***New Secured Debt***means all obligations, liabilities and indebtedness of every nature of theCompany from time to time owed to the New Secured Note Holders under the New Secured Notes,including, without limitation, the principal amount of all debts, claims and indebtedness, accruedand unpaid interest and all costs and expenses, whether primary, secondary, direct, contingent,fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whetherbefore or after the filing of a Proceeding under the Bankruptcy Code together with any interestaccruing thereon after the commencement of a Proceeding, without regard to whether or not suchinterest is an allowed claim.***New Secured Notes***means the Senior Subordinated Promissory Notes due 2013, in an aggregateprincipal amount of $4,000,000 issued by the Company to Costa Brava and Griffin (as amended by thatcertain Second Omnibus Amendment, dated as of July 1, 2011, by and among the Debtor, the HolderRepresentative, Costa Brava, Griffin, and certain other investors party thereto).***New Secured Note Holders***means Costa Brava and Griffin as holders of the New Secured Notes, orany of their respective successors or assigns as the holders of the New Secured Notes.***Obligation***means, collectively, all indebtedness, liabilities, and obligations of Debtor tothe holders of the Notes and the Holder Representative arising under the Notes and this SecurityAgreement. The Obligation shall include, without limitation, future, *as well as*existing,indebtedness, liabilities, and obligations owed by Debtor to the holders of the Notes and theHolder Representative arising under the Notes and this Security Agreement.***Patents***has the meaning set forth in ***Section 4***hereof.***Permitted Liens***means the liens and security interests permitted by the Notes, including, forthe avoidance of doubt, the liens and security interests securing Debtor’s obligations with respectto the Existing Secured Note.***Previous Convertible Debt***means all obligations, liabilities and indebtedness of every natureof the Company from time to time owed to the Previous Convertible Note Holders under the PreviousConvertible Notes, including, without limitation, the principal amount of all debts, claims andindebtedness, accrued and unpaid interest and all costs and expenses, whether primary, secondary,direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, dueor payable, whether before or after the filing of a Proceeding under the Bankruptcy Code togetherwith any interest accruing thereon after the commencement of a Proceeding, without regard towhether or not such interest is an allowed claim.***Previous Convertible Notes***means the 12% Subordinated Secured Convertible Notes due 2015, inan aggregate principal amount not to exceed $11,020,800, that have been issued and may in thefuture be issued by the Company pursuant to that certain Securities Purchase Agreement, dated as ofDecember 23, 2010, among the Company and the initial holders of such Previous Convertible Notes (asamended by that certain Second Omnibus Amendment, dated as of July 1, 2011, by and among theDebtor, the Holder Representative, Costa Brava, Griffin, and certain other investors partythereto).
 
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***Previous Convertible Note Holders***means Costa Brava, Griffin and certain other investors asholders of the Previous Convertible Notes, or any of their respective successors or assigns as theholders of the Previous Convertible Notes.***Security Interest***means the security interest granted and the pledge and assignment made under***Section 3***hereof.***Summit***means Summit Financial Resources, L.P., a Hawaii limited partnership.***Summit Consent Letter***means the letter, dated as of June 30, 2011, from Summit to the Companyconsenting, among other things, to the issuance of the Notes and waiving certain defaults under theSummit Financing Agreement.***Summit Debt***means all obligations, liabilities and indebtedness of every nature of the Companyfrom time to time owed to Summit under the Summit Financing Agreement, including, withoutlimitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interestand all costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise,heretofore, now and from time to time hereafter owing, due or payable, whether before or after thefiling of a Proceeding under the Bankruptcy Code together with any interest accruing thereon afterthe commencement of a Proceeding, without regard to whether or not such interest is an allowedclaim.***Summit Financing Agreement***means the Financing Agreement, dated as of June 16, 2009, betweenthe Company and Summit.***Trademarks***has the meaning set forth in ***Section 4***hereof.***UCC***means the Uniform Commercial Code, including each such provision as it may subsequently berenumbered, as enacted in the State of New York or other applicable jurisdiction, as amended at thetime in question.**3. SECURITY INTEREST**. In order to secure the full and complete payment and performance of theObligation when due, Debtor hereby grants to Holder Representative for the benefit of the holdersof the Notes a Security Interest in all of Debtor’s rights, titles, and interests in and to theCollateral and pledges, collaterally transfers, and assigns the Collateral to Holder Representativefor the benefit of the holders of the Notes, all upon and subject to the terms and conditions ofthis Security Agreement. Such Security Interest is granted and pledge and assignment are made assecurity only and shall not subject Holder Representative to, or transfer or in any way affect ormodify, any obligation of Debtor with respect to any of the Collateral or any transaction involvingor giving rise thereto. If the grant, pledge, or collateral transfer or assignment of any specificitem of the Collateral is expressly prohibited by any contract or by law, then the SecurityInterest created hereby nonetheless remains effective to the extent allowed by such contract, theUCC or other applicable laws, but is otherwise limited by that prohibition.
 
