Document:

EXHIBIT
      10.40

    

    NEITHER
      THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE
      BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
      MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
      OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
      EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
      SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY
      AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN
      CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
      SECURITIES.

    

    COMMON
      STOCK PURCHASE WARRANT

    

    QPC
      LASERS, INC.

     

     

    
      	
              Warrant
                Shares: _______

            	
              Initial
                Exercise Date: May ___, 2008

            

    

    

    THIS
      COMMON STOCK PURCHASE WARRANT (the “Warrant”)
      certifies that, for value received, _____________ (the “Holder”)
      is
      entitled, upon the terms and subject to the limitations on exercise and the
      conditions hereinafter set forth, at any time on or after the date hereof (the
      “Initial
      Exercise Date”)
      and on
      or prior to the close of business on the five year anniversary of the Initial
      Exercise Date (the “Termination
      Date”)
      but
      not thereafter, to subscribe for and purchase from QPC Lasers, Inc., a Nevada
      corporation (the “Company”),
      up to
      ______ shares (the “Warrant
      Shares”)
      of
      Common Stock. The purchase price of one share of Common Stock under this Warrant
      shall be equal to the Exercise Price, as defined in Section 2(b). 

    

    Section
      1. Definitions.
      Capitalized terms used and not otherwise defined herein shall have the meanings
      set forth in that certain Securities Purchase Agreement (the “Purchase
      Agreement”),
      dated
      May __, 2008, among the Company and the purchaser signatories
      thereto.

    

    Section
      2. Exercise.

    

    a) Exercise
      of Warrant.
      Exercise of the purchase rights represented by this Warrant may be made, in
      whole or in part, at any time or times on or after the Initial Exercise Date
      and
      on or before the Termination Date by delivery to the Company (or such other
      office or agency of the Company as it may designate by notice in writing to
      the
      registered Holder at the address of the Holder appearing on the books of the
      Company) of a duly executed facsimile copy of the Notice of Exercise Form
      annexed hereto; and, within 3 Trading Days of the date said Notice of Exercise
      is delivered to the Company, the Holder shall have paid the aggregate Exercise
      Price of the shares thereby purchased by wire transfer or cashier’s check drawn
      on a United States bank. Notwithstanding anything herein to the contrary, the
      Holder shall not be required to physically surrender this Warrant to the Company
      until the Holder has purchased all of the Warrant Shares available hereunder
      and
      the Warrant has been exercised in full, in which case, the Holder shall
      surrender this Warrant to the Company for cancellation within 3 Trading Days
      of
      the date the final Notice of Exercise is delivered to the Company. Partial
      exercises of this Warrant resulting in purchases of a portion of the total
      number of Warrant Shares available hereunder shall have the effect of lowering
      the outstanding number of Warrant Shares purchasable hereunder in an amount
      equal to the applicable number of Warrant Shares purchased. The Holder and
      the
      Company shall maintain records showing the number of Warrant Shares purchased
      and the date of such purchases. The Company shall deliver any objection to
      any
      Notice of Exercise Form within 1 Business Day of receipt of such notice. In
      the
      event of any dispute or discrepancy, the records of the Holder shall be
      controlling and determinative in the absence of manifest error. The
      Holder and any assignee, by acceptance of this Warrant, acknowledge and agree
      that, by reason of the provisions of this paragraph, following the purchase
      of a
      portion of the Warrant Shares hereunder, the number of Warrant Shares available
      for purchase hereunder at any given time may be less than the amount stated
      on
      the face hereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    b) Exercise
      Price.
      The
      exercise price per share of the Common Stock under this Warrant shall be
$1.05,
      subject
      to adjustment hereunder (the “Exercise
      Price”).

    

    c) Cashless
      Exercise.
      If at
      any time after the earlier of (i) the one year anniversary of the date of the
      Purchase Agreement and (ii) the completion of the then-applicable holding period
      required by Rule 144, or any successor provision then in effect, there is no
      effective registration statement registering, or no current prospectus available
      for, the resale of the Warrant Shares by the Holder, then this Warrant may
      also
      be exercised at such time by means of a “cashless exercise” in which the Holder
      shall be entitled to receive a certificate for the number of Warrant Shares
      equal to the quotient obtained by dividing [(A-B) (X)] by (A),
      where:

    

    (A)
      = the
      VWAP on the Trading Day immediately preceding the date of such
      election;

    

    (B)
      = the
      Exercise Price of this Warrant, as adjusted; and 

    

    (X)
      = the
      number of Warrant Shares issuable upon exercise of this Warrant in accordance
      with the terms of this Warrant by means of a cash exercise rather than a
      cashless exercise.

    

    Notwithstanding
      anything herein to the contrary, on the Termination Date, this Warrant shall
      be
      automatically exercised via cashless exercise pursuant to this Section
      2(c).

     

    
      
        
        

      

