Unassociated Document


     

     

     

     

     

    Exhibit
      10.13

    

      SECURITY
        AGREEMENT

       

      THIS
        SECURITY AGREEMENT (this "Security
        Agreement"), is
        dated
        as of September 18,
        2006,
        between QUINTESSENCE PHOTONICS CORPORATION, a Delaware corporation (the
        "Company") and
        FINISAR CORPORATION ("Secured
        Party").

      


      WITNESSETH

       

      A.
        WHEREAS,the
        Company is the maker of that certain Secured Promissory Note in
        favor
        of the Secured Party dated as of even date herewith in the original principal
        amount
        of
$6,000,000
        (the "Note," and, together with this Security Agreement, the
        "Transaction Documents").

       

      B.
        WHEREAS,
        in order to secure the Company's prompt payment on the Note, and to
        secure
        performance of all of the Company's obligations under the Transaction
        Documents (collectively,
        the "Obligations"), the
        Company has agreed to execute and deliver this Security Agreement.

       

      NOW,
        THEREFORE, in consideration of the premises and covenants contained herein,
        and
        for
        other good and valuable consideration, the sufficiency of which is hereby
        acknowledged and received, the parties hereto agree as follows:

      AGREEMENT

       

      1.
        Defined
        Terms. All
        terms
        not otherwise defined herein shall have the meanings provided
        for by the Uniform Commercial Code as enacted and in effect in the State
        of
        California (the
        "UCC"). As
        used
        herein:

       

      1.1
        "Collateral"
        means
        all accounts, chattel paper, commercial tort claims, deposit
        accounts, documents, equipment (including all fixtures), general intangibles
        (including Intellectual
        Property owned or licensed by the Company), instruments, inventory,
        investment property, letter-of-credit rights, money and all products, proceeds
        and supporting obligations
        of any
        and
        all of the foregoing.

       

      Anything
        contained in this Security Agreement to the contrary notwithstanding, the
        term
"Collateral"
        shall not include any equipment that is now or hereafter held by the
Company
        as lessee,
        licensee, or debtor under purchase money secured financing, in the event
        that:
(a)
        as a
result
        of
        the grant of a security interest therein, the Company's rights in or with
        respect to such
        asset
        would be forfeited or the Company would be deemed to have breached or defaulted
        under the applicable lease, license, or other agreement that governs such
        asset
        pursuant to restrictions
        contained
        in the applicable lease, license or other agreement; and (b) any such
        restriction is effective
        and enforceable under applicable law; provided, however, that
        the
        term "Collateral" shall
        include, at any time that the restrictions in the lease, license, or other
        agreement
        are no longer
        effective and enforceable (including as a result of the exercise of an option
        to
        purchase or
        the
        repayment of the secured financing) or
        at
any
        time
        that the applicable lessor, licensor or other applicable party's consent
        is
        obtained to the grant of a security interest in and to such
        asset in favor
        of
        the Secured Party, (1) any and all proceeds of such assets, and (2) such
        assets.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      1.2
        "Copyrights"
        means
        any and all
        copyright
        rights, copyright applications, copyright
        registrations and like protections in each work or authorship and derivative
        work thereof,
        whether published or unpublished and whether or not the same also constitutes
        a
        Trade Secret,
        now or hereafter existing, created, acquired or held.

       

      1.3 "Intellectual
        Property" means
        all
        of the Company's right, title, and interest in
        and to
        the following;

       

      (a) Copyrights,
        Trademarks and Patents;

       

      (b)
        Any
        and
        all Trade Secrets, inventions, mask works, programs, works
        of
        authorship, know-how, discoveries, developments, designs, design rights and
        techniques
        and any and all intellectual property rights in computer software and computer
        software
        products now or hereafter existing, created, acquired or held;

       

      (c)
        Any
        and
        all claims for damages by way of past, present and future infringement
        of any of the rights included in (a) or (b) above, with the right, but not
        the
obligation,
        to sue for and collect such damages for such use or for infringement of such
        rights;

       

      (d)
        All
        licenses or other rights to use any of the Copyrights, Patents or Trademarks,
        and all license fees and royalties arising from such use to the extent permitted
        by such
        license or rights;

       

      (e) All
        amendments, renewals and extensions of any of the Copyrights,
        Trademarks or Patents;

       

      (f)
        All
        documents, models, samples, specimens, reports, drawings, research
        materials, notes and other materials in connection with or which in any way
        embody or relate
        to
        any Patent or patentable matter and the right to pursue, prepare, file and
        prosecute any Patent
        application(s) in connection therewith;

       

      
        (g)
          All
          other
          rights and interests of the Licensor as described in the License
          Agreement; and

      

       

      (h)
        All
        proceeds and products of the foregoing, including without limitation
        all payments under insurance or any indemnity or warranty payable in respect
        of
        any of
        the
        foregoing.

       

      1.4
        "Intercreditor
        Agreement" means
        that certain Intercreditor Agreement dated
        as
        of even date herewith by and among the Secured Party, the Company and the
        Senior
Creditor.