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**4. COLLATERAL**. As used herein, the term “*Collateral*” means the following items and types ofproperty, wherever located, now owned or in the future acquired by Debtor, and all proceeds andproducts thereof, and any substitutes or replacements therefor:(a) All accounts, chattel paper (whether tangible or electronic), goods (including inventory,equipment, and any accessions thereto), software, instruments, investment property, documents,deposit accounts, money, commercial tort claims, letters of credit or letter-of-credit rights,supporting obligations, tax refunds, general intangibles (including payment intangibles) and allbooks and records pertaining to the foregoing;(b) (i) All copyrights (whether statutory or common law, registered or unregistered), worksprotectable by copyright, copyright registrations, copyright licenses, and copyright applicationsof Debtor, including, without limitation, all of Debtor’s right, title, and interest in and to allcopyrights registered in the United States Copyright Office or anywhere else in the world and alsoincluding, without limitation, the copyrights set forth on ***Schedule B***; (ii) all renewals,extensions, and modifications thereof; (iii) all income, licenses, royalties, damages, profits, andpayments relating to or payable under any of the foregoing; (iv) the right to sue for past,present, or future infringements of any of the foregoing; and (v) all other rights and benefitsrelating to any of the foregoing throughout the world; in each case, whether now owned or hereafteracquired by Debtor (the “***Copyrights***”);(c) (i) All patents, patent applications, patent licenses, and patentable inventions ofDebtor, including, without limitation, registrations, recordings, and applications thereof in theUnited States Patent and Trademark Office or in any similar office or agency of the United States,any state thereof or any other country or any political subdivision thereof, including, withoutlimitation, those set forth on ***Schedule B***, and all of the inventions and improvements described andclaimed therein; (ii) all continuations, divisions, renewals, extensions, modifications,substitutions, reexaminations, continuations-in-part, or reissues of any of the foregoing; (iii)all income, royalties, profits, damages, awards, and payments relating to or payable under any ofthe foregoing; (iv) the right to sue for past, present, and future infringements of any of theforegoing; and (v) all other rights and benefits relating to any of the foregoing throughout theworld; in each case, whether now owned or hereafter acquired by Debtor (the “***Patents***”);(d) (i) All trademarks, trademark licenses, trade names, corporate names, company names,business names, fictitious business names, trade styles, service marks, certification marks,collective marks, logos, other business identifiers, all registrations, recordings, andapplications thereof, including, without limitation, registrations, recordings, and applications inthe United States Patent and Trademark Office or in any similar office or agency of the UnitedStates, any state thereof or any other country or any political subdivision thereof, including,without limitation, those set forth on ***Schedule B***; (ii) all reissues, extensions, and renewalsthereof; (iii) all income, royalties, damages, and payments now or hereafter relating to or payableunder any of the foregoing, including, without limitation, damages or payments for past or futureinfringements of any of the foregoing; (iv) the right to sue for past, present, and futureinfringements of any of the foregoing; (v) all rights corresponding to any of the foregoingthroughout the world; and (vi) all goodwill associated with and symbolized by any of the foregoing,in each case, whether now owned or hereafter acquired by Debtor (the “***Trademarks***”, and collectivelywith the Copyrights and the Patents, the “***Intellectual Property***”); *provided*that (i) with respectto any Trademarks, applications in the United States Patent and Trademark Office to registerTrademarks or service marks on the basis of the Company’s “intent to use” such Trademarks orservice marks will not be deemed to be Collateral unless and until a“Statement of Use” or “Amendment to Allege Use” has been filed and accepted in the UnitedStates Patent and Trademark Office, whereupon such application shall be automatically subject tothe security interest granted herein and deemed to be included in the Collateral;
 
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(e) All present and future distributions, income, increases, profits, combinations,reclassifications, improvements, and products of, accessions, attachments, and other additions to,tools, parts, and equipment used in connection with, and substitutes and replacements for, all orpart of the Collateral described above;(f) All present and future accounts, contract rights, general intangibles, chattel paper,documents, instruments, cash and noncash proceeds, and other rights arising from or by virtue of,or from the voluntary or involuntary sale or other disposition of, or collections with respect to,or insurance proceeds payable with respect to, or proceeds payable by virtue of warranty or otherclaims against the manufacturer of, or claims against any other person or entity with respect to,all or any part of the Collateral heretofore described in this clause or otherwise; and(g) All present and future security for the payment to Debtor of any of the Collateraldescribed above and goods which gave or will give rise to any such Collateral or are evidenced,identified, or represented therein or thereby.The description of the Collateral contained in this ***Section 4***shall not be deemed to permitany action prohibited by this Security Agreement or by the terms incorporated in this SecurityAgreement. Furthermore, notwithstanding any contrary provision, Debtor agrees that, if, but forthe application of this paragraph, granting a Security Interest in the Collateral would constitutea fraudulent conveyance under *11 U.S.C. § 548*or a fraudulent conveyance or transfer under anystate fraudulent conveyance, fraudulent transfer, or similar law in effect from time to time (eacha “***fraudulent conveyance***”), then the Security Interest remains enforceable to the maximum extentpossible without causing such Security Interest to be a fraudulent conveyance, and this SecurityAgreement is automatically amended to carry out the intent of this paragraph. For the sake ofclarity, the Debtor and Holder Representative acknowledge and agree that Collateral does notinclude the interests owned by Optics 1, Inc. in certain Intellectual Property that is co-owned byOptics 1, Inc. and Debtor.**5. REPRESENTATIONS AND WARRANTIES**. Debtor represents and warrants to Holder Representative asof the date hereof that:(a) Transaction Documents. Certain representations and warranties in the TransactionDocuments are applicable to it or its assets or operations, and each such representation andwarranty is true and correct.
 
