Exhibit 10.2





Exhibit 10.2




SECURITY AGREEMENT




THIS SECURITY AGREEMENT (this “Security Agreement”) is executed as of July 1, 2011, by Irvine
Sensors Corporation, a Delaware corporation (“Debtor”), whose address is 3001 Red Hill Avenue,
Building 4, Suite 108, Costa Mesa, California 92626, and Costa Brava Partnership III L.P., in its
capacity as Holder Representative under the Notes (as such term is defined below) (in such
capacity, together with any successor appointed pursuant to the terms of the Notes, “Holder
Representative”).



RECITALS




A. Debtor desires to issue up to $7,000,000 in aggregate principal amount of 12% Subordinated
Secured Convertible Notes due 2015 (the “Notes”) to Costa Brava Partnership III L.P. (“Costa
Brava”), The Griffin Fund LP (“Griffin”) and certain other investors who may purchase the Notes
(such additional purchasers, collectively with Costa Brava and Griffin, the “Purchasers”).



B. The execution and delivery of this Security Agreement is a condition precedent to the
willingness of the Purchasers to purchase and extend credit under the Notes.



ACCORDINGLY, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Debtor and Holder Representative hereby agree as follows:



1. REFERENCE TO LOAN DOCUMENTS. This Security Agreement is one of the “Transaction Documents”
referred to in the Notes.



2. CERTAIN DEFINITIONS. Unless otherwise defined herein, or the context hereof otherwise
requires, each term defined in any of the Notes or the UCC is used in this Security Agreement with
the same meaning; provided that, if the definition given to such term in the Notes conflicts with
the definition given to such term in the UCC, the Notes definition shall control to the extent
legally allowable; and if any definition given to such term in Chapter 9 of the UCC conflicts with
the definition given to such term in any other chapter of the UCC, the Chapter 9 definition shall
prevail. As used herein, the following terms have the meanings indicated:




Collateral has the meaning set forth in Section 4 hereof.



Collateral Obligor means any person or entity obligated with respect to any of the Collateral,
whether as an account debtor, obligor on an instrument, issuer of securities, or otherwise.




Copyrights has the meaning set forth in Section 4 hereof.



Intellectual Property has the meaning set forth in Section 4 hereof.


 


 









 





New Secured Debt means all obligations, liabilities and indebtedness of every nature of the
Company 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, 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, due or payable, whether
before or after the filing of a Proceeding under the Bankruptcy Code together with any interest
accruing thereon after the commencement of a Proceeding, without regard to whether or not such
interest is an allowed claim.



New Secured Notes means the Senior Subordinated Promissory Notes due 2013, in an aggregate
principal amount of $4,000,000 issued by the Company to Costa Brava and Griffin (as amended by that
certain Second Omnibus Amendment, dated as of July 1, 2011, by and among the Debtor, the Holder
Representative, 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, or
any of their respective successors or assigns as the holders of the New Secured Notes.



Obligation means, collectively, all indebtedness, liabilities, and obligations of Debtor to
the holders of the Notes and the Holder Representative arising under the Notes and this Security
Agreement. 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 the
Holder 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, for
the avoidance of doubt, the liens and security interests securing Debtor’s obligations with respect
to the Existing Secured Note.



Previous Convertible Debt means all obligations, liabilities and indebtedness of every nature
of the Company from time to time owed to the Previous Convertible Note Holders under the Previous
Convertible Notes, including, without limitation, the principal amount of all debts, claims and
indebtedness, 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, due
or payable, whether before or after the filing of a Proceeding under the Bankruptcy Code together
with any interest accruing thereon after the commencement of a Proceeding, without regard to
whether or not such interest is an allowed claim.



Previous Convertible Notes means the 12% Subordinated Secured Convertible Notes due 2015, in
an aggregate principal amount not to exceed $11,020,800, that have been issued and may in the
future be issued by the Company pursuant to that certain Securities Purchase Agreement, dated as of
December 23, 2010, among the Company and the initial holders of such Previous Convertible Notes (as
amended by that certain Second Omnibus Amendment, dated as of July 1, 2011, by and among the
Debtor, the Holder Representative, Costa Brava, Griffin, and certain other investors party
thereto).


 


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Previous Convertible Note Holders means Costa Brava, Griffin and certain other investors as
holders of the Previous Convertible Notes, or any of their respective successors or assigns as the
holders 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 Company
consenting, among other things, to the issuance of the Notes and waiving certain defaults under the
Summit Financing Agreement.



Summit Debt means all obligations, liabilities and indebtedness of every nature of the Company
from time to time owed to Summit under the Summit Financing Agreement, including, without
limitation, the principal amount of all debts, claims and indebtedness, 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, due or payable, whether before or after the
filing of a Proceeding under the Bankruptcy Code together with any interest accruing thereon after
the commencement of a Proceeding, without regard to whether or not such interest is an allowed
claim.



Summit Financing Agreement means the Financing Agreement, dated as of June 16, 2009, between
the 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 be
renumbered, as enacted in the State of New York or other applicable jurisdiction, as amended at the
time in question.