       

      1.5 "License
        Agreement" means that certain License Agreement dated as of September 18,
        2003 by and between Licensor and Licensee.

       

      1.6 "Lien" means
        any
        lien, security interest, pledge, assignment, encumbrance or other interest
        in
        property.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      


      1.7 "Other Collateral" means
        all
        Collateral
        other
        than
        the
Company's
        Intellectual
        Property.

       

      1.8
        "Patents" means
        all
        patents, patent applications, all types of exclusionary or protective rights
        granted (or applications therefor) or inventions and like protections
(including
        without limitation improvements, divisions, patents-of-addition, continuations,
        renewals,
        reissues, extensions and continuations-in-part of the same) and any and all
        patentable
        subject matter (including, without limitation, methods of doing business,
        machines,
        articles of manufacture, processes, compositions of matter and new uses or
        improvements
        of any of the foregoing).

       

      1.9
        "Permitted
        Dispositions" means
        any
        disposition of Collateral that is either (i)
        in
        the ordinary course of the business of the Company, or (ii) to a third party
        for
reasonably
        equivalent value as deemed appropriate by the Company in its reasonable
business
        judgment, and that, in either case, that does not result, in a single
        transaction or a series
        of
        related transactions, in the disposition or sale of all or substantially
        all of
        the assets
        of
        the Company.

       

      1.10
        "Permitted
        Liens" means
        (a)
        Liens in favor of the Secured Party, (b) Liens for
        unpaid taxes that either (i) are not yet delinquent, or (ii) do not constitute
        an Event of Default
        hereunder and are the subject of Permitted Protests, (c) Liens set forth
        on
Schedule
        A, (d)
        the
        interests of lessors or sublessors under operating leases, (e) purchase
money
        Liens or the interests of lessors under capital leases so long as such Lien
        attaches only
        to
        the asset purchased or acquired and the proceeds thereof, (f) Liens arising
        by
operation
        of law in favor of warehousemen, landlords, carriers, mechanics, materialmen,
        laborers, or suppliers, incurred in the ordinary course of the Company's
        business and not in
        connection with the borrowing of money, and which Liens either (i) are for
        sums
        not yet
        delinquent, or (ii) are the subject of Permitted Protests, (g) Liens or deposits
        to secure performance
        of bids, tenders, or leases incurred in the ordinary course of business and
        not
in
        connection with the borrowing of money, (h) Liens granted as security for
        surety
        or appeal
        bonds in connection with obtaining such bonds in the ordinary course of
        business, (i) Liens resulting from any judgment or award that is not an Event
        of
        Default hereunder, (j) any interest or title of a licensee or licensor under
        any
        license agreement permitted by this
        Security Agreement, (k) Liens that arise in the ordinary course of business
        and
        do not in
        any
        material respect affect the Collateral, (1) Liens which are subject of a
        Permitted Protest,
        (in) Liens on patents, trademarks, trade names, service marks, copyrights,
        trade
secrets
        or other intellectual property to the extent such Liens arise solely from
        the
granting
        of licenses composing Permitted Dispositions thereto or from any Person in
        the
ordinary
        course of business consistent with past practice, and (n) Liens in favor
        of the
Senior
        Creditor to secure the Senior Credit Obligations.

       

      1.11
        "Permitted
        Protest" means
        the
        right to protest any Lien (other than any such
        Lien
        that secures the Obligations), taxes (other than payroll taxes or taxes that
        are
        the subject of a United States federal tax lien), or rental payment, provided
        that (a) any such
        protest is instituted promptly and prosecuted diligently by the applicable
        Person in good faith, and (b) while any such protest is pending, there will
        be
        no impairment of the enforceability,
        validity, or priority of any of the Secured Party's Liens.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      1.12
        "Person" means
        natural persons, corporations, limited liability companies, limited
        partnerships, general partnerships, limited liability partnerships, joint
        ventures, trusts,
        land trusts, business trusts, or other organizations, irrespective of whether
        they are legal
        entities, and governments and agencies and political subdivisions
        thereof.

       

      1.13
        "Senior
        Creditor" means
        (i)
        each of the holders of promissory notes (as amended
        from time to time, the "Senior
        Notes") issued
        pursuant to that certain Loan Agreement
        dated as of May 21, 2004 (as amended from time to time) by and among the
        Maker
        and
        the persons and entities named therein as "Lenders" (the "Loan
        Agreement") and
        (ii)
        M.U.S.A. Inc., doing business as DBA Money USA, in
        its
        capacity as collateral agent
        for
        the Lenders (the "Senior
        Collateral Agent").

       

      1.14
        "Senior
        Credit Documents" means
        the
        Loan Agreement, the Senior Notes and
        the
        Senior Security Agreement dated as of May 21, 2004 between the Maker and
        the
Senior
        Collateral Agent, all as may be from time to time amended.

       

      1.15
        "Senior
        Credit Obligations" means
        the
        obligations owed to the Senior Creditor
        pursuant to the Senior Credit Documents.