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(b) Binding Obligation/Perfection. This Security Agreement creates a legal, valid,and binding Security Interest in and to the Collateral in favor of Holder Representative andenforceable against Debtor except as the enforceability thereof may be limited by bankruptcy,insolvency, moratorium, reorganization or similar laws affecting the enforcement of creditors’rights generally, and except for judicial limitations on the enforcement of the remedy of specificperformance and other equitable remedies. For Collateral in which the Security Interest may beperfected by the filing of Financing Statements, once those Financing Statements have beenproperly filed in the jurisdiction described on ***Schedule A***hereto, and, in the case of theRegistered IP (as defined below) with respect to which a security interest may be perfected byfiling, recording or registration in the United States (or any political subdivisions thereof) andits territories and possessions, upon the receipt and recording of a short form of this SecurityAgreement with the United States Patent and Trademark Office or the United States Copyright Office,as applicable, the Security Interest in such Collateral will be fully perfected, subject only toPermitted Liens. Other than the Financing Statements and with respect to this Security Agreement,there are no other financing statements or control agreements covering any Collateral, other thanthose evidencing Permitted Liens. The creation of the Security Interest does not require theconsent of any person or entity that has not been obtained.(c) Debtor Information. Debtor’s exact legal name, mailing address, jurisdiction oforganization, type of entity, and state issued organizational identification number are as setforth on ***Schedule A***hereto.(d) Location/Fixtures. (i) Debtor’s place of business and chief executive office iswhere Debtor is entitled to receive notices hereunder; the present and foreseeable location ofDebtor’s books and records concerning any of the Collateral that is accounts is as set forth on***Schedule A***hereto, and the location of all other Collateral, including, without limitation,Debtor’s inventory and equipment is as set forth on ***Schedule A***hereto; and, *except*as noted on***Schedule A***hereto, all such books, records, and Collateral are in Debtor’s possession.(e) Governmental Authority. No authorization, approval, or other action by, and nonotice to or filing with, any governmental authority is required for the pledge by Debtor of theCollateral pursuant to this Security Agreement or for the execution, delivery, or performance ofthis Security Agreement by Debtor, other than filings with applicable governmental authorities toperfect the security interests created hereby.(f) Liens. Debtor owns all existing Collateral free and clear of all liens, *except*Permitted Liens.(g) Intellectual Property.(i) All of Debtor’s interests in the Debtor’s issued Patents, Patent applications,registered Trademarks, Trademark applications, registered Copyrights, and Copyrightapplications are identified on ***Schedule B***hereto (the “***Registered IP***”). Debtor herebyagrees to deliver to Holder Representative, within 30 days of the date hereof, fullyexecuted short forms of this Security Agreement in substantially the form attached as***Exhibits I, II***and ***III***, as applicable, containing a description of the Registered IPconsisting of Patents or Patent applications, Trademarks or Trademark applications orCopyrights or Copyright applications, as applicable, for recording by the United StatesPatent and Trademark Office or the United States Copyright Office, as applicable.(ii) Debtor is the owner of the Registered IP included in the Collateral, free andclear of any liens *other than*(A) any Permitted Liens or (B) any licenses permitted by***Section 8(c)***.
 
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**6. COVENANTS**. Until the Obligation is paid and performed in full, Debtor covenants and agreeswith Holder Representative that Debtor will:(a) Information/Record of Collateral. Maintain, at the place where Debtor is entitledto receive notices under the Notes, a current record of where all material Collateral is located,permit representatives of Holder Representative at any time, upon reasonable prior written noticeduring normal business hours to inspect and make abstracts from such records (*provided*, that solong as no Default exists, Holder Representative shall conduct such inspections no more frequentlythan annually), and furnish to Holder Representative, at such intervals as Holder Representativemay reasonably request, such documents, lists, descriptions, certificates, and other information asmay be reasonably necessary or proper to keep Holder Representative informed with respect to theidentity, location, and status of the Collateral.(b) Schedules. Notwithstanding any other provision herein, Debtor’s failure todescribe any Collateral required to be listed on any schedule hereto shall not impair HolderRepresentative’s Security Interest therein.(c) Obligations. Notwithstanding anything contained herein to the contrary, (i)Debtor shall remain liable under the contracts, agreements, documents, and instruments included inthe Collateral to the extent set forth therein to perform all of its duties and obligationsthereunder to the same extent as if this Security Agreement had not been executed, and (ii) unlessand until Holder Representative forecloses thereon and becomes the owner thereof pursuant to theexercise of its remedies hereunder, Holder Representative shall not have any liability orobligation under any of such contracts, agreements, documents and instruments, and HolderRepresentative shall not be obligated to perform any of the obligations or duties of Debtorthereunder or to take any action to collect or enforce any claim for payment assigned thereunder.(d) Notices. (i) Except as may be otherwise expressly permitted under the terms ofthe Transaction Documents, promptly notify Holder Representative of (A) any claim, action, orproceeding that materially affects title to all or any of the Collateral or the Security Interest;(B) any material damage to or loss of any material Collateral, and (C) the occurrence of any otherevent or condition (including, without limitation, matters as to lien priority) that could have amaterial adverse effect on the Collateral (taken as a whole) or the Security Interest createdhereunder; and (ii) give Holder Representative thirty (30) days written notice before any proposed(A) relocation of its principal place of business or chief executive office, (B) change of its nameor identity; (C) relocation of the place where its books and records concerning its accounts arekept; (D) relocation of any Collateral (*other than*delivery of inventory in the ordinary course ofbusiness to third party contractors for processing and sales of inventory in the ordinary course ofbusiness or as permitted by the Transaction Documents) to a location not described on the attached***Schedule A***, and (E) change of its jurisdiction of organization or organizational identificationnumber, as applicable. Prior to making any of the changes contemplated in *clause (ii)*preceding,Debtor shall execute and deliver all such additionaldocuments and perform all additional acts as Holder Representative may reasonably request inorder to continue or maintain the existence and priority of the Security Interest in all of theCollateral.
 
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(e) Further Assurances. At Debtor’s expense and Holder Representative’s reasonablerequest (i) after a Default, file or cause to be filed such applications and take such otheractions as Holder Representative may reasonably request to obtain the consent or approval of anygovernmental authority to Holder Representative’s rights hereunder, including, without limitation,the right to sell all the Collateral upon a Default without additional consent or approval fromsuch governmental authority (and, because Debtor agrees that Holder Representative’s remedies atlaw for failure of Debtor to comply with this provision would be inadequate and that such failurewould not be adequately compensable in damages, Debtor agrees that its covenants in this provisionmay be specifically enforced); (ii) from time to time, either before or after a Default, promptlyexecute and deliver to Holder Representative all such other assignments, certificates, supplementaldocuments, and financing statements, and do all other acts or things as Holder Representative mayreasonably request in order to more fully create, evidence, perfect, continue, and preserve thepriority of the Security Interest and to carry out the provisions of this Security Agreement; and(iii) either before or after a Default, pay all filing fees in connection with any financing,continuation, or termination statement or other instrument with respect to the Security Interest.(f) Encumbrances. Not create, permit, or suffer to exist, and shall defend theCollateral against, any lien or other encumbrance on the Collateral other than Permitted Liens, andshall defend Debtor’s rights in the Collateral and Holder Representative’s Security Interest in,the Collateral against the claims and demands of all persons or entities except those holding orclaiming Permitted Liens.(g) Collection of Accounts. In accordance with prudent business practices, endeavorto collect or cause to be collected from each account debtor under its accounts, as and when due,any and all amounts owing under such accounts.(h) Intellectual Property.(i) Give Holder Representative prompt written notice if Debtor shall obtain rights toor become entitled to the benefit of any additional issued patents, registered trademarks orregistered copyrights (or makes application therefor) that are not identified on ***Schedule B***hereto; promptly (but in no event later than 30 days thereafter) deliver to HolderRepresentative an appropriate short form of this Security Agreement in substantially theform of ***Exhibit I, II***or ***III***, as applicable, containing a description of such additionalRegistered IP, for recording by the United States Patent and Trademark Office or the UnitedStates Copyright Office, as applicable; and cooperate as reasonably necessary to enableHolder Representative to make such recordations.(ii) If a Default exists, use its reasonable efforts to obtain any consents, waivers,or agreements necessary to enable Holder Representative to exercise its rights and remedieswith respect to the Intellectual Property.
 
