
any applicable state securities laws;

(ii) have been, or will be, duly and validly authorized and on the date of
issuance of the Continuation Shares, exercise of the Warrants and issuance of
the Warrant Shares against payment therefor will be duly and validly issued,
fully paid and nonassessable and the Warrant Shares, if registered for resale
pursuant to the 1933 Act and resold pursuant to an effective registration
statement under the 1933 Act, will be free trading and unrestricted;

 

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(iii) will not have been issued or sold in violation of any preemptive or other
similar rights of the holders of any securities of the Borrower;

(iv) will not subject the holders thereof to personal liability by reason of
being such holders; and

(v) will have been issued in reliance upon an exemption from the registration
requirements of and will not result in a violation of Section 5 under the 1933
Act.

(h) Reporting Company. The Borrower is a publicly-held company subject to
reporting obligations pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the “1934 Act”) and has a class of common shares registered
pursuant to Section 12(g) of the 1934 Act. Except for the Form 10-K for the
fiscal year ended October 1, 2006, the Borrower has timely filed all reports and
other materials required to be filed thereunder with the Commission during the
preceding twelve months pursuant to the provisions of the 1934 Act.

(i) Information Concerning Borrower. The Reports contain all material
information relating to the Borrower and its operations and financial condition
as of their respective dates which information is required to be disclosed
therein. Since the date of the latest financial statements included in the
Reports, and except as modified in the Other Written Information or in the
Schedules, there has been no material adverse change in the Borrower’s business,
financial condition or affairs not disclosed in the Reports (it being understood
that by signing this Agreement, the Lender shall be deemed to have agreed in
writing to receiving such Other Written Information and Schedules). As of their
respective dates, the Reports did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances when
made. The Other Written Information does not constitute material non-public
information.

(j) No Market Manipulation. The Borrower will not take, directly or indirectly,
any action designed to, or that might reasonably be expected to, cause or result
in stabilization or manipulation of the price of the Common Stock of the
Borrower to facilitate the sale or resale of the Securities or affect the price
at which the Securities may be issued or resold.

(k) Listing. The Borrower’s Common Stock is listed on the NCM under the symbol
IRSN. Except for a notice received during January 2007, which has been
satisfactorily resolved, the Borrower has not received any oral or written
notice that the Common Stock is not eligible nor will become ineligible for
listing on the NCM nor that the Common Stock does not meet all requirements for
the continuation of such listing. As of the date of this Agreement and the
Closing Date, the Borrower satisfies all the requirements for the continued
listing and trading of the Common Stock on the NCM.

(l) Stop Transfer. The Securities, when issued, will be restricted securities.
The Borrower will not issue any stop transfer order or other order impeding the
sale, resale or delivery of any of the Securities, except as may be required in
order to facilitate compliance with applicable federal or state securities laws
and unless contemporaneous notice of such instruction is given to the Lender.

(m) Not an Integrated Offering. Neither the Borrower, nor any of its Affiliates,
nor to its knowledge, any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Borrower for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the NCM which would impair the exemptions relied

 

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upon in the offer and issuance of the Note and Securities, if and when offered
and issued (“Offering”), the Borrower’s ability to timely comply with its
obligations hereunder, or the continued listing of the Common Stock on the NCM.
Nor will the Borrower or any of its Affiliates take any action or steps that
would cause the Offering to be integrated with other offerings which integration
would impair the exemptions relied upon in the Offering or the Borrower’s
ability to timely comply with its obligations hereunder, or under the rules and
regulations of the NCM, or impair the continued listing of the Common Stock on
the NCM. The Borrower will not conduct any offering that will be integrated with
the Offering, which integration would impair the exemptions relied upon in the
Offering or the Borrower’s ability to timely comply with its obligations
hereunder or under the rules and regulations of the NCM, or impair the continued
listing of the Common Stock on the NCM.

(n) No General Solicitation. Neither the Borrower, nor any of its Affiliates,
nor to its knowledge, any person acting on its or their behalf, has engaged or
will engage in any form of general solicitation or general advertising (within
the meaning of Regulation D under the 1933 Act) in connection with the Offering.