       

      1.16
        "Trademarks" means
        trademarks, service marks, trade names, designs, logos,
        slogans, and general intangibles of like nature, together with all goodwill,
        registrations
        and applications related to any of the foregoing.

       

      1.17"Trade
        Fixtures" means
        any
        equipment or machinery which may be removed
        from the Company's premises without doing material damage to the
        premises.

       

      1.18
        "Trade
        Secrets" means
        trade secrets and other proprietary or confidential information,
        know-how, technology, processes, formulae, algorithms, models and methodologies
        in any format and whether tangible or not.

       

      2. Security
        Interest and Subordination.

       

      2.1
        Grant
        of Security Interest. To
        secure
        the prompt and complete payment, performance
        and observance of the Obligations, and to induce the Secured Party to enter
        into
        the Transaction
        Documents, to make the loan in accordance with the terms thereof, the Company
        hereby
        grants, conveys, mortgages, pledges, hypothecates and transfers to the Secured
        Party, a security
        interest in all of the Company's right, title and interest in, to and under
        the
        Collateral.

       

      2.2
        Security
        Interest Absolute. Except
        as
        required by applicable law, all rights of
        the
        Secured Party hereunder, the security interest granted hereby, and all
        obligations of
        the
Company
        hereunder, shall be absolute and unconditional irrespective of (a) any agreement
        with respect
        to any of the Obligations or any other agreement or instrument relating to
        any
        of the foregoing,
        (b) any change in the time, manner or place of payment of, or in any other
        term
        of, all or
        any of
        the Obligations, or any other amendment or waiver of or any other agreement
        or
instrument,
        (c) any exchange, release or non-perfection of any other Collateral, or any
        release, amendment
        or waiver of, or consent to or departure from, any guaranty for all or any
        of
        the Obligations,
        or (d) any other circumstance which might otherwise constitute a defense
        available to,
        or a
        discharge of, the Company in respect of the Obligations or in respect of
        this
        Security Agreement.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      2.3
        Set-Off
        Rights. The
        Company hereby grants to the Secured Party a right of
        set-off against the property of the Company held by the Secured Party,
        consisting of any Collateral
        now or hereafter in the possession or custody of or in transit to or from
        the
        Secured Party,
        for any purpose, including safekeeping, collection or pledge, for the account
        of
        the Company,
        or as to which the Company may have any right or power.

       

      2.4
        Limitation
        on Obligations. It
        is
        expressly agreed by the Company that, anything
        herein to the contrary notwithstanding, the Company shall remain liable under
        each of its agreements that are included in the Collateral to observe and
        perform all the conditions and obligations
        to be observed and performed by it thereunder and the Company shall comply
        and
perform
        with or pursuant to the terms and provisions of each such agreement. The
        Secured
        Party shall
        not
        have any obligation or liability under any agreement included in the Collateral
        by reason
        of
        or arising out of any Transaction Document, or the granting of the security
        interest herein
        or
        the receipt by the Secured Party of any payment relating to any agreement
        included in the
        Collateral pursuant hereto, nor shall Secured Party be required or obligated
        in
        any manner to perform
        or fulfill any of the obligations of the Company under or pursuant to any
        agreement included
        in the Collateral, or to make any payment, or to make any inquiry as to the
        nature or the sufficiency
        of any payment received by it or the sufficiency of any performance by any
        party
under
        any
        agreement included in the Collateral, or to present or file any claim, or
        to
        take any action
        to
        collect or enforce any performance or the payment of any amounts which may
        have
been
        assigned to it or to which it may be entitled at any time or times.

       

      2.5
        Filing
        Authorization. The
        Company authorizes the Secured Party to file financing
        statements and other filing or recording documents with respect to the
        Collateral (including
        any amendments thereto, or continuation or termination statements thereof),
        without the signature or other additional authorization of the Company, in
        such
        form and in such offices as the
        Secured Party reasonably determines appropriate to perfect or maintain the
        perfection of the
        security interest of the Secured Party hereunder. Other than in connection
        with
        Permitted Liens,
        the Company acknowledges and agrees that it is not authorized to, and will
        not,
        file financing statements or other filing or recording documents with respect
        to
        the Collateral (including
        any amendments thereto, or continuation or termination statements thereof),
        without the express prior written approval by the Secured Party, consenting
        to
        the form and substance of such filing or recording document. The Company
        approves, authorizes and ratifies any filings or recordings
        made by or on behalf of the Secured Party in connection with the perfection
        of
        the security interest in favor of the Secured Party. The Company agrees that
        upon request of the Secured
        Party, the Company will promptly execute all such documents as may be reasonably
        necessary
        or appropriate to effect the foregoing.