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(iii) Not transfer, assign or otherwise dispose of any of the Intellectual Propertyincluded in the Collateral except as permitted in the Note.(iv) Except to the extent that failure to act could not reasonably be expected to havea Material Adverse Effect, take all commercially reasonable steps necessary to (x) maintainthe validity and enforceability of any Registered IP and maintain such Registered IP in fullforce and effect and (y) pursue the application, obtain the relevant registration andmaintain the registration of each of its Patents, Trademarks and Copyrights, including,without limitation, by the payment of required fees and taxes, the filing of responses tooffice actions issued by the U.S. Patent and Trademark Office, the U.S. Copyright Office orother governmental authorities, the filing of applications for renewal or extension, thefiling of affidavits, the filing of divisional, continuation, continuation-in-part, reissueand renewal applications or extensions, the payment of maintenance fees and theparticipation in interference, reexamination, opposition, cancellation, infringement andmisappropriation proceedings.(v) Except to the extent that failure to act could not reasonably be expected to have aMaterial Adverse Effect, not do or permit any act or knowingly omit to do any act wherebyany of its Intellectual Property may lapse, be terminated, or become invalid orunenforceable or placed in the public domain (or in case of a trade secret, lose itscompetitive value).(vi) Except to the extent that failure to act could not reasonably be expected to havea Material Adverse Effect, take all commercially reasonable steps to preserve and protecteach item of its Intellectual Property, including, without limitation, maintaining thequality of any and all products or services used or provided in connection with any of theTrademarks, consistent with the quality of the products and services as of the date hereof,and taking all commercially reasonable steps necessary to ensure that all licensed users ofany of the Trademarks abide by the applicable license’s terms with respect to the standardsof quality.Notwithstanding the foregoing provisions of this subsection (i) or anything to the contrary inthis Security Agreement, nothing in this Security Agreement shall prevent Debtor from discontinuingthe use or maintenance of any of its Intellectual Property, the enforcement of its licenseagreements or the pursuit of actions against infringers, if Debtor determines in its reasonablebusiness judgment that such discontinuance is desirable in the conduct of its business.**7. DEFAULT; REMEDIES**. If a Default exists, Holder Representative may, at its election (butsubject to Section 9 below and to the terms and conditions of the Transaction Documents), exerciseany and all rights available to a secured party under the UCC, in addition to any and all otherrights afforded by the Transaction Documents, at law, in equity, or otherwise, including, withoutlimitation, (a) requiring Debtor to assemble all or part of the Collateral and make it available toHolder Representative at a place to be designated by Holder Representative which is reasonablyconvenient to Debtor and Holder Representative, (b) surrendering any policies of insurance on allor part of the Collateral and receiving and applying the unearned premiums as a credit on theObligation, (c) applying by appropriate judicialproceedings for appointment of a receiver for all or part of the Collateral (and Debtor herebyconsents to any such appointment), and (d) applying to the Obligation any cash held by HolderRepresentative under this Security Agreement.
 
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(a) Notice. Reasonable notification of the time and place of any public sale of theCollateral, or reasonable notification of the time after which any private sale or other intendeddisposition of the Collateral is to be made, shall be sent to Debtor and to any other person orentity entitled to notice under the UCC. It is agreed that notice sent or given not less than tencalendar days prior to the taking of the action to which the notice relates is reasonablenotification and notice for the purposes of this subparagraph.(b) Condition of Collateral; Warranties. Holder Representative has no obligation toclean-up or otherwise prepare the Collateral for sale. Holder Representative may sell theCollateral without giving any warranties as to the Collateral. Holder Representative mayspecifically disclaim any warranties of title or the like. This procedure will not be consideredadversely to affect the commercial reasonableness of any sale of the Collateral.(c) Compliance with Other Laws. Holder Representative may comply with any applicablestate or federal laws in connection with a disposition of the Collateral and compliance will not beconsidered to adversely affect the commercial reasonableness of any sale of the Collateral.(d) Application of Proceeds. Holder Representative shall apply the proceeds of anysale or other disposition of the Collateral under this ***Section 7***in the following order: *first*, tothe payment of all expenses incurred in retaking, holding, and preparing any of the Collateral forsale(s) or other disposition, in arranging for such sale(s) or other disposition, and in actuallyselling or disposing of the same (all of which are part of the Obligation); *second*, towardrepayment of amounts expended by Holder Representative under ***Section 8***; and *third,*toward paymentof the balance of the Obligation in the order and manner as Holder Representative determines in itssole discretion. Any surplus remaining shall be delivered to Debtor or as a court of competentjurisdiction may direct. If the proceeds are insufficient to pay the Obligation in full, thenDebtor shall remain liable for any deficiency.(e) Sales on Credit. If Holder Representative sells any of the Collateral uponcredit, Debtor will be credited only with payments actually made by the purchaser, received by theHolder Representative, and applied to the indebtedness of the purchaser. In the event thepurchaser fails to pay for the Collateral, Holder Representative may resell the Collateral andDebtor shall be credited with the proceeds of the sale.**8. OTHER RIGHTS OF HOLDER REPRESENTATIVE**.(a) Performance. If Debtor fails to pay when due all taxes on any of the Collateralin the manner required by the Transaction Documents, or fails to preserve the priority of theSecurity Interest in any of the Collateral, or fails to keep the Collateral insured as required bythe Transaction Documents, or otherwise fails to perform any of its obligations under theTransaction Documents with respect to the Collateral, then Holder Representative may, at itsoption, but without being required to do so, and upon prior written notice to Debtor if no Defaultotherwise exists, pay such taxes, prosecute or defend any suits in relation to the Collateral,or insure and keep insured the Collateral in any amount deemed appropriate by HolderRepresentative, or take all other action which Debtor is required, but has failed or refused, totake under the Transaction Documents. Any sum which may be expended or paid by HolderRepresentative under this subparagraph (including, without limitation, court costs and reasonableattorneys’ fees) shall be payable by Debtor to Holder Representative upon demand and shall be partof the Obligation.
 