3. SECURITY INTEREST. In order to secure the full and complete payment and performance of the
Obligation when due, Debtor hereby grants to Holder Representative for the benefit of the holders
of the Notes a Security Interest in all of Debtor’s rights, titles, and interests in and to the
Collateral and pledges, collaterally transfers, and assigns the Collateral to Holder Representative
for the benefit of the holders of the Notes, all upon and subject to the terms and conditions of
this Security Agreement. Such Security Interest is granted and pledge and assignment are made as
security only and shall not subject Holder Representative to, or transfer or in any way affect or
modify, any obligation of Debtor with respect to any of the Collateral or any transaction involving
or giving rise thereto. If the grant, pledge, or collateral transfer or assignment of any specific
item of the Collateral is expressly prohibited by any contract or by law, then the Security
Interest created hereby nonetheless remains effective to the extent allowed by such contract, the
UCC 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 of
property, wherever located, now owned or in the future acquired by Debtor, and all proceeds and
products 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 all
books and records pertaining to the foregoing;



(b) (i) All copyrights (whether statutory or common law, registered or unregistered), works
protectable by copyright, copyright registrations, copyright licenses, and copyright applications
of Debtor, including, without limitation, all of Debtor’s right, title, and interest in and to all
copyrights registered in the United States Copyright Office or anywhere else in the world and also
including, without limitation, the copyrights set forth on Schedule B; (ii) all renewals,
extensions, and modifications thereof; (iii) all income, licenses, royalties, damages, profits, and
payments 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 benefits
relating to any of the foregoing throughout the world; in each case, whether now owned or hereafter
acquired by Debtor (the “Copyrights”);



(c) (i) All patents, patent applications, patent licenses, and patentable inventions of
Debtor, including, without limitation, registrations, recordings, and applications thereof in the
United 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, without
limitation, those set forth on Schedule B, and all of the inventions and improvements described and
claimed 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 of
the foregoing; (iv) the right to sue for past, present, and future infringements of any of the
foregoing; and (v) all other rights and benefits relating to any of the foregoing throughout the
world; 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, and
applications thereof, including, without limitation, registrations, recordings, and applications in
the United 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,
without limitation, those set forth on Schedule B; (ii) all reissues, extensions, and renewals
thereof; (iii) all income, royalties, damages, and payments now or hereafter relating to or payable
under any of the foregoing, including, without limitation, damages or payments for past or future
infringements of any of the foregoing; (iv) the right to sue for past, present, and future
infringements of any of the foregoing; (v) all rights corresponding to any of the foregoing
throughout 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 collectively
with the Copyrights and the Patents, the “Intellectual Property”); provided that (i) with respect
to any Trademarks, applications in the United States Patent and Trademark Office to register
Trademarks or service marks on the basis of the Company’s “intent to use” such Trademarks or
service 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 United
States Patent and Trademark Office, whereupon such application shall be automatically subject to
the 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 or
part 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 other
claims 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 Collateral
described 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 permit
any action prohibited by this Security Agreement or by the terms incorporated in this Security
Agreement. Furthermore, notwithstanding any contrary provision, Debtor agrees that, if, but for
the application of this paragraph, granting a Security Interest in the Collateral would constitute
a fraudulent conveyance under 11 U.S.C. § 548 or a fraudulent conveyance or transfer under any
state fraudulent conveyance, fraudulent transfer, or similar law in effect from time to time (each
a “fraudulent conveyance”), then the Security Interest remains enforceable to the maximum extent
possible without causing such Security Interest to be a fraudulent conveyance, and this Security
Agreement is automatically amended to carry out the intent of this paragraph. For the sake of
clarity, the Debtor and Holder Representative acknowledge and agree that Collateral does not
include the interests owned by Optics 1, Inc. in certain Intellectual Property that is co-owned by
Optics 1, Inc. and Debtor.



5. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to Holder Representative as
of the date hereof that:



(a) Transaction Documents. Certain representations and warranties in the Transaction
Documents are applicable to it or its assets or operations, and each such representation and
warranty 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 and
enforceable 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 specific
performance and other equitable remedies. For Collateral in which the Security Interest may be
perfected by the filing of Financing Statements, once those Financing Statements have been
properly filed in the jurisdiction described on Schedule A hereto, and, in the case of the
Registered IP (as defined below) with respect to which a security interest may be perfected by
filing, recording or registration in the United States (or any political subdivisions thereof) and
its territories and possessions, upon the receipt and recording of a short form of this Security
Agreement 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 to
Permitted 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 than
those evidencing Permitted Liens. The creation of the Security Interest does not require the
consent of any person or entity that has not been obtained.



(c) Debtor Information. Debtor’s exact legal name, mailing address, jurisdiction of
organization, type of entity, and state issued organizational identification number are as set
forth on Schedule A hereto.