       

      3. Representations and Warranties. The
        Company
        makes the following representations
        and warranties to the Secured Party:

       

      3.1
        Collateral. The
        Company has good and marketable title to the Collateral, free and clear of
        any
        lien, security interest, pledge, assignment, encumbrance or other interest
        of
        any third party, other than Permitted Liens. The Company has all requisite
        power
        and authority to
        pledge
        and grant a security interest in the Collateral as contemplated in this Security
        Agreement
        and to create a lien on the Collateral in favor of the Secured Party. Subject
        in
        priority only
        to
        Permitted Liens, this Security Agreement, together with any filings required
        to
        be made, shall
        create a valid first priority lien upon and perfected first priority security
        interest in the Collateral
        to the extent such lien and security interest can be perfected by the filing
        of
        a UCC-1 financing
        statement. This
        Security Agreement, when executed, has been duly and validly executed
        and is the legal, valid and binding obligation of the Company and is enforceable
        against the
        Company by the Secured Party in accordance with its terms, except (i) as
        limited
        by applicable
        bankruptcy, insolvency, reorganization, moratorium, and other laws of general
        application
        affecting enforcement of creditors' rights generally, (ii) as limited by
        laws
        relating to the availability of specific performance, injunctive relief,
        or
        other equitable remedies and (iii) as limited
        by applicable federal or state securities laws. To the Company's knowledge,
        no
        third party
        is
        infringing or violating the Company's rights in or to any of the Company's
        Intellectual Property
        in any material respect, or exceeding the scope of authorization or license
        corresponding
        thereto in any material respect.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      3.2
        Claims. The
        Collateral is not the subject of any present or threatened material
        suit, action, arbitration, administrative or other material proceeding, and
        the
        Company is not
        aware
        of the institution of any such proceedings. No authorization, approval or
        other
        action by,
        and
        no notice to or filing (other than the filing of a financing statement) with,
        any governmental
        authority or regulatory body which has not already been obtained is required
        either (i)
        for
        the pledge by the Company of the Collateral pursuant to this Security Agreement,
        (ii) for the
        execution, delivery or performance of this Security Agreement by the Company
        or
        (iii) for the
        exercise by the Secured Party of any remedies with respect to the Collateral
        (excluding any exercise
        of remedies against the Company's investment property which may be subject
        to
applicable
        securities laws).

       

      3.3 Noncontravention. The
        execution and delivery by the Company of this Security
        Agreement will not (a) conflict with or violate any provision of the charter
        or
        by-laws of the Company, (b) require on the part of the Company any notice
        to or
        filing with, or any permit, authorization,
        consent or approval of, any governmental entity (other than the filing
of
        UCC
        financing
        statements pursuant hereto), (c) conflict with, result in a breach of,
        constitute (with or without
        due notice or lapse of time or both) a default under, result in the acceleration
        of obligations
        under, create in any party the right to terminate, modify or cancel, or require
        any notice,
        consent or waiver under, any contract or instrument to which the Company
        is a
        party or by
        which
        the Company is bound or to which any of its assets is subject, (d) result
        in the
imposition
        of any security interest upon any assets of the Company, except for the lien
        to
        be granted
        under this Security Agreement or (e) violate any order, writ, injunction,
        decree, statute, rule
        or
        regulation applicable to the Company
        or any of
        its
        properties or assets.

       

      4. Covenants. The
        Company hereby covenants to and agrees with the Secured Party that,
        from the date hereof and thereafter until this Security Agreement is
        terminated:

       

      4.1
        Corporate
        Changes. The
        Company shall not change its corporate form or jurisdiction
        of organization or relocate its chief executive officer or chief financial
        officer without
        giving Secured Party fifteen (15) days prior written notice thereof. The
        Company
        shall preserve
        and keep in full force and effect its valid existence and all rights and
        franchises material to
        the
        Company,

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      4.2
        Payments
        and Insurance. The
        Company shall pay and discharge all material
        taxes, assessments and charges or levies against the Company or the Collateral
        prior to delinquency thereof. The Company, at its own expense, shall have
        and
        maintain insurance at all times
        with respect to all Collateral against such risks and liabilities, with such
        carrier and in such amounts
        as are maintained as of the date hereof. The Secured Party shall be an
        additional insured
        with respect to all risk and liability insurance. All other insurance shall
        provide that the Secured Party and the Company are joint loss payees as their
        interests may appear and shall not be subject to cancellation or reduction
        in
        coverage without thirty (30) days' prior written notice to
        the
        Secured Party. The Company shall supply certificates of such insurance to
        the
        Secured Party
        upon the reasonable request therefore by the Secured Party.

       

      4.3
        No
        Disposition of Collateral. Other
        than Permitted Dispositions, the Company
        shall not sell, convey, assign (by operation of law or otherwise), exchange
        or
otherwise
        voluntarily or involuntarily transfer or dispose of any interest in the
        Collateral or any portion
        thereof or encumber, or hypothecate or pledge, or create, incur or permit
        to
        exist any Lien
        or
        adverse claim upon or other interest in or with respect to any of the Collateral
        except for Permitted
        Liens.

       

      4.4
        Records
        and Reports. The
        Company will maintain books and records with respect
        to the Collateral, and furnish to the Secured Party such reports relating
        to the
        Collateral as
        the
        Secured Party shall from time to time reasonably request.