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(b) Collection. If a Default exists and upon written notice from HolderRepresentative, each Collateral Obligor with respect to any payments on any of the Collateral(including, without limitation, insurance proceeds payable by reason of loss or damage to any ofthe Collateral) is hereby authorized and directed by Debtor to make payment directly to HolderRepresentative, regardless of whether Debtor was previously making collections thereon. Until suchnotice is given, Debtor is authorized to retain and expend all payments made on Collateral. If aDefault exists, Holder Representative shall have the right in its own name or in the name of Debtorto compromise or extend time of payment with respect to all or any portion of the Collateral forsuch amounts and upon such terms as Holder Representative may determine; to demand, collect,receive, receipt for, sue for, compound, and give acquittances for any and all amounts due or tobecome due with respect to Collateral; to take control of cash and other proceeds of anyCollateral; to endorse the name of Debtor on any notes, acceptances, checks, drafts, money orders,or other evidences of payment on Collateral that may come into the possession of HolderRepresentative; to sign the name of Debtor on any invoice or bill of lading relating to anyCollateral, on any drafts against Collateral Obligors or other persons or entities making paymentwith respect to Collateral, on assignments and verifications of accounts or other Collateral and onnotices to Collateral Obligors making payment with respect to Collateral; to send requests forverification of obligations to any Collateral Obligor; and to do all other acts and thingsnecessary to carry out the intent of this Security Agreement. If a Default exists and anyCollateral Obligor fails or refuses to make payment on any Collateral when due, HolderRepresentative is authorized, in its sole discretion, either in its own name or in the name ofDebtor, to take such action as Holder Representative shall deem appropriate for the collection ofany amounts owed with respect to Collateral or upon which a delinquency exists. Regardless of anyother provision hereof, however, Holder Representative shall never be liable for its failure tocollect, or for its failure to exercise diligence in the collection of, any amounts owed withrespect to Collateral, nor shall it be under any duty whatsoever to anyone *except*Debtor to accountfor funds that it shall actually receive hereunder***.***(c) Intellectual Property. For purposes of enabling Holder Representative to exerciseits rights and remedies under this Security Agreement and enabling Holder Representative and itssuccessors and assigns to enjoy the full benefits of the Collateral, Debtor hereby grants to HolderRepresentative an irrevocable, nonexclusive license (exercisable without payment of royalty orother compensation to Debtor) to use, license, or sublicense any of Debtor’s rights in theIntellectual Property to the extent such rights are transferable but only during such time as aDefault exists. During the existence of a Default, Debtor shall provide Holder Representative withreasonable access to all media in which any of the Intellectual Property may be recorded or storedand all computer programs used for the completion or printout thereof. This license shall alsoinure to the benefit of all successors, assigns, and transferees of Holder Representative. If aDefault exists, Holder Representative may require thatDebtor assign all of its right, title, and interest in and to the Intellectual Property or anypart thereof to Holder Representative or such other person or entity as Holder Representative maydesignate pursuant to documents satisfactory to Holder Representative. If no Default exists, thenDebtor shall have the exclusive right and license to use the Intellectual Property in the ordinarycourse of business and the exclusive right to grant to other persons or entities licenses andsublicenses with respect to the Intellectual Property.
 
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(d) Use and Operation of Collateral. Should any Collateral come into the possessionof Holder Representative while a Default exists, Holder Representative may use or operate suchCollateral for the purpose of preserving it or its value pursuant to the order of a court ofappropriate jurisdiction or in accordance with any other rights held by Holder Representative inrespect of such Collateral. Debtor covenants to promptly reimburse and pay to HolderRepresentative, at Holder Representative’s request, the amount of all reasonable expenses(including, without limitation, the cost of any insurance and payment of taxes or other charges)incurred by Holder Representative in connection with its custody and preservation of Collateral,and all such expenses, costs, taxes and other charges shall be payable by Debtor to HolderRepresentative upon demand and shall become part of the Obligation. However, the risk ofaccidental loss or damage to, or diminution in value of, Collateral is on Debtor, and HolderRepresentative shall have no liability whatever for failure to obtain or maintain insurance, nor todetermine whether any insurance ever in force is adequate as to amount or as to the risks insured.With respect to Collateral that is in the possession of Holder Representative, HolderRepresentative shall have no duty to fix or preserve rights against prior parties to suchCollateral and shall never be liable for any failure to use diligence to collect any amount payablein respect of such Collateral, but shall be liable only to exercise reasonable care in thesafekeeping of any Collateral in its possession (it being agreed that treatment substantially equalto that which the Holder Representative accords its own property shall be deemed to constitute theexercise of reasonable care) and to account to Debtor for what it may actually collect or receivethereon. The provisions of this subparagraph are only applicable during the existence of aDefault.(e) Power of Attorney. Debtor hereby irrevocably constitutes and appoints HolderRepresentative and any officer or agent thereof, with full power of substitution, as its true andlawful attorney-in-fact with full power and authority in the name of Debtor or in its own name,while a Default exists, to take any and all action and to execute any and all documents andinstruments which Holder Representative at any time and from time to time deems necessary ordesirable to accomplish the purposes of this Security Agreement and, without limiting thegenerality of the foregoing, Debtor hereby gives Holder Representative the power and right onbehalf of Debtor and in its own name to do any of the following while a Default exists, withoutnotice to or the consent of Debtor:(i) to use the Intellectual Property or to grant or issue any exclusive ornon-exclusive license under the Intellectual Property to anyone else, and to perform any actnecessary for the Holder Representative to assign, pledge, convey, or otherwise transfertitle in or dispose of the Intellectual Property to any other person or entity;(ii) to demand, sue for, collect, or receive, in the name of Debtor or in its own name,any money or property at any time payable or receivable on account of or in exchange for anyof the Collateral and, in connection therewith, endorse checks, notes,drafts, acceptances, money orders, documents of title or any other instruments for thepayment of money under the Collateral or any policy of insurance;
 