(d) Location/Fixtures. (i) Debtor’s place of business and chief executive office is
where Debtor is entitled to receive notices hereunder; the present and foreseeable location of
Debtor’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 no
notice to or filing with, any governmental authority is required for the pledge by Debtor of the
Collateral pursuant to this Security Agreement or for the execution, delivery, or performance of
this Security Agreement by Debtor, other than filings with applicable governmental authorities to
perfect 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 Copyright
applications are identified on Schedule B hereto (the “Registered IP”). Debtor hereby
agrees to deliver to Holder Representative, within 30 days of the date hereof, fully
executed 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 IP
consisting of Patents or Patent applications, Trademarks or Trademark applications or
Copyrights or Copyright applications, as applicable, for recording by the United States
Patent 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 and
clear 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 agrees
with Holder Representative that Debtor will:



(a) Information/Record of Collateral. Maintain, at the place where Debtor is entitled
to 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 notice
during normal business hours to inspect and make abstracts from such records (provided, that so
long as no Default exists, Holder Representative shall conduct such inspections no more frequently
than annually), and furnish to Holder Representative, at such intervals as Holder Representative
may reasonably request, such documents, lists, descriptions, certificates, and other information as
may be reasonably necessary or proper to keep Holder Representative informed with respect to the
identity, location, and status of the Collateral.



(b) Schedules. Notwithstanding any other provision herein, Debtor’s failure to
describe any Collateral required to be listed on any schedule hereto shall not impair Holder
Representative’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 in
the Collateral to the extent set forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Security Agreement had not been executed, and (ii) unless
and until Holder Representative forecloses thereon and becomes the owner thereof pursuant to the
exercise of its remedies hereunder, Holder Representative shall not have any liability or
obligation under any of such contracts, agreements, documents and instruments, and Holder
Representative shall not be obligated to perform any of the obligations or duties of Debtor
thereunder 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 of
the Transaction Documents, promptly notify Holder Representative of (A) any claim, action, or
proceeding 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 other
event or condition (including, without limitation, matters as to lien priority) that could have a
material adverse effect on the Collateral (taken as a whole) or the Security Interest created
hereunder; 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 name
or identity; (C) relocation of the place where its books and records concerning its accounts are
kept; (D) relocation of any Collateral (other than delivery of inventory in the ordinary course of
business to third party contractors for processing and sales of inventory in the ordinary course of
business 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 identification
number, as applicable. Prior to making any of the changes contemplated in clause (ii) preceding,
Debtor shall execute and deliver all such additional
documents and perform all additional acts as Holder Representative may reasonably request in
order to continue or maintain the existence and priority of the Security Interest in all of the
Collateral.


 


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(e) Further Assurances. At Debtor’s expense and Holder Representative’s reasonable
request (i) after a Default, file or cause to be filed such applications and take such other
actions as Holder Representative may reasonably request to obtain the consent or approval of any
governmental 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 from
such governmental authority (and, because Debtor agrees that Holder Representative’s remedies at
law for failure of Debtor to comply with this provision would be inadequate and that such failure
would not be adequately compensable in damages, Debtor agrees that its covenants in this provision
may be specifically enforced); (ii) from time to time, either before or after a Default, promptly
execute and deliver to Holder Representative all such other assignments, certificates, supplemental
documents, and financing statements, and do all other acts or things as Holder Representative may
reasonably request in order to more fully create, evidence, perfect, continue, and preserve the
priority 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 the
Collateral against, any lien or other encumbrance on the Collateral other than Permitted Liens, and
shall 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 or
claiming Permitted Liens.



(g) Collection of Accounts. In accordance with prudent business practices, endeavor
to 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 to
or become entitled to the benefit of any additional issued patents, registered trademarks or
registered 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 Holder
Representative an appropriate short form of this Security Agreement in substantially the
form of Exhibit I, II or III, as applicable, containing a description of such additional
Registered IP, for recording by the United States Patent and Trademark Office or the United
States Copyright Office, as applicable; and cooperate as reasonably necessary to enable
Holder 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 remedies
with respect to the Intellectual Property.


 


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(iii) Not transfer, assign or otherwise dispose of any of the Intellectual Property
included in the Collateral except as permitted in the Note.




(iv) Except to the extent that failure to act could not reasonably be expected to have
a Material Adverse Effect, take all commercially reasonable steps necessary to (x) maintain
the validity and enforceability of any Registered IP and maintain such Registered IP in full
force and effect and (y) pursue the application, obtain the relevant registration and
maintain 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 to
office actions issued by the U.S. Patent and Trademark Office, the U.S. Copyright Office or
other governmental authorities, the filing of applications for renewal or extension, the
filing of affidavits, the filing of divisional, continuation, continuation-in-part, reissue
and renewal applications or extensions, the payment of maintenance fees and the
participation in interference, reexamination, opposition, cancellation, infringement and
misappropriation proceedings.




(v) Except to the extent that failure to act could not reasonably be expected to have a
Material Adverse Effect, not do or permit any act or knowingly omit to do any act whereby
any of its Intellectual Property may lapse, be terminated, or become invalid or
unenforceable or placed in the public domain (or in case of a trade secret, lose its
competitive value).