       

      4.5
        Further
        Assurances. The
        Company will execute and deliver to the Secured Party
        all
        financing statements, amendments thereto and other documents, and will perform
        such other
        actions, as are from time to time reasonably requested by the Secured Party
        in
        order to perfect,
        maintain and protect the validity, enforceability and perfected status of
        the
        security interest
        in the Collateral or to enable the Secured Party to exercise and enforce
        its
        rights and remedies
        hereunder with respect to the Collateral; provided
        that, prior
        to
        the occurrence and continuance
        of an Event of Default, the Secured Party agrees that the Company shall not
        have
        to deliver
        any documents or enter into any agreements in order to achieve the perfection
        of
        the Secured
        Party's security interest in the Collateral except for the delivery of a
        UCC-1
        financing statement in favor of the Secured Party, the execution and delivery
        of
        this Security Agreement and
        the
        Intercreditor Agreement, and the delivery of such documents and agreements
        reasonable requested
        by Secured Party from time to time in order to perfect its security interest
        in
        the Intellectual
        Property.

       

      4.6 Intellectual
        Property Covenants. The
        Company shall:

       

      (a)
        consistent with commercially reasonable practices, prosecute diligently,
        as the Company's Board of Directors may reasonably determine, airy necessary
        and
material
        Patent, Trademark or Copyright application which is pending as of the date
        of
        this Security
        Agreement or hereafter and otherwise maintain all material
        rights in and to the Intellectual
        Property necessary for the Company's business, including making all necessary
        filings
        and recordings and paying all required fees and taxes to record and maintain
        its
registration
        and ownership of all such material Intellectual Property included in the
        Collateral;

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      (b) not
        materially impair any of the Secured Party's rights of action described
        herein without the written consent of the Secured Party;

       

      (c)
        (i)
        protect, defend and maintain, in all material respects, the validity and
        enforceability of the material Trademarks, Patents and Copyrights, (ii) detect
        material
        infringements of the material Trademarks, Patents and Copyrights and promptly
        advise the
        Secured Party in writing of material infringements detected and (iii) not
        allow
        any material Trademarks,
        Patents or Copyrights to be abandoned, forfeited or dedicated to the public
        without the
        prior
        written consent of the Secured Party; and

       

      (d)
        promptly
        notify the Secured Party in writing of any applications or registrations
        that the Company makes or files in respect of any Patents, Copyrights or
        Trademarks
        as well as any material change in the Intellectual Property.

       

      4.7
        Inspection
        and Verification. The
        Secured Party shall have the right, upon reasonable
        advance notice and at such times as may be reasonably requested, to visit
        and
        inspect any
        of
        the properties of the Company for the purpose of inspecting the same, and
        shall
        be provided
        reasonable access to the books, records, officers and accountants of the
        Company; provided, however,
        that the
        Company shall
        not
        be
        obligated to provide any information that it considers
        in good faith to be a trade secret or to contain confidential or classified
        information.

       

      4.8
        Maintenance
        of Collateral. The
        Company shall maintain and preserve, in all
        material respects, all
        of
        its
        properties which are necessary or useful in the proper conduct of its
        business in good working order and condition, ordinary wear and tear excepted,
        and comply at
        all
        times with the provisions of all leases to which it is
        a
        party
        as lessee so as to prevent any loss
        or
        forfeiture thereof or thereunder.

       

      5. Events
        Of Default. Any
        one
        or more of the following events (each an "Event
        of Default") shall
        constitute a default by the Company under this Security Agreement:

       

      5.1 The
        occurrence of an Event of Default as defined in the Note; or

       

      5.2
        The
        Company's breach of any representation or warranty in
        any
        material respect,
        or violation or failure to perform any of the covenants or agreements in
        this
        Security Agreement
        and such breach, violation or failure remains unremedied (to the extent capable
        of being remedied) for a period of thirty (30) days after the Secured Party
        provides the Company with
        written notice of such breach, violation or failure.

       

      6. Remedies
        Upon Default.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      6.1
        Remedies
        Upon Default. Upon
        the
        occurrence and during the continuance of
        an
        Event of Default, the Secured Party, at its option and in its sole and absolute
        discretion, and without
        notice or demand, may exercise and shall have any and all rights and remedies
        accorded to
        the
        Secured Party under this Security Agreement or otherwise by the UCC and/or
        any
        other governing
        law, including, without limitation, the right of the Secured Parties to retain
        the Collateral
        in satisfaction of the obligation or sell the Collateral at public or private
        sale in accordance
        with the UCC or any other applicable statute. Notwithstanding
        anything to the contrary in this Security Agreement, if the Secured Party
        elects
        to exercise its remedies as provided
        above, upon the occurrence and during the continuance of an Event of Default,
        the
        Secured Party shall first dispose of or sell all Other Collateral (unless
        by
        court order such
        Other Collateral may not be disposed of or sold). In the event the disposition
        or sale of
        the Other Collateral is insufficient to satisfy the Obligations, the Secured
        Party, upon ninety
        (90) days' prior written notice to the Company, shall have the right to dispose
        of or sell
        the portion of the Collateral consisting of the Company's Intellectual Property.
        If
        any
notification
        of disposition of all
        or
        any
        portion of the Collateral is required by law, such notification
        shall be deemed reasonably and properly given if mailed at least ten (10)
        days
        prior to such disposition, postage prepaid to the Company at its last address
        appearing on the records of
        the
        Secured Party by registered or certified mail, return receipt
        requested.