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(iii) to pay or discharge taxes, liens, or other encumbrances levied or placed on orthreatened against the Collateral;(iv) to notify post office authorities to change the address for delivery of Debtor toan address designated by Holder Representative and to receive, open, and dispose of mailaddressed to Debtor; and(v) (A) to direct account debtors and any other parties liable for any payment underany of the Collateral to make payment of any and all monies due and to become due thereunderdirectly to Holder Representative or as Holder Representative shall direct; (B) to receivepayment of and receipt for any and all monies, claims, and other amounts due and to becomedue at any time in respect of or arising out of any Collateral; (C) to sign and endorse anyinvoices, freight or express bills, bills of lading, storage or warehouse receipts, draftsagainst debtors, assignments, proxies, stock powers, verifications, and notices inconnection with accounts and other documents relating to the Collateral; (D) to commence andprosecute any suit, action, or proceeding at law or in equity in any court of competentjurisdiction to collect the Collateral or any part thereof and to enforce any other right inrespect of any Collateral; (E) to defend any suit, action, or proceeding brought againstDebtor with respect to any Collateral; (F) to settle, compromise, or adjust any suit,action, or proceeding described above and, in connection therewith, to give such dischargesor releases as Holder Representative may deem appropriate; (G) to exchange any of theCollateral for other property upon any merger, consolidation, reorganization,recapitalization, or other readjustment of the issuer thereof and, in connection therewith,deposit any of the Collateral with any committee, depositary, transfer agent, registrar, orother designated agency upon such terms as Holder Representative may determine; (H) to addor release any guarantor, indorser, surety, or other party to any of the Collateral; (I) torenew, extend, or otherwise change the terms and conditions of any of the Collateral; (J) toendorse Debtor’s name on all applications, documents, papers, and instruments necessary ordesirable in order for Holder Representative to use or maintain any of the IntellectualProperty; (K) to make, settle, compromise or adjust any claims under or pertaining to any ofthe Collateral (including claims under any policy of insurance); (L) to file on behalf ofDebtor any financing statements or continuation statements with respect to the SecurityInterests created hereby, and to do any and all acts and things to protect and preserve theCollateral, including, without limitation, the protection and prosecution of all rightsincluded in the Collateral; and (M) to sell, transfer, pledge, convey, make any agreementwith respect to or otherwise deal with any of the Collateral as fully and completely asthough Holder Representative were the absolute owner thereof for all purposes, and to do, atHolder Representative’s option and Debtor’s expense, at any time, or from time to time, allacts and things which Holder Representative deems necessary to protect, preserve, maintain,or realize upon the Collateral and Holder Representative’s Security Interest therein. Thispower of attorney is a power coupled with an interest and shall be irrevocable unless oruntil all principal and interest payable under the Note have been repaid in full. HolderRepresentative shall be under no duty to exercise
 
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or withhold the exercise of any of the rights, powers, privileges, and options expressly or implicitlygranted to Holder Representative in this Security Agreement, and shall not be liable for anyfailure to do so or any delay in doing so. Neither Holder Representative nor any person orentity designated by Holder Representative shall be liable for any act or omission or forany error of judgment or any mistake of fact or law. This power of attorney is conferred onHolder Representative solely to protect, preserve, maintain, and realize upon its SecurityInterest in the Collateral. Holder Representative shall not be responsible for any declinein the value of the Collateral and shall not be required to take any steps to preserverights against prior parties or to protect, preserve, or maintain any Lien given to securethe Collateral; provided, however, that the Holder Representative shall use reasonable carein the safekeeping of any Collateral in its possession (it being agreed that treatmentsubstantially equal to that which the Holder Representative accords its own property shallbe deemed to constitute the exercise of reasonable care).(f) Holder Representative’s Fees and Expenses; Indemnification.(i) The parties hereto agree that Holder Representative shall be entitled toreimbursement of its expenses incurred hereunder as provided in Section 20(f) of the Notes.(ii) Debtor hereby assumes all liability for the Collateral, for the Security Interest,and for any use, possession, maintenance, and management of, all or any of the Collateral,including, without limitation, any transfer taxes arising as a result of, or in connectionwith, the transactions contemplated herein, and agrees to assume liability for, and toindemnify and hold Holder Representative harmless from and against, any and all claims,causes of action, or liability, for injuries to or deaths of persons or entities and damageto property, howsoever arising from or incident to such use, possession, maintenance, andmanagement, whether such persons or entities be agents or employees of Debtor or of thirdparties, or such damage be to property of Debtor or of others; *provided, however,*that theindemnity set forth in this ***Section ******8(f)*** will not apply to any such claims, causes of actionor liability caused by the gross negligence, bad faith or willful misconduct of HolderRepresentative.**9. SUBORDINATION OF LIENS.**It is a requirement of the Existing Secured Note, the New SecuredNotes and of the Summit Consent Letter that the liens or security interests securing the Notes besubordinate and junior to the liens and security interests securing the Indebtedness of the Companyin respect of the Existing Secured Note, the New Secured Notes and the Summit Debt, respectively.Accordingly, and notwithstanding anything contained herein or in the other Transaction Documents,the Holder Representative, on behalf of the holders of the Notes, hereby covenants and agrees withthe Company as follows:(a) Acknowledgment. The Holder Representative acknowledges that the Existing SecuredNote Holder, the New Secured Note Holders and the Previous Convertible Note Holders have beengranted a security interest in the Collateral and that Summit has been granted a security interestin a portion of the Collateral. The Holder Representative acknowledges and agrees that thesecurity interest granted to it in the Collateral for the benefit of the holders of the Notes issubordinated to the respective security interests of the ExistingSecured Note Holder, the New Secured Note Holders and Summit in the Collateral (to the extentthat a security interest in the Collateral has been granted to such Person) and is on parity withthe security interests of the Previous Convertible Note Holders in the Collateral (to the extentthat a security interest in the Collateral has been granted to such Person), all in the manner andpursuant to the terms set forth in this Section 9.
 