(vi) Except to the extent that failure to act could not reasonably be expected to have
a Material Adverse Effect, take all commercially reasonable steps to preserve and protect
each item of its Intellectual Property, including, without limitation, maintaining the
quality of any and all products or services used or provided in connection with any of the
Trademarks, 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 of
any of the Trademarks abide by the applicable license’s terms with respect to the standards
of quality.



Notwithstanding the foregoing provisions of this subsection (i) or anything to the contrary in
this Security Agreement, nothing in this Security Agreement shall prevent Debtor from discontinuing
the use or maintenance of any of its Intellectual Property, the enforcement of its license
agreements or the pursuit of actions against infringers, if Debtor determines in its reasonable
business 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 (but
subject to Section 9 below and to the terms and conditions of the Transaction Documents), exercise
any and all rights available to a secured party under the UCC, in addition to any and all other
rights afforded by the Transaction Documents, at law, in equity, or otherwise, including, without
limitation, (a) requiring Debtor to assemble all or part of the Collateral and make it available to
Holder Representative at a place to be designated by Holder Representative which is reasonably
convenient to Debtor and Holder Representative, (b) surrendering any policies of insurance on all
or part of the Collateral and receiving and applying the unearned premiums as a credit on the
Obligation, (c) applying by appropriate judicial
proceedings for appointment of a receiver for all or part of the Collateral (and Debtor hereby
consents to any such appointment), and (d) applying to the Obligation any cash held by Holder
Representative under this Security Agreement.


 


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(a) Notice. Reasonable notification of the time and place of any public sale of the
Collateral, or reasonable notification of the time after which any private sale or other intended
disposition of the Collateral is to be made, shall be sent to Debtor and to any other person or
entity entitled to notice under the UCC. It is agreed that notice sent or given not less than ten
calendar days prior to the taking of the action to which the notice relates is reasonable
notification and notice for the purposes of this subparagraph.



(b) Condition of Collateral; Warranties. Holder Representative has no obligation to
clean-up or otherwise prepare the Collateral for sale. Holder Representative may sell the
Collateral without giving any warranties as to the Collateral. Holder Representative may
specifically disclaim any warranties of title or the like. This procedure will not be considered
adversely to affect the commercial reasonableness of any sale of the Collateral.



(c) Compliance with Other Laws. Holder Representative may comply with any applicable
state or federal laws in connection with a disposition of the Collateral and compliance will not be
considered to adversely affect the commercial reasonableness of any sale of the Collateral.



(d) Application of Proceeds. Holder Representative shall apply the proceeds of any
sale or other disposition of the Collateral under this Section 7 in the following order: first, to
the payment of all expenses incurred in retaking, holding, and preparing any of the Collateral for
sale(s) or other disposition, in arranging for such sale(s) or other disposition, and in actually
selling or disposing of the same (all of which are part of the Obligation); second, toward
repayment of amounts expended by Holder Representative under Section 8; and third, toward payment
of the balance of the Obligation in the order and manner as Holder Representative determines in its
sole discretion. Any surplus remaining shall be delivered to Debtor or as a court of competent
jurisdiction may direct. If the proceeds are insufficient to pay the Obligation in full, then
Debtor shall remain liable for any deficiency.



(e) Sales on Credit. If Holder Representative sells any of the Collateral upon
credit, Debtor will be credited only with payments actually made by the purchaser, received by the
Holder Representative, and applied to the indebtedness of the purchaser. In the event the
purchaser fails to pay for the Collateral, Holder Representative may resell the Collateral and
Debtor 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 Collateral
in the manner required by the Transaction Documents, or fails to preserve the priority of the
Security Interest in any of the Collateral, or fails to keep the Collateral insured as required by
the Transaction Documents, or otherwise fails to perform any of its obligations under the
Transaction Documents with respect to the Collateral, then Holder Representative may, at its
option, but without being required to do so, and upon prior written notice to Debtor if no Default
otherwise 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 Holder
Representative, or take all other action which Debtor is required, but has failed or refused, to
take under the Transaction Documents. Any sum which may be expended or paid by Holder
Representative under this subparagraph (including, without limitation, court costs and reasonable
attorneys’ fees) shall be payable by Debtor to Holder Representative upon demand and shall be part
of the Obligation.


 


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(b) Collection. If a Default exists and upon written notice from Holder
Representative, 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 of
the Collateral) is hereby authorized and directed by Debtor to make payment directly to Holder
Representative, regardless of whether Debtor was previously making collections thereon. Until such
notice is given, Debtor is authorized to retain and expend all payments made on Collateral. If a
Default exists, Holder Representative shall have the right in its own name or in the name of Debtor
to compromise or extend time of payment with respect to all or any portion of the Collateral for
such 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 to
become due with respect to Collateral; to take control of cash and other proceeds of any
Collateral; 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 Holder
Representative; to sign the name of Debtor on any invoice or bill of lading relating to any
Collateral, on any drafts against Collateral Obligors or other persons or entities making payment
with respect to Collateral, on assignments and verifications of accounts or other Collateral and on
notices to Collateral Obligors making payment with respect to Collateral; to send requests for
verification of obligations to any Collateral Obligor; and to do all other acts and things
necessary to carry out the intent of this Security Agreement. If a Default exists and any
Collateral Obligor fails or refuses to make payment on any Collateral when due, Holder
Representative is authorized, in its sole discretion, either in its own name or in the name of
Debtor, to take such action as Holder Representative shall deem appropriate for the collection of
any amounts owed with respect to Collateral or upon which a delinquency exists. Regardless of any
other provision hereof, however, Holder Representative shall never be liable for its failure to
collect, or for its failure to exercise diligence in the collection of, any amounts owed with
respect to Collateral, nor shall it be under any duty whatsoever to anyone except Debtor to account
for funds that it shall actually receive hereunder.