       

      6.2
        The
        Company's Obligations Upon Event of Default. Upon
        the
        request of the
        Secured Party after the occurrence and during the continuance of an Event
        of
        Default, the Company
        will promptly:

       

      (a) Assemble
        and make available to the Secured Party the Collateral and
        all
        records relating thereto at the Company's principal place of
        business.

       

      (b)
        Permit
        the Secured Party, or the Secured Party's representatives, with
        or
        without judicial process or the aid or assistance of others, to enter any
        premises where all or
        any
        part of the Collateral, or the books and records relating thereto, or both,
        are
        located, to take
        possession of all or any part of the Collateral and to remove all
        or
        any
        part of the Collateral, to
        complete the provision of any services giving rise to any Collateral or take
        actions as the Secured
        Party shall deem necessary to preserve and protect any Collateral.

       

      6.3
        Substitute
        Performance. Upon
        the
        occurrence and during the continuance of
        an
        Event of Default or an event which, upon the lapse of time or the giving
        of
        notice, or both, would constitute an Event of Default, without having any
        obligation to do so, the Secured Party may,
        upon
        notice to the Company, perform or pay any obligation which the Company has
        agreed to
        perform or pay in this Security Agreement but has not performed or paid and
        the
        Company shall
        reimburse the Secured Party for any amounts paid or incurred pursuant to
        such
        performance or
        payment.

       

      6.4 Application
        of Funds Received. Subject
        to the terms of the Intercreditor Agreement,
        the proceeds of Collateral received by the Secured Party shall be applied
        as
        follows:

       

      (a)
        First, for
        the
        payment of all reasonable costs, expenses, attorneys' paralegals'
        and other professionals' fees, taxes and charges incurred by the Secured
        Party
        in connection
        with the collection of any sum and foreclosure on Collateral, whether accruing
        before or
        after
        such Event of Default, to the extent payment is required pursuant to Section
        9.3
        of this Security
        Agreement;

       

      (b) Second, ratably,
        for the payment of all other Obligations under the Transaction
        Documents; and

       

      (c) Third, to
        the
        Company.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      7. General
        Provisions.

       

      7.1
        Waivers,
        Amendments and Remedies. No
        delay
        or omission of the Secured
        Party to exercise any right, power or remedy granted under this Security
        Agreement shall
        impair such right, power or remedy or be construed to be a waiver of any
        Event
        of Default or
        an
        acquiescence therein, and any single or partial exercise of any such right,
        power or remedy shall
        not
        preclude other or further exercise thereof or the exercise of any other right,
        power or remedy,
        and no waiver, amendment or other variation of the terms, conditions or
        provisions of this
        Security Agreement whatsoever shall be valid unless signed by each of the
        parties hereto, and
        then
        only to the extent specifically set forth in such writing.

       

      7.2 General
        Authorizations.

       

      (a)
        Subject
        to the terms of Section 7.2(b) below, the Company irrevocably
        authorizes the Secured Party at any time and from time to time in the sole
        discretion of
        the
        Secured Party, and irrevocably appoints the Secured Party as its
        attorney-in-fact to act on behalf
        of
        the Company, in the name of the Company or otherwise, from time to time in
        the
Secured
        Party's discretion, to take any action and to execute any instrument which
        is
        reasonably necessary
        or advisable to accomplish the purposes of this Security Agreement, including
        without limitation
        (a) to file financing statements necessary or desirable in the Secured Party's
        sole discretion
        to perfect and to maintain the perfection and priority of the Secured Party's
        security interest
        in the Collateral; (b) to file a carbon, photographic or other reproduction
        of
        this Security Agreement
        or any financing statement with respect to the Collateral as a financing
        statement in such
        offices as the Secured Party in its sole discretion deems necessary or desirable
        to perfect and
        to
        maintain the perfection and priority of the Secured Party's security interest
        in
        the Collateral;
        (c) to cause the proceeds of any Collateral received by the Secured Party
        to be
        applied to
        the
        Obligations; and (d) to do all things necessary to carry out this Security
        Agreement.