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(b) Priority of Liens. The Holder Representative hereby confirms that regardless ofthe relative times of attachment or perfection thereof, and regardless of anything in anyTransaction Document to the contrary, any security interests or liens granted from time to time tothe Existing Secured Note Holder, the New Secured Note Holders or Summit in all or any part of theCollateral as security for the Existing Secured Debt, the New Secured Debt or the Summit Debt, asapplicable, shall in all respects be first and senior security interests and liens, superior to anysecurity interests or liens at any time granted to the Holder Representative for the benefit of theholders of the Notes in such Collateral as security for the Obligations, and any security interestsor liens granted from time to time to the Previous Convertible Note Holders in all or any part ofthe Collateral as security for the Previous Convertible Debt shall in all respects be *pari passu*security interests and liens, on parity with any security interests or liens at any time granted tothe Holder Representative for the benefit of the holders of the Notes in such Collateral assecurity for the Obligations. The priorities specified herein are applicable irrespective of thetime, order or method of attachment or perfection of security interests or the time or order offiling of financing statements. The Holder Representative agrees on behalf of the holders of theNotes not to seek to challenge, to avoid, to subordinate or to contest or directly or indirectly tosupport any other Person in challenging, avoiding, subordinating or contesting in any judicial orother proceeding, including, without limitation, any Proceeding involving the Company, thepriority, validity, extent, perfection or enforceability of any lien held by the Existing SecuredNote Holder, the New Secured Note Holders, the Previous Convertible Note Holders or Summit in allor any part of the Collateral.(c) Release of Collateral. If, in connection with the exercise by any of the ExistingSecured Note Holder, the New Secured Note Holders, the Previous Convertible Note Holders or Summitof its or their rights and remedies in respect of the Collateral, the Existing Secured Note Holder,the New Secured Note Holders, the Previous Convertible Note Holders or Summit, as applicable,release any of its or their liens on any part of the Collateral, then the liens, if any, of theHolder Representative, for itself and on behalf of the holders of the Notes, shall beautomatically, unconditionally and simultaneously released; *provided*, that after the ExistingSecured Debt, the New Secured Debt and (if secured by liens on such Collateral) the Summit Debthave each been indefeasibly paid in full in cash, the balance, if any, of the proceeds of suchCollateral shall be applied to the Obligations for the benefit of the holders of the Notes and thePrevious Convertible Notes on a *pari passu*basis. The Holder Representative agrees promptly toexecute and deliver to the Company, the Existing Secured Note Holder, the New Secured Note Holders,the Previous Convertible Note Holders or Summit (as applicable) such termination statements,releases and other documents as the Existing Secured Note Holder, the New Secured Note Holders, thePrevious Convertible Note Holders or Summit (as applicable) may reasonably require to effectivelyconfirm such release.
 
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(d) No Improvements. This Section 9 shall not be construed in any way to limit orimpair the right of (i) the Holder Representative to bid for and purchase any Collateral atany private sale, public sale or judicial foreclosure upon such Collateral initiated by theExisting Secured Note Holder, the New Secured Note Holders or Summit, (ii) the HolderRepresentative to join (but not control) any foreclosure or other judicial lien enforcementproceeding with respect to the Collateral initiated by the Existing Secured Note Holder, the NewSecured Note Holders or Summit thereon, so long as it does not delay or interfere with the exerciseby the Existing Secured Note Holder, the New Secured Note Holders or Summit (as applicable) of itsor their rights and (iii) subject to the terms of this Security Agreement, the right of the HolderRepresentative to receive payments from the proceeds of the collection, sale or other dispositionof any Collateral after the Existing Secured Debt, the New Secured Debt and the Summit Debt (ifsecured by liens on such Collateral) has been indefeasibly paid in full in cash.**10. MISCELLANEOUS**.(a) Continuing Security Interest. This Security Agreement creates a continuingsecurity interest in the Collateral and shall (i) remain in full force and effect until theObligation is paid and performed in full; and (ii) inure to the benefit of and be enforceable byHolder Representative and its successors, transferees, and assigns. Without limiting thegenerality of the foregoing ***clause (ii)***, Holder Representative may assign or otherwise transfer anyof their respective rights under this Security Agreement to any other person or entity upon tenbusiness days prior written notice to Debtor provided that the assignee agrees to be bound by theterms and conditions of the Transaction Documents. To the extent of such assignment or transfer,such person or entity shall thereupon become vested with all the rights and benefits in respectthereof granted herein or otherwise to Holder Representative. Upon payment in full of theObligation, Debtor shall be entitled to the return, upon its request and at its expense, of (i) anyconfidential information provided to Holder Representative or its agents or assignees pursuant tothe Transaction Documents and (ii) such of the Collateral as shall not have been sold or otherwiseapplied pursuant to the terms hereof.(b) Termination and Release.(i) Upon the full and final payment and performance of the Obligation, this SecurityAgreement shall automatically terminate.(ii) The liens created by this Security Agreement on any of the Collateral shall beautomatically released if Debtor disposes of such Collateral pursuant to a transactionpermitted by the Note.(iii) In connection with any termination or release pursuant to clauses (i) or (ii),Holder Representative shall promptly execute and deliver to Debtor, at Debtor’s expense, alldocuments that Debtor shall reasonably request to evidence such termination or release. Anyexecution and delivery of documents pursuant to this Section 10(b)(iii) shall be withoutrecourse to or warranty by Holder Representative.
 