(c) Intellectual Property. For purposes of enabling Holder Representative to exercise
its rights and remedies under this Security Agreement and enabling Holder Representative and its
successors and assigns to enjoy the full benefits of the Collateral, Debtor hereby grants to Holder
Representative an irrevocable, nonexclusive license (exercisable without payment of royalty or
other compensation to Debtor) to use, license, or sublicense any of Debtor’s rights in the
Intellectual Property to the extent such rights are transferable but only during such time as a
Default exists. During the existence of a Default, Debtor shall provide Holder Representative with
reasonable access to all media in which any of the Intellectual Property may be recorded or stored
and all computer programs used for the completion or printout thereof. This license shall also
inure to the benefit of all successors, assigns, and transferees of Holder Representative. If a
Default exists, Holder Representative may require that
Debtor assign all of its right, title, and interest in and to the Intellectual Property or any
part thereof to Holder Representative or such other person or entity as Holder Representative may
designate pursuant to documents satisfactory to Holder Representative. If no Default exists, then
Debtor shall have the exclusive right and license to use the Intellectual Property in the ordinary
course of business and the exclusive right to grant to other persons or entities licenses and
sublicenses with respect to the Intellectual Property.


 


11









 





(d) Use and Operation of Collateral. Should any Collateral come into the possession
of Holder Representative while a Default exists, Holder Representative may use or operate such
Collateral for the purpose of preserving it or its value pursuant to the order of a court of
appropriate jurisdiction or in accordance with any other rights held by Holder Representative in
respect of such Collateral. Debtor covenants to promptly reimburse and pay to Holder
Representative, 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 Holder
Representative upon demand and shall become part of the Obligation. However, the risk of
accidental loss or damage to, or diminution in value of, Collateral is on Debtor, and Holder
Representative shall have no liability whatever for failure to obtain or maintain insurance, nor to
determine 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, Holder
Representative shall have no duty to fix or preserve rights against prior parties to such
Collateral and shall never be liable for any failure to use diligence to collect any amount payable
in respect of such Collateral, but shall be liable only to exercise reasonable care in the
safekeeping of any Collateral in its possession (it being agreed that treatment substantially equal
to that which the Holder Representative accords its own property shall be deemed to constitute the
exercise of reasonable care) and to account to Debtor for what it may actually collect or receive
thereon. The provisions of this subparagraph are only applicable during the existence of a
Default.



(e) Power of Attorney. Debtor hereby irrevocably constitutes and appoints Holder
Representative and any officer or agent thereof, with full power of substitution, as its true and
lawful 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 and
instruments which Holder Representative at any time and from time to time deems necessary or
desirable to accomplish the purposes of this Security Agreement and, without limiting the
generality of the foregoing, Debtor hereby gives Holder Representative the power and right on
behalf of Debtor and in its own name to do any of the following while a Default exists, without
notice to or the consent of Debtor:




(i) to use the Intellectual Property or to grant or issue any exclusive or
non-exclusive license under the Intellectual Property to anyone else, and to perform any act
necessary for the Holder Representative to assign, pledge, convey, or otherwise transfer
title 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 any
of the Collateral and, in connection therewith, endorse checks, notes,
drafts, acceptances, money orders, documents of title or any other instruments for the
payment of money under the Collateral or any policy of insurance;


 


12









 






(iii) to pay or discharge taxes, liens, or other encumbrances levied or placed on or
threatened against the Collateral;




(iv) to notify post office authorities to change the address for delivery of Debtor to
an address designated by Holder Representative and to receive, open, and dispose of mail
addressed to Debtor; and