(o) Dilution. The Borrower’s executive officers and directors understand the
nature of the Securities issuable hereunder and recognize that the issuance of
the Securities, if and when issued, will have a potential dilutive effect on the
equity holdings of other holders of the Borrower’s equity or rights to receive
equity of the Borrower. The board of directors of the Borrower has unanimously
concluded, in its good faith business judgment, that the issuance of the
Securities, if and when issued, is in the best interests of the Borrower. The
Borrower specifically acknowledges that if and when an obligation arises to
issue the Continuation Shares, Warrants and Warrant Shares upon exercise of the
Warrants, such obligation will be binding upon the Borrower and enforceable
regardless of the dilution such issuance may have on the ownership interests of
other shareholders of the Borrower or parties entitled to receive equity of the
Borrower.

(p) No Disputes with Accountants and Lawyers. There are no disputes of any kind
presently existing, or reasonably anticipated by the Borrower to arise, between
the Borrower and the accountants and lawyers formerly or presently employed by
the Borrower, including but not limited to disputes or conflicts over payment
owed to such accountants and lawyers. Schedule 4(p) describes the status of the
Borrower’s relationship with its accountants.

(q) Incorporation by Reference. Except as modified on Schedule 4(q), the
Borrower hereby represents and warrants for itself and each Subsidiary that all
of the representations made by Borrower in Section 4 of a certain Term Loan and
Security Agreement between Lender and Alpha Capital Anstalt as Lenders and the
Borrower, dated as of December 29, 2006, are true and correct in all material
respects as of the date of this Agreement and will be true and correct in all
material respects as of the Closing Date, subject to such qualifications and
exceptions set forth therein or in the Schedules delivered by Borrower
therewith.

(r) Subsidiary Representations. The Borrower makes each of the representations
contained in Sections 4(a), (b), (c), (d), (e), (f), (p) and (q) of this
Agreement, as same relate to each Subsidiary of the Borrower, with the same
qualifications to each such representation.

(s) DTC Status/Transfer Agent. The Borrower’s transfer agent is eligible to
participate in and the Common Stock is eligible for transfer through DWAC
pursuant to the Depository Trust Company Automated Securities Transfer Programs,
subject to any restrictions imposed by securities laws. The name, address,
telephone number, fax number, contact person and email address of the Borrower
transfer agent are set forth on Schedule 4(s).

 

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(t) Correctness of Representations. The Borrower represents that the foregoing
representations and warranties are true and correct as of the date hereof in all
material respects, and, unless the Borrower otherwise notifies Lender prior to
the Closing Date and Delivery Date, shall be true and correct in all material
respects as of the Closing Date and Delivery Date, respectively. The Borrower
will deliver to Lender on the Delivery Date, the Schedules described herein,
updated and amended to be accurate in all material respects as of August 15,
2007 and the last Business Day preceding the Delivery Date.

(u) Survival. The foregoing representations and warranties shall survive the
Closing Date for a period of three years.

5. Regulation D Offering; Legal Opinion. The offer and issuance of the
Securities to Lender will be made pursuant to the exemption from the
registration provisions of the 1933 Act afforded by Section 4(2) of the 1933 Act
and/or Rule 506 of Regulation D promulgated thereunder. Provided that the
representations and warranties of Lender contained herein are true and accurate
on the Delivery Date and that no facts have changed since the Closing Date, the
Borrower will provide an opinion to Lender on the Delivery Date from the
Borrower’s legal counsel opining on the availability of an exemption from
registration under the 1933 Act as it relates to the Offering set forth in the
form of legal opinion set forth in an exhibit delivered to Lender on the date
hereof. The Borrower will provide an opinion to Lender on the Closing Date from
the Borrower’s legal counsel opining on certain other matters set forth in the
form of legal opinion set forth in an exhibit delivered to Lender on the date
hereof. The Borrower will provide its transfer agent, at the Borrower’s expense,
such other legal opinions in the future as are reasonably necessary for the
issuance and resale of the Warrants, Warrant Shares and Continuation Shares.