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(c) Actions Not Releases. The Security Interest and Debtor’s obligations and HolderRepresentative’s rights hereunder shall not be released, diminished, impaired, or adverselyaffected by the occurrence of any one or more of the following events: (i) the taking or acceptingof any other security or assurance for any or all of the Obligation; (ii) any release,surrender, exchange, subordination, or loss of any security or assurance at any time existingin connection with any or all of the Obligation; (iii) the modification of, amendment to, or waiverof compliance with any terms of any of the other Transaction Documents without the notification orconsent of Debtor, *except*as required therein; (iv) the insolvency, bankruptcy, or lack ofcorporate or trust power of any party at any time liable for the payment of any or all of theObligation, whether now existing or hereafter occurring; (v) any renewal, extension, orrearrangement of the payment of any or all of the Obligation, either with or without notice to orconsent of Debtor, or any adjustment, indulgence, forbearance, or compromise that may be granted orgiven by Holder Representative to Debtor; (vi) any neglect, delay, omission, failure, or refusal ofHolder Representative to take or prosecute any action in connection with any other agreement,document, guaranty, or instrument evidencing, securing, or assuring the payment of all or any ofthe Obligation; (vii) any failure of Holder Representative to notify Debtor of any renewal,extension, or assignment of the Obligation or any part thereof, or the release of any Collateral orother security, or of any other action taken or refrained from being taken by Holder Representativeagainst Debtor or any new agreement between or among Holder Representative and Debtor, *it beingunderstood that*except as expressly provided herein or required by law, Holder Representative shallnot be required to give Debtor any notice of any kind under any circumstances whatsoever withrespect to or in connection with the Obligation, including, without limitation, notice ofacceptance of this Security Agreement or any Collateral ever delivered to or for the account ofHolder Representative hereunder; (viii) the illegality, invalidity, or unenforceability of all orany part of the Obligation against any party obligated with respect thereto by reason of the factthat the Obligation, or the interest paid or payable with respect thereto, exceeds the amountpermitted by applicable laws, the act of creating the Obligation, or any part thereof, is *ultravires*, or the officers, partners, or trustees creating same acted in excess of their authority, orfor any other reason; or (ix) if any payment by any party obligated with respect thereto is held toconstitute a preference under applicable laws or for any other reason Holder Representative isrequired to refund such payment or pay the amount thereof to someone else.(d) Waivers. Except to the extent expressly otherwise provided herein or in otherTransaction Documents and to the fullest extent permitted by applicable laws, Debtor waives (i) anyright to require Holder Representative to proceed against any other person or entity, to exhaustits rights in Collateral, or to pursue any other right which Holder Representative may have; (ii)with respect to the Obligation, presentment and demand for payment, protest, notice of protest andnonpayment, and notice of the intention to accelerate; and (iii) all rights of marshaling inrespect of any and all of the Collateral.(e) Financing Statement; Authorization. Debtor hereby irrevocably authorizes HolderRepresentative at any time and from time to time to file in any UCC jurisdiction any initialfinancing statements and amendments thereto (without the requirement for Debtor’s signaturethereon) that (i) indicate the Collateral (A) as all assets of Debtor or words of similar effect,regardless of whether any particular asset comprised in the Collateral falls within the scope ofArticle 9 of the UCC of the state or such jurisdiction or whether such assets are included in theCollateral hereunder, or (B) as being of an equal or lesser scope or with greater detail, and (ii)contain any other information required by Article 9 of the UCC of the state or such jurisdictionfor the sufficiency or filing office acceptance of any financing statement or amendment, includingwhether the Company is an organization, the type of organization, andany organization identification number issued to Debtor. Debtor agrees to furnish any suchinformation to Holder Representative promptly upon request.
 
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(f) Amendments. This Security Agreement may be amended only by an instrument inwriting executed jointly by Debtor and Holder Representative, and supplemented only by documentsdelivered or to be delivered in accordance with the express terms hereof.(g) Multiple Counterparts. This Security Agreement has been executed in a number ofidentical counterparts, each of which shall be deemed an original for all purposes and all of whichconstitute, collectively, one agreement; but, in making proof of this Security Agreement, it shallnot be necessary to produce or account for more than one such counterpart.(h) Parties Bound; Assignment. This Security Agreement shall be binding on Debtor andDebtor’s heirs, legal representatives, successors, and assigns and shall inure to the benefit ofHolder Representative and Holder Representative’s successors and assigns; *provided that*Debtor maynot, without the prior written consent of Holder Representative, assign any rights, duties, orobligations hereunder.(i) General Authority of Holder Representative. By acceptance of the benefits of thisSecurity Agreement, each holder of the Notes (whether or not a signatory hereto) shall be deemedirrevocably (a) to consent to the appointment of Holder Representative as its agent hereunder, (b)to confirm that Holder Representative shall have the authority to act as the exclusive agent ofsuch Person for the enforcement of any provisions of this Security Agreement against Debtor, theexercise of remedies hereunder and the giving or withholding of any consent or approval hereunderrelating to any Collateral or Debtor’s obligations with respect thereto, (c) to agree that it shallnot take any action to enforce any provisions of this Security Agreement against Debtor, toexercise any remedy hereunder or to give any consents or approvals hereunder except as expresslyprovided in this Security Agreement or in the Notes and (d) to agree to be bound by the terms ofthis Security Agreement.(j) GOVERNING LAW. THIS SECURITY AGREEMENT SHALL BE CONSTRUED AND ENFORCEDIN ACCORDANCE WITH, AND ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, INTERPRETATION ANDPERFORMANCE OF THIS NOTE SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUTGIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OFNEW YORK OR ANY OTHER JURISDICTIONS) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANYJURISDICTIONS OTHER THAN THE STATE OF NEW YORK.***Remainder of Page Intentionally Blank.***