(v) (A) to direct account debtors and any other parties liable for any payment under
any of the Collateral to make payment of any and all monies due and to become due thereunder
directly to Holder Representative or as Holder Representative shall direct; (B) to receive
payment of and receipt for any and all monies, claims, and other amounts due and to become
due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any
invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, proxies, stock powers, verifications, and notices in
connection with accounts and other documents relating to the Collateral; (D) to commence and
prosecute any suit, action, or proceeding at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to enforce any other right in
respect of any Collateral; (E) to defend any suit, action, or proceeding brought against
Debtor 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 discharges
or releases as Holder Representative may deem appropriate; (G) to exchange any of the
Collateral 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, or
other designated agency upon such terms as Holder Representative may determine; (H) to add
or release any guarantor, indorser, surety, or other party to any of the Collateral; (I) to
renew, extend, or otherwise change the terms and conditions of any of the Collateral; (J) to
endorse Debtor’s name on all applications, documents, papers, and instruments necessary or
desirable in order for Holder Representative to use or maintain any of the Intellectual
Property; (K) to make, settle, compromise or adjust any claims under or pertaining to any of
the Collateral (including claims under any policy of insurance); (L) to file on behalf of
Debtor any financing statements or continuation statements with respect to the Security
Interests created hereby, and to do any and all acts and things to protect and preserve the
Collateral, including, without limitation, the protection and prosecution of all rights
included in the Collateral; and (M) to sell, transfer, pledge, convey, make any agreement
with respect to or otherwise deal with any of the Collateral as fully and completely as
though Holder Representative were the absolute owner thereof for all purposes, and to do, at
Holder Representative’s option and Debtor’s expense, at any time, or from time to time, all
acts and things which Holder Representative deems necessary to protect, preserve, maintain,
or realize upon the Collateral and Holder Representative’s Security Interest therein. This
power of attorney is a power coupled with an interest and shall be irrevocable unless or
until all principal and interest payable under the Note have been repaid in full. Holder
Representative shall be under no duty to exercise


 


13









 






or withhold the exercise of any of the rights, powers, privileges, and options expressly or implicitly
granted to Holder Representative in this Security Agreement, and shall not be liable for any
failure to do so or any delay in doing so. Neither Holder Representative nor any person or
entity designated by Holder Representative shall be liable for any act or omission or for
any error of judgment or any mistake of fact or law. This power of attorney is conferred on
Holder Representative solely to protect, preserve, maintain, and realize upon its Security
Interest in the Collateral. Holder Representative shall not be responsible for any decline
in the value of the Collateral and shall not be required to take any steps to preserve
rights against prior parties or to protect, preserve, or maintain any Lien given to secure
the Collateral; provided, however, that the Holder Representative shall use reasonable care
in the safekeeping of any Collateral in its possession (it being agreed that treatment
substantially equal to that which the Holder Representative accords its own property shall
be 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 to
reimbursement 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 connection
with, the transactions contemplated herein, and agrees to assume liability for, and to
indemnify 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 damage
to property, howsoever arising from or incident to such use, possession, maintenance, and
management, whether such persons or entities be agents or employees of Debtor or of third
parties, or such damage be to property of Debtor or of others; provided, however, that the
indemnity set forth in this Section 8(f) will not apply to any such claims, causes of action
or liability caused by the gross negligence, bad faith or willful misconduct of Holder
Representative.



9. SUBORDINATION OF LIENS. It is a requirement of the Existing Secured Note, the New Secured
Notes and of the Summit Consent Letter that the liens or security interests securing the Notes be
subordinate and junior to the liens and security interests securing the Indebtedness of the Company
in 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 with
the Company as follows:



(a) Acknowledgment. The Holder Representative acknowledges that the Existing Secured
Note Holder, the New Secured Note Holders and the Previous Convertible Note Holders have been
granted a security interest in the Collateral and that Summit has been granted a security interest
in a portion of the Collateral. The Holder Representative acknowledges and agrees that the
security interest granted to it in the Collateral for the benefit of the holders of the Notes is
subordinated to the respective security interests of the Existing
Secured Note Holder, the New Secured Note Holders and Summit in the Collateral (to the extent
that a security interest in the Collateral has been granted to such Person) and is on parity with
the security interests of the Previous Convertible Note Holders in the Collateral (to the extent
that a security interest in the Collateral has been granted to such Person), all in the manner and
pursuant to the terms set forth in this Section 9.


 


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(b) Priority of Liens. The Holder Representative hereby confirms that regardless of
the relative times of attachment or perfection thereof, and regardless of anything in any
Transaction Document to the contrary, any security interests or liens granted from time to time to
the Existing Secured Note Holder, the New Secured Note Holders or Summit in all or any part of the
Collateral as security for the Existing Secured Debt, the New Secured Debt or the Summit Debt, as
applicable, shall in all respects be first and senior security interests and liens, superior to any
security interests or liens at any time granted to the Holder Representative for the benefit of the
holders of the Notes in such Collateral as security for the Obligations, and any security interests
or liens granted from time to time to the Previous Convertible Note Holders in all or any part of
the 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 to
the Holder Representative for the benefit of the holders of the Notes in such Collateral as
security for the Obligations. The priorities specified herein are applicable irrespective of the
time, order or method of attachment or perfection of security interests or the time or order of
filing of financing statements. The Holder Representative agrees on behalf of the holders of the
Notes not to seek to challenge, to avoid, to subordinate or to contest or directly or indirectly to
support any other Person in challenging, avoiding, subordinating or contesting in any judicial or
other proceeding, including, without limitation, any Proceeding involving the Company, the
priority, validity, extent, perfection or enforceability of any lien held by the Existing Secured
Note Holder, the New Secured Note Holders, the Previous Convertible Note Holders or Summit in all
or any part of the Collateral.