6. Covenants of the Borrower. The Borrower covenants and agrees with the Lender
as follows:

(a) Stop Orders. The Borrower will advise the Lender, within four hours after
the Borrower or its attorneys receive actual notice of issuance by the
Commission, the Principal Market (as defined in Section 6(b)) or any other
trading or listing market, any state securities commission or any other
regulatory authority of any stop order or of any order preventing or suspending
any offering of any Securities, or of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.

(b) Listing. From the date of this Agreement and until the sooner of (i) three
(3) years after the Delivery Date, or (ii) until all the Warrant Shares and
Continuation Shares have been resold or transferred by Lender pursuant to a
registration statement or pursuant to Rule 144, without regard to volume
limitations (“End Date”), the Borrower will maintain the listing or quotation of
its Common Stock on the American Stock Exchange, NCM, Nasdaq Global Market,
Nasdaq Global Select Market, or New York Stock Exchange (whichever of the
foregoing is at the time the principal trading exchange or market for the Common
Stock (the “Principal Market”)), and will comply in all respects with the
Borrower’s reporting, filing and other obligations under the bylaws or rules of
the Principal Market, as applicable. The Borrower will provide Lender copies of
all notices it receives notifying the Borrower of the threatened and actual
delisting of the Common Stock from any Principal Market. As of the date of this
Agreement, the NCM is the Principal Market.

(c) Market Regulations. The Borrower shall notify the Commission, Principal
Market and applicable state authorities, in accordance with their requirements,
of the transactions contemplated by this Agreement, and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Securities to
Lender and promptly provide copies thereof to Lender.

 

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(d) Filing Requirements. From the date of this Agreement until the End Date, the
Borrower will (A) cause its Common Stock to continue to be registered under
Section 12(b) or 12(g) of the 1934 Act, (B) comply in all respects with its
reporting and filing obligations under the 1934 Act, (C) voluntarily comply with
all reporting requirements that are applicable to an issuer with a class of
shares registered pursuant to Section 12(g) of the 1934 Act, if Borrower is not
subject to such reporting requirements, and (D) comply with all requirements
related to any registration statement filed in connection with any of the
Securities. The Borrower will use its best efforts not to take any action or
file any document (whether or not permitted by the 1933 Act or the 1934 Act or
the rules thereunder) to terminate or suspend such registration or to terminate
or suspend its reporting and filing obligations under said acts until three
(3) years after the Closing Date. From the date of this Agreement until the End
Date, the Borrower will use its best efforts to continue the listing or
quotation of the Common Stock on a Principal Market and will comply in all
respects with the Borrower’s reporting, filing and other obligations under the
bylaws or rules of the Principal Market. The Borrower agrees to timely file a
Form D with respect to the Securities if required under Regulation D and to
provide a copy thereof to Lender promptly after such filing.

(e) Reservation. Prior to the Closing Date, the Borrower undertakes to reserve,
pro rata, on behalf of Lender, from its authorized but unissued Common Stock, a
number of common shares equal to the Continuation Shares and 115% of the amount
of Warrant Shares issuable upon exercise of the Class B Warrants. For so long as
the Securities are issued or are issuable, failure to have sufficient shares
reserved pursuant to this Section 6(e) for three (3) consecutive business days
or ten (10) days in the aggregate shall be a material default of the Borrower’s
obligations under this Agreement.