       

      (b)
        Subject
        at all times to the second sentence of Section 6.1 hereof, upon
        the
        occurrence and during the continuance of any Event of Default, the Company
        irrevocably
        authorizes the Secured Party at any time and from time to time in the sole
        discretion of
        the
        Secured Party, and irrevocably appoints the Secured Party as its
        attorney-in-fact to act on behalf
        of
        the Company, in the name of the Company or otherwise, from time to time in
        the
Secured
        Party's discretion, to take any of the following actions: (a) to sign the
        Company's name on
        any
        invoice
        relating to any Collateral, including any schedules and assignments of such
        Collateral,
        on notices of assignment, financing statements and other public records,
        on
verifications
        of accounts and on notices to licensees; (b) to grant or issue any exclusive
        or
nonexclusive
        license under the Collateral to any person, to the extent consistent with
        the
        terms of any
        license agreements, (c) to assign, pledge, convey or otherwise transfer title
        in
        or to or dispose
        of the Collateral to any party, including without limitation, to make
        assignments, recordings,
        registrations and applications therefor in the United States Patent and
        Trademark Office,
        the United States Copyright Office or any similar office or agency of the
        United
        States, any
        State
        thereof or any other country or political subdivision thereof, and to execute
        and deliver any
        and
        all agreements, documents, instruments of assignment or other papers necessary
        or advisable
        to effect any of the foregoing or the recordation, registration, filing or
        perfection thereof,
        or (d) to send requests for verification of any Collateral or any proceeds
        therefrom.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (c)
        The
        Secured Party will not be liable for any acts or omissions except
        those determined pursuant to a final,
        non-appealable
        order of a court of competent jurisdiction
        to have resulted solely from the Secured Party's gross negligence or willful
        misconduct.
        The power conferred on the Secured Party hereunder is solely to protect its
        interests in
        the
        Collateral and shall not impose any duty upon the Secured Party to exercise
        such
        power. This
        power, being coupled with an interest, is irrevocable.

       

      7.3
        Expenses. The
        Company agrees to pay upon demand to the Secured Party the amount of all
        reasonable expenses, including the reasonable fees and expenses of its counsel
        and
        of
        any experts of the Secured Party, which the Secured Party may incur in
        connection with (a)
        the.custody
        or preservation of, or the sale of, collection from, or other realization
        upon,
        any of
        the
        Collateral, (b) the administration of this Security Agreement or any Transaction
        Document,
        (c) the exercise or enforcement of any of the rights of the Secured Party
        hereunder or thereunder, or (d) the failure by the Company to perform or
        observe
        any of the provisions hereof or
        thereof.

       

      7.4 Indemnification.

       

      (a)
        The
        Company agrees to indemnify the Secured Party, and its respective
        partners, employees, officers, directors and agents against, and defend and
        hold
        them harmless
        from, any and all losses, claims, damages, liabilities and related expenses,
        including reasonable attorneys', paralegals' and other professional fees,
        disbursements and other similar charges,
        incurred by or asserted against any of them arising out of, in any way connected
        with, or as
        a
        result of, the execution, delivery or performance of this Security Agreement
        or
        any claim, litigation, investigation or proceeding relating hereto or to
        the
        Collateral, whether or not the Secured
        Party is a party thereto; provided that
        such
        indemnity shall not be available to the extent that
        such
        losses, claims, damages, liabilities or related expenses are determined by
        a
        court of competent
        jurisdiction by final and non-appealable judgment to have resulted from the
        gross negligence
        or willful misconduct of the Secured Party.

       

      (b)
        The
        provisions of this Section 7.4 shall remain operative and in fullforce
        and
        effect regardless of the termination of this Security Agreement or any
        Transaction Document,
        the consummation of the transactions contemplated hereby and thereby, the
        invalidity or
        unenforceability of any term or provision of this Security Agreement or any
        Transaction Document,
        or any investigation made by or on behalf of the Secured Party.

       

      (c)
        Any
        such amounts payable as provided hereunder shall be additional
        Obligations secured by this Security Agreement, and all amounts due under
        this
Section
        7.4 shall be payable on written demand therefor and shall bear interest at
        the
        rate of 10% per
        annum
        (or the highest amount permitted by law) from the date incurred by the Secured
        Party until
        paid in full.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      7.5 Insolvency. Notwithstanding
        anything to the contrary contained in this Security
        Agreement, until this Security Agreement is terminated pursuant to Section
        8.6
        hereof, this
        Security Agreement shall remain in full force and effect and continue to
        be
        effective should any
        petition be filed by or against the Company for liquidation or reorganization,
        should the Company
        become insolvent or make an assignment for any benefit of creditors or should
        a
receiver
        or trustee be appointed for all or any significant part of the Company's
        assets,
        and shall continue
        to be effective or be reinstated, as the case may be, if at any time payment
        and
performance
        of the obligations, or any part thereof, is, pursuant to applicable law,
        rescinded or reduced
        in amount, or must otherwise be restored or returned by any obligee of the
        obligations, whether
        as a "voidable preference," "fraudulent conveyance" or otherwise, all as
        though
        such payment,
        or any part thereof, is rescinded, reduced, restored or returned.