(c) Release of Collateral. If, in connection with the exercise by any of the Existing
Secured Note Holder, the New Secured Note Holders, the Previous Convertible Note Holders or Summit
of 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 the
Holder Representative, for itself and on behalf of the holders of the Notes, shall be
automatically, unconditionally and simultaneously released; provided, that after the Existing
Secured Debt, the New Secured Debt and (if secured by liens on such Collateral) the Summit Debt
have each been indefeasibly paid in full in cash, the balance, if any, of the proceeds of such
Collateral shall be applied to the Obligations for the benefit of the holders of the Notes and the
Previous Convertible Notes on a pari passu basis. The Holder Representative agrees promptly to
execute 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, the
Previous Convertible Note Holders or Summit (as applicable) may reasonably require to effectively
confirm such release.


 


15









 





(d) No Improvements. This Section 9 shall not be construed in any way to limit or
impair the right of (i) the Holder Representative to bid for and purchase any Collateral at
any private sale, public sale or judicial foreclosure upon such Collateral initiated by the
Existing Secured Note Holder, the New Secured Note Holders or Summit, (ii) the Holder
Representative to join (but not control) any foreclosure or other judicial lien enforcement
proceeding with respect to the Collateral initiated by the Existing Secured Note Holder, the New
Secured Note Holders or Summit thereon, so long as it does not delay or interfere with the exercise
by the Existing Secured Note Holder, the New Secured Note Holders or Summit (as applicable) of its
or their rights and (iii) subject to the terms of this Security Agreement, the right of the Holder
Representative to receive payments from the proceeds of the collection, sale or other disposition
of any Collateral after the Existing Secured Debt, the New Secured Debt and the Summit Debt (if
secured by liens on such Collateral) has been indefeasibly paid in full in cash.




10. MISCELLANEOUS.



(a) Continuing Security Interest. This Security Agreement creates a continuing
security interest in the Collateral and shall (i) remain in full force and effect until the
Obligation is paid and performed in full; and (ii) inure to the benefit of and be enforceable by
Holder Representative and its successors, transferees, and assigns. Without limiting the
generality of the foregoing clause (ii), Holder Representative may assign or otherwise transfer any
of their respective rights under this Security Agreement to any other person or entity upon ten
business days prior written notice to Debtor provided that the assignee agrees to be bound by the
terms 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 respect
thereof granted herein or otherwise to Holder Representative. Upon payment in full of the
Obligation, Debtor shall be entitled to the return, upon its request and at its expense, of (i) any
confidential information provided to Holder Representative or its agents or assignees pursuant to
the Transaction Documents and (ii) such of the Collateral as shall not have been sold or otherwise
applied pursuant to the terms hereof.




(b) Termination and Release.




(i) Upon the full and final payment and performance of the Obligation, this Security
Agreement shall automatically terminate.




(ii) The liens created by this Security Agreement on any of the Collateral shall be
automatically released if Debtor disposes of such Collateral pursuant to a transaction
permitted 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, all
documents that Debtor shall reasonably request to evidence such termination or release. Any
execution and delivery of documents pursuant to this Section 10(b)(iii) shall be without
recourse to or warranty by Holder Representative.


 


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(c) Actions Not Releases. The Security Interest and Debtor’s obligations and Holder
Representative’s rights hereunder shall not be released, diminished, impaired, or adversely
affected by the occurrence of any one or more of the following events: (i) the taking or accepting
of 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 existing
in connection with any or all of the Obligation; (iii) the modification of, amendment to, or waiver
of compliance with any terms of any of the other Transaction Documents without the notification or
consent of Debtor, except as required therein; (iv) the insolvency, bankruptcy, or lack of
corporate or trust power of any party at any time liable for the payment of any or all of the
Obligation, whether now existing or hereafter occurring; (v) any renewal, extension, or
rearrangement of the payment of any or all of the Obligation, either with or without notice to or
consent of Debtor, or any adjustment, indulgence, forbearance, or compromise that may be granted or
given by Holder Representative to Debtor; (vi) any neglect, delay, omission, failure, or refusal of
Holder 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 of
the 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 or
other security, or of any other action taken or refrained from being taken by Holder Representative
against Debtor or any new agreement between or among Holder Representative and Debtor, it being
understood that except as expressly provided herein or required by law, Holder Representative shall
not be required to give Debtor any notice of any kind under any circumstances whatsoever with
respect to or in connection with the Obligation, including, without limitation, notice of
acceptance of this Security Agreement or any Collateral ever delivered to or for the account of
Holder Representative hereunder; (viii) the illegality, invalidity, or unenforceability of all or
any part of the Obligation against any party obligated with respect thereto by reason of the fact
that the Obligation, or the interest paid or payable with respect thereto, exceeds the amount
permitted by applicable laws, the act of creating the Obligation, or any part thereof, is ultra
vires, or the officers, partners, or trustees creating same acted in excess of their authority, or
for any other reason; or (ix) if any payment by any party obligated with respect thereto is held to
constitute a preference under applicable laws or for any other reason Holder Representative is
required to refund such payment or pay the amount thereof to someone else.