(f) Confidentiality/Public Announcement. From the date of this Agreement and
until the End Date, the Borrower agrees that except in connection with a Form
8-K and any registration statement or statements regarding the Securities, or in
any other correspondence or filings with the Commission or the Principal Market,
it will not disclose publicly or privately the identity of Lender unless
expressly agreed to in writing by Lender or only to the extent required by law
and then only upon three business days prior notice to Lender. In any event and
subject to the foregoing, the Borrower undertakes to file a Form 8-K or make a
public announcement describing the Offering not later than the fourth business
day after the Closing Date and to file a Form 8-K or make a public announcement
not later than four business days after exercise of the Prepayment Option or, in
the event the Prepayment Option is not exercised by August 15, 2007, not later
than August 21, 2007 disclosing the non-exercise by the Borrower of the
Prepayment option and the particular terms thereof. Prior to filing or
announcement, such Forms 8-K or public announcements will be provided to Lender
for its review and approval not later than three business days prior to such
filing. In the Forms 8-K or public announcements, the Borrower will specifically
disclose the amount of Common Stock outstanding immediately prior to the filing
of the Form 8-K or public announcement. Except for notice or information
relating to the Offering, upon delivery by the Borrower to Lender after the
Closing Date of any notice or information, in writing, electronically or
otherwise, and while a Note, Continuation Shares, Warrants, or Warrant Shares
are held by Lender, unless the Borrower has in good faith determined that the
matters relating to such notice do not constitute material, nonpublic
information relating to the Borrower or Subsidiaries, or unless the Borrower has
complied with Section 6(h) hereof, or unless otherwise agreed to in writing by
the Lender, the Borrower shall within one business day after any such delivery
publicly disclose such material, nonpublic information on a Report on Form 8-K
or otherwise. In the event that the Borrower believes that a notice or
communication to Lender contains material, nonpublic information, relating to
the Borrower or Subsidiaries, the Borrower shall so indicate to the Lender

 

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contemporaneously with delivery of such notice or information. In the absence of
any such indication, the Lender shall be allowed to presume that all matters
relating to such notice and information do not constitute material, nonpublic
information relating to the Borrower or Subsidiaries.

(h) Non-Public Information. The Borrower covenants and agrees that neither it
nor any other person acting on its behalf has provided nor will provide Lender
or its agents or counsel with any information that the Borrower believes
constitutes material non-public information, unless prior thereto such Lender or
its agents or counsel shall have agreed in writing to receive such information.
The Borrower understands and confirms that Lender shall be relying on the
foregoing representations in effecting transactions in securities of the
Borrower.

(i) Special Waiver. The Borrower covenants not to exercise its right arising
under any agreement to which the Borrower and Lender are parties, to pay any
interest, damages or liquidated damages with the delivery of Common Stock, until
such time as such “payment in kind” will not cause or result in a violation of
the rules and regulations of the Principal Market, including but not limited to
those rules limiting the amount of Common Stock that may be issued without
filing a pre-approval application with the Principal Market or without obtaining
approval of the shareholders of the Borrower.

(j) Offering Restrictions. For so long as the Subordinated Debt Notes remain
outstanding and held by the Lender, except for Excepted Issuances (which shall
have the same meaning as given such term in the Class A Warrant other than
clause (xi) of such term unless the proceeds of such underwritten public
offering will fully retire the debt obligations Borrower owes to Lender) and
except for Excluded Stock (which shall have the same meaning as given such term
in the Subordinated Debt Notes other than clause (B) of such term), the Company
will not, without the prior written consent of the Lender, enter into an
agreement to issue any individual equity security, convertible debt security or
other individual security convertible into Common Stock or equity of the Company
at a price that would trigger the anti-dilution provisions set forth in
Section 10(d) of the Subordinated Debt Notes; provided however, that no consent
of the Lender shall be required for the issuance of any convertible security
that has an exercise price or conversion price above the Conversion Price set
forth in Section 10(d) of the Subordinated Debt Notes).

7. Broker. The Borrower on the one hand, and Lender on the other hand, agrees to
indemnify the other against and hold the other harmless from any and all
liabilities to any persons claiming brokerage commissions or finder’s fees or
similar payments on account of services purported to have been rendered on
behalf of the indemnifying party in connection with this Agreement or the
transactions contemplated hereby and arising out of such party’s actions. The
Borrower represents that there are no parties entitled to receive fees,
commissions, or similar payments in connection with the Offering.

8. Legal Fees. On the Closing Date, the Borrower shall pay to Grushko & Mittman,
P.C., a fee of $40,000 (“Legal Fees”) as reimbursement for services rendered to
Lender in connection with this Agreement and the issuance of the Note. The Legal
Fees and reimbursement for estimated UCC search and filing fees and credit
reports, if any, will be payable on the Closing Date.