       

      8. Miscellaneous.

       

      8.1
        Binding
        Agreement; Assignments. This
        Security Agreement, and the terms,
        covenants and conditions hereof, shall be binding upon and inure to the benefit
        of the parties
        hereto and their respective successors and permitted assigns. The rights
        and
        obligations under
        this Security Agreement may not be assigned or transferred, nor may any duties
        and obligations
        hereunder be delegated, without the prior written consent of the other party.
        Notwithstanding
        the foregoing, the Secured Party may assign its rights under his Security
        Agreement to a third party as part of a sale of all or substantially all
        of the
        assets or stock of Secured
        Party to that third party, or a sale of the relevant business line.

       

      8.2
        GOVERNING
        LAW AND CONSENT TO JURISDICTION. THE
        VALIDITY,
        CONSTRUCTION AND EFFECT OF THIS SECURITY AGREEMENT SHALL BE
        GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.

       

      ANY
        ACTION OF ANY TYPE OR NATURE WHATSOEVER
        WITH RESPECT TO THIS
        SECURITY AGREEMENT, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE,
        SHALL BE BROUGHT IN A STATE OR FEDERAL COURT OF COMPETENT
        JURISDICTION IN THE CITY
        OF
        LOS
        ANGELES,
        STATE
        OF
        CALIFORNIA,
        AND THE COMPANY ACCEPTS FOR ITSELF AND ITS ASSETS AND PROPERTIES,
        GENERALLY
        AND
        UNCONDITIONALLY,
        THE
        EXCLUSIVE
        JURISDICTION
        OF THE AFORESAID COURTS.

       

      THE
        COMPANY
        WAIVES, TO THE
        FULLEST
        EXTENT PERMITTED BY APPLICABLE
        LAW, ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
        TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
        CONVENIENS)
        WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
        ANY
        SUCH ACTION IN ANY SUCH JURISDICTION.

       

      8.3 Notices. All
        communications and notices hereunder shall be in writing and
        given
        as provided in the Note.

       

      8.4
        Severability. In
        case
        any one or more of the provisions contained in this Security Agreement should
        be
        invalid, illegal or unenforceable in any respect, no party hereto shall
        be
        required to comply with such provision for so long as such provision is held
        to
        be invalid,
        illegal or unenforceable and the validity, legality and enforceability of
        the
        remaining provisions
        contained herein shall
        not
        in
        any way be affected or impaired. The parties shall endeavor
        in good-faith negotiations to replace the invalid, illegal and unenforceable
        provisions with
        valid provisions, the economic effect of which comes as close as possible
        to
        that of the invalid,
        illegal or unenforceable provisions.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      8.5
        Counterparts. This
        Security Agreement may be executed in two or more counterparts, each of which
        shall constitute an original, but all of which, when taken together,
shall
        constitute but one instrument.

       

      8.6
        Termination. This
        Security Agreement and the security interest granted in the
        Collateral hereby shall terminate after and only after all the Obligations
        have
        been paid in full (other
        than Obligations constituting contingent indemnification obligations). The
        Secured Party, at
        the
        expense of the Company, shall
        authorize
        the Company to file UCC termination statements and
        execute and deliver similar documents prepared by the Company which the Company
        shall reasonably
        request to evidence any such termination of interest in the
        Collateral.

       

      8.7
        Modification. Any
        term
        of this Security Agreement may be amended and the
        observance of any term of the Security Agreement may be waived (either generally
        or in a particular instance and either retroactively or prospectively), with
        the
        written consent of the Company
        and the Secured Party.

       

      8.8
        Intererceditor Agreement. The
        Company and the Secured Party acknowledge
        and agree that certain rights and priorities between the Secured Party and
        the
Senior
        Creditor with respect to certain of the Collateral shall be set forth in
        the
        Intercreditor Agreement.

       

      IN
        WITNESS
        WHEREOF, each
        party hereto has caused this Security Agreement to be executed
        as of the date first set forth above.

       

    

    
      	
            	 	 
	 	Company:
	 	 
	 	
              QUINTESSENCE
                PHOTONICS CORPORATION

            
	 
 	 
 	 
 
	 	By:  	
              /s/ George
                Lintz           
                

            
	 	Name:
              George Lintz
	 	
              Title:
                CFO

            


    

     

    
      	 	 	 
	 	Secured
              Party:
	 	 
	 	
              FINISAR
                CORPORATION

            
	 
 	 
 	 
 
	 	By:  	
              /s/ S.K.
                Workman        

            
	 	Name:
              S.K. Workman 
	 	Title:
              CFO


    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    

      SCHEDULE
        A

      EXISTING
        LIENS

       

      1)
        Liens
        created by that certain Security Agreement dated August 1, 2005 by and among
        the
Company
        and M.U.S.A. Inc., in its capacity as collateral agent for certain lenders
        named
        therein (the "Subordinated
        Security Agreement"), which
        liens secure obligations under those certain Notes
        and
        that certain Loan Agreement entered into by the Company and such lenders
        concurrently
        therewith. Pursuant to the terms of the Subordinated Security Agreement,
        such
liens
        are
        subordinate to the liens created by this Security Agreement.

       

      A-1