(d) Waivers. Except to the extent expressly otherwise provided herein or in other
Transaction Documents and to the fullest extent permitted by applicable laws, Debtor waives (i) any
right to require Holder Representative to proceed against any other person or entity, to exhaust
its 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 and
nonpayment, and notice of the intention to accelerate; and (iii) all rights of marshaling in
respect of any and all of the Collateral.



(e) Financing Statement; Authorization. Debtor hereby irrevocably authorizes Holder
Representative at any time and from time to time to file in any UCC jurisdiction any initial
financing statements and amendments thereto (without the requirement for Debtor’s signature
thereon) 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 of
Article 9 of the UCC of the state or such jurisdiction or whether such assets are included in the
Collateral 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 jurisdiction
for the sufficiency or filing office acceptance of any financing statement or amendment, including
whether the Company is an organization, the type of organization, and
any organization identification number issued to Debtor. Debtor agrees to furnish any such
information to Holder Representative promptly upon request.


 


17









 





(f) Amendments. This Security Agreement may be amended only by an instrument in
writing executed jointly by Debtor and Holder Representative, and supplemented only by documents
delivered or to be delivered in accordance with the express terms hereof.



(g) Multiple Counterparts. This Security Agreement has been executed in a number of
identical counterparts, each of which shall be deemed an original for all purposes and all of which
constitute, collectively, one agreement; but, in making proof of this Security Agreement, it shall
not be necessary to produce or account for more than one such counterpart.



(h) Parties Bound; Assignment. This Security Agreement shall be binding on Debtor and
Debtor’s heirs, legal representatives, successors, and assigns and shall inure to the benefit of
Holder Representative and Holder Representative’s successors and assigns; provided that Debtor may
not, without the prior written consent of Holder Representative, assign any rights, duties, or
obligations hereunder.



(i) General Authority of Holder Representative. By acceptance of the benefits of this
Security Agreement, each holder of the Notes (whether or not a signatory hereto) shall be deemed
irrevocably (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 of
such Person for the enforcement of any provisions of this Security Agreement against Debtor, the
exercise of remedies hereunder and the giving or withholding of any consent or approval hereunder
relating to any Collateral or Debtor’s obligations with respect thereto, (c) to agree that it shall
not take any action to enforce any provisions of this Security Agreement against Debtor, to
exercise any remedy hereunder or to give any consents or approvals hereunder except as expressly
provided in this Security Agreement or in the Notes and (d) to agree to be bound by the terms of
this Security Agreement.



(j) GOVERNING LAW. THIS SECURITY AGREEMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, AND ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, INTERPRETATION AND
PERFORMANCE OF THIS NOTE SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
NEW YORK OR ANY OTHER JURISDICTIONS) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTIONS OTHER THAN THE STATE OF NEW YORK.



Remainder of Page Intentionally Blank.

Signature Page to Follow.



 


18









 






EXECUTED as of the date first stated in this Security Agreement.



	 	 	 	 	 
	 	DEBTOR:



IRVINE SENSORS CORPORATION

 	 
	 	By:  	/c/ John J. Stuart, Jr.
 	 
	 	 	Name:  	John J. Stuart, Jr. 	 
	 	 	Title:  	Sr. VP & CFO 	 
	 



Signature Page to Security Agreement




 


 









 





	 	 	 	 	 	 	 
	 	 	HOLDER REPRESENTATIVE:	 	 
	 
	 	 	 	 	 	 
	 	 	COSTA BRAVA PARTNERSHIP III L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Roark, Rearden & Hamot, LLC,

its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Seth W. Hamot
 

Name: Seth W. Hamot 

Title:   President
	 	 





Signature Page to Security Agreement



 


 









 





	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	as a Holder of Notes	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 






Signature Page to Security Agreement



 


 









 





SCHEDULE A




DEBTOR INFORMATION AND LOCATION OF COLLATERAL




	 	 	 
	A. Exact Legal Name of Debtor:

	 	Irvine Sensors Corporation
	 
	 	 
	B. Mailing Address of Debtor:

	 	3001 Red Hill Avenue, Building 4, Suite 108 Costa Mesa, California 92626
	 
	 	 
	C. Type of Entity:

	 	Corporation
	 
	 	 
	D. Jurisdiction of Organization:

	 	Delaware
	 
	 	 
	E. State Issued Organizational
Identification Number:

	 	2149404
	 
	 	 
	F. Location of Books and Records:

	 	3001 Red Hill Avenue, Buildings 3 and 4, Suite 108 Costa Mesa, California 92626
	 
	 	 
	G. Location(s) of Collateral:

	 	3001 Red Hill Avenue, Buildings 3 and 4, Suite 108 Costa Mesa, California 92626


 Certain of Debtor’s assets that
are co-owned by Optics 1, Inc. pursuant to that teaming agreement between Optics 1, Inc. and Debtor may be located at the
offices of Optics 1, Inc. located at 1050 Holt Avenue, Manchester, New Hampshire 03109.
	 
	 	 
	H. Jurisdiction(s) for Filing
Financing Statements:

	 	Delaware