9. Covenants of the Borrower and Lender Regarding Indemnification.

(a) The Borrower agrees to indemnify, hold harmless, reimburse and defend the
Lender, the Lender’s officers, directors, agents, Affiliates, attorneys, control
persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Lender or any such person which results,
arises

 

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out of or is based upon (i) any material misrepresentation by Borrower or breach
of any warranty by Borrower in this Agreement or in any Exhibits or Schedules,
or other agreement delivered pursuant hereto; or (ii) after any applicable
notice and/or cure periods, any breach or default in performance by the Borrower
of any covenant or undertaking to be performed by the Borrower hereunder, or any
other agreement entered into by the Borrower and Lender relating hereto.

(b) Lender agrees to indemnify, hold harmless, reimburse and defend the Borrower
and each of the Borrower’s officers, directors, agents, Affiliates, attorneys,
control persons against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or imposed
upon the Borrower or any such person which results, arises out of or is based
upon (i) any material misrepresentation by such Lender in this Agreement or in
any Exhibits or Schedules, or other agreement delivered pursuant hereto; or
(ii) after any applicable notice and/or cure periods, any breach or default in
performance by Lender of any covenant or undertaking to be performed by Lender
hereunder, or any other agreement entered into by the Borrower and Lender,
relating hereto.

(c) In no event shall the liability of Lender or permitted successor hereunder
or under any other agreement delivered in connection herewith be greater in
amount than the amount of the Advance that is actually repaid to Lender by
Borrower.

(d) The procedures set forth in Section 5 of a certain Registration Rights
Agreement dated as of December 29, 2006, to which Borrower and Lender are
parties shall apply to the indemnification set forth in Sections 9(a) and 9(b)
above.

10. Miscellaneous.

(a) 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 below 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.
The addresses for such communications shall be: (i) if to the Borrower, to:
Irvine Sensors Corporation, 3001 Red Hill Avenue, Costa Mesa, CA 92650, Attn:
Chief Financial Officer, telecopier: (714) 444-8773, with a copy by telecopier
only to: Dorsey & Whitney LLP, 38 Technology Drive, Irvine, CA 92618, Attn:
Ellen S. Bancroft, Esq., telecopier: (949) 932-3601, and (ii) if to the Lender,
to: Longview Fund, L.P., 600 Montgomery Street, 44th Floor, San Francisco, CA
94111, Attn: S. Michael Rudolph, telecopier: (415) 981-5301, with an additional
copy by telecopier only to: Grushko & Mittman, P.C., 551 Fifth Avenue, Suite
1601, New York, New York 10176, telecopier: (212) 697-3575.

(b) Entire Agreement; Assignment. This Agreement and other documents delivered
in connection herewith represent the entire agreement between the parties hereto
with respect to the subject matter hereof and may be amended only by a writing
executed by both parties. Except as set forth or referred to herein, all other
agreements to which the Borrower, Lender, Subsidiaries, and Affiliates

 

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are parties remain in full force and effect and unmodified. Neither the Borrower
nor Lender has relied on any representations not contained or referred to in
this Agreement and the documents delivered herewith. No right or obligation of
the Borrower shall be assigned without prior notice to and the written consent
of Lender.

(c) 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 by facsimile transmission.

(d) Law Governing this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the State of New York. The parties and the individuals executing this Agreement
and other agreements referred to herein or delivered in connection herewith on
behalf of the Borrower agree to submit to the jurisdiction of such courts and
waive trial by jury. The prevailing party shall be entitled to recover from the
other party its reasonable attorney’s fees and costs. In the event that any
provision of this Agreement or any other agreement delivered in connection
herewith is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of any agreement.

(e) Specific Enforcement, Consent to Jurisdiction. The Borrower and Lender
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to which
any of them may be entitled by law or equity. Subject to Section 10(d) hereof,
each of the Borrower, Lender and any signatory hereto in his personal capacity
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction in New York of
such court, that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is improper. Nothing
in this Section shall affect or limit any right to serve process in any other
manner permitted by law.

(f) Calendar Days. All references to “days” in the Transaction Documents shall
mean calendar days unless otherwise stated. The terms “business days” and
“trading days” shall mean days that the New York Stock Exchange is open for
trading for three or more hours. Time periods shall be determined as if the
relevant action, calculation or time period were occurring in New York City.

(g) Default and Waiver. The Borrower acknowledges that (i) the failure to obtain
the Lender’s and Alpha’s consent to the Borrower’s issuance on May 16, 2007 of a
warrant to purchase up to 200,000 shares of common stock is a technical default
under the Subscription Agreement (the “Consent Default”), and (ii) the failure
to register shares of Common Stock issued or issuable to Lender constitutes a
technical default under the Subscription Agreement and the Registration Rights
Agreement dated December 29, 2006 but shall not be deemed to be to be a cross
default for purposes of the Note. The Lender waives such failures solely for
purposes of accelerating or requiring repurchase of the obligations under any
agreement or instrument between the Borrower and/or its subsidiaries and the
Lender and/or Alpha, triggering default

 

13

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interest under any such agreement or instrument (but only with respect to the
Consent Default), exercising remedies with respect to collateral (including
without limitation account collections, settlements, adjustments or compromises,
returned inventory, and inspection, audit and appraisal) securing the
obligations under any such agreement or instrument, claiming a cross-default
under any such agreement or instrument, tolling any restriction periods in any
such agreement or instrument, preventing the payment of interest in shares of
Borrower’s common stock under any such agreement or instrument (but only with
respect to the Consent Default), or preventing Borrower’s ability to repurchase
stock from former employees or directors of Borrower under any such agreement or
instrument. Notwithstanding the foregoing, (i) such waiver of the failure to
register the shares of Common Stock issued or issuable to Lender shall not
constitute a waiver of any default interest or liquidated damages that may have
accrued or will accrue with respect to such default ; (ii) such waiver shall
continue only so long as Tim Looney, TWL Group, L.P. or their Affiliates do not
attempt to accelerate or collect any obligations owed to them by Borrower or
Optex Systems, Inc. nor foreclose on any of their security interests in any of
the assets of Borrower, Optex Systems, Inc. or their Subsidiaries; and
(iii) subject to the foregoing, Lender hereby agrees to extend the deadline to
register any such shares until October 19, 2007. Except as specifically set
forth herein or in the Note, no provision of this Agreement shall be deemed a
waiver of any default by the Borrower under any other agreement between the
Borrower and/or a Subsidiary and the Lender.

(h) Application of Payments. Anything in any Transaction Document to the
contrary notwithstanding, Lender, at Lender’s sole discretion and election, may
apply any payment received from or on behalf of Borrower or any Subsidiary to
any component or components of any obligation owed by Borrower or a Subsidiary
to Lender pursuant to the Transaction Documents or any other source, in any
sequence elected by Lender. The foregoing notwithstanding, payment of the
Redemption Amount described in Section 3 of the Note shall be applied as
described in Section 3 of the Note.

[THIS SPACE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the Borrower and Lender have entered into this Loan
Agreement as of July 19, 2007.

 

IRVINE SENSORS CORPORATION (“Borrower”) a Delaware corporation  

/s/John C. Carson

    (Signature)   Name:   John C. Carson   Title:   President and CEO  

 

LONGVIEW FUND, LP (“Lender”)

600 Montgomery Street, 44th Floor

San Francisco, CA 94111

Fax: (415) 981-5301

 

/s/ S. Michael Rudolph

    (Signature)   Name:   S. Michael Rudolph   Title:   CFO Investment Adviser  

[SIGNATURE PAGE TO LONGVIEW LOAN AGREEMENT]

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LIST OF EXHIBITS AND SCHEDULES

 

Exhibit A    Form of Note Exhibit B    Form of Class B Warrant Schedule 4(a)   
Subsidiaries Schedule 4(d)    Additional Issuances/Capitalization Schedule 4(e)
   Consents Schedule 4(f)    No Violation or Conflict Schedule 4(p)   
Accountants and Lawyers Schedule 4(q)    Exceptions to Incorporation by
Reference Schedule 4(r)    Subsidiary Representations Schedule 4(s)    Transfer
Agent