      
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    d) Exercise
      Limitations.
      The
      Company shall not effect any exercise of this Warrant, and a Holder shall not
      have the right to exercise any portion of this Warrant, pursuant to Section
      2 or
      otherwise, to the extent that after giving effect to such issuance after
      exercise as set forth on the applicable Notice of Exercise, the Holder (together
      with the Holder’s Affiliates, and any other person or entity acting as a group
      together with the Holder or any of the Holder’s Affiliates), would beneficially
      own in excess of the Beneficial Ownership Limitation (as defined below). 
For purposes of the foregoing sentence, the number of shares of Common Stock
      beneficially owned by the Holder and its Affiliates shall include the number
      of
      shares of Common Stock issuable upon exercise of this Warrant with respect
      to
      which such determination is being made, but shall exclude the number of shares
      of Common Stock which would be issuable upon (A) exercise of the remaining,
      nonexercised portion of this Warrant beneficially owned by the Holder or any
      of
      its Affiliates and (B) exercise or conversion of the unexercised or nonconverted
      portion of any other securities of the Company (including, without limitation,
      any other Common Stock Equivalents) subject to a limitation on conversion or
      exercise analogous to the limitation contained herein beneficially owned by
      the
      Holder or any of its affiliates.  Except as set forth in the preceding
      sentence, for purposes of this Section 2(d), beneficial ownership shall be
      calculated in accordance with Section 13(d) of the Exchange Act and the rules
      and regulations promulgated thereunder, it being acknowledged by the Holder
      that
      the Company is not representing to the Holder that such calculation is in
      compliance with Section 13(d) of the Exchange Act and the Holder is solely
      responsible for any schedules required to be filed in accordance therewith.
      To
      the extent that the limitation contained in this Section 2(d) applies, the
      determination of whether this Warrant is exercisable (in relation to other
      securities owned by the Holder together with any Affiliates) and of which
      portion of this Warrant is exercisable shall be in the sole discretion of the
      Holder, and the submission of a Notice of Exercise shall be deemed to be the
      Holder’s determination of whether this Warrant is exercisable (in relation to
      other securities owned by the Holder together with any Affiliates) and of which
      portion of this Warrant is exercisable, in each case subject to the Beneficial
      Ownership Limitation, and the Company shall have no obligation to verify or
      confirm the accuracy of such determination. In addition, a determination as
      to
      any group status as contemplated above shall be determined in accordance with
      Section 13(d) of the Exchange Act and the rules and regulations promulgated
      thereunder. For purposes of this Section 2(d), in determining the number of
      outstanding shares of Common Stock, a Holder may rely on the number of
      outstanding shares of Common Stock as reflected in (A) the Company’s most recent
      periodic or annual report, as the case may be, (B) a more recent public
      announcement by the Company or (C) any other notice by the Company or the
      Transfer Agent setting forth the number of shares of Common Stock
      outstanding.  Upon the written or oral request of a Holder, the Company
      shall within two Trading Days confirm orally and in writing to the Holder the
      number of shares of Common Stock then outstanding.  In any case, the number
      of outstanding shares of Common Stock shall be determined after giving effect
      to
      the conversion or exercise of securities of the Company, including this Warrant,
      by the Holder or its Affiliates since the date as of which such number of
      outstanding shares of Common Stock was reported. The “Beneficial
      Ownership Limitation”
shall
      be 4.99% of the number of shares of the Common Stock outstanding immediately
      after giving effect to the issuance of shares of Common Stock issuable upon
      exercise of this Warrant as determined in accordance with this Section 2(d).
      The
      Holder, upon not less than 61 days’ prior notice to the Company, may increase or
      decrease the Beneficial Ownership Limitation provisions of this Section 2(d),
      provided that the Beneficial Ownership Limitation in no event exceeds 9.99%
      of
      the number of shares of the Common Stock outstanding immediately after giving
      effect to the issuance of shares of Common Stock upon exercise of this Warrant
      held by the Holder and the provisions of this Section 2(d) shall continue to
      apply. Any such increase or decrease will not be effective until the
      61st
      day
      after such notice is delivered to the Company. The provisions of this paragraph
      shall be construed and implemented in a manner otherwise than in strict
      conformity with the terms of this Section 2(d) to correct this paragraph (or
      any
      portion hereof) which may be defective or inconsistent with the intended
      Beneficial Ownership Limitation herein contained or to make changes or
      supplements necessary or desirable to properly give effect to such limitation.
      The limitations contained in this paragraph shall apply to a successor holder
      of
      this Warrant.

     

    
      
        
        

      

      
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    e) Mechanics
      of Exercise.
      

    

    i. Delivery
      of Certificates Upon Exercise.
      Certificates for shares purchased hereunder shall be transmitted by the Transfer
      Agent to the Holder by crediting the account of the Holder’s prime broker with
      the Depository Trust Company through its Deposit Withdrawal Agent Commission
      (“DWAC”)
      system
      if the Company is then a participant in such system and either (A) there is
      an
      effective registration statement permitting the resale of the Warrant Shares
      by
      the Holder or (B) the shares are eligible for resale without volume or
      manner-of-sale limitations pursuant to Rule 144, and otherwise by physical
      delivery to the address specified by the Holder in the Notice of Exercise within
      3 Trading Days from the delivery to the Company of the Notice of Exercise Form,
      surrender of this Warrant (if required) and payment of the aggregate Exercise
      Price as set forth above (the “Warrant
      Share Delivery Date”).
      This
      Warrant shall be deemed to have been exercised on the date the Exercise Price
      is
      received by the Company. The Warrant Shares shall be deemed to have been issued,
      and Holder or any other person so designated to be named therein shall be deemed
      to have become a holder of record of such shares for all purposes, as of the
      date the Warrant has been exercised by payment to the Company of the Exercise
      Price (or by cashless exercise, if permitted) and all taxes required to be
      paid
      by the Holder, if any, pursuant to Section 2(e)(vi) prior to the issuance of
      such shares, have been paid. If the Company fails for any reason to deliver
      to
      the Holder certificates evidencing the Warrant Shares subject to a Notice of
      Exercise by the Warrant Share Delivery Date, the Company shall pay to the
      Holder, in cash, as liquidated damages and not as a penalty, for each $1,000
      of
      Warrant Shares subject to such exercise (based on the VWAP of the Common Stock
      on the date of the applicable Notice of Exercise), $10 per Trading Day
      (increasing to $20 per Trading Day on the fifth Trading Day after such
      liquidated damages begin to accrue) for each Trading Day after such Warrant
      Share Delivery Date until such certificates are delivered. 

     

    
      
        
        

      

      
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    ii. Delivery
      of New Warrants Upon Exercise.
      If this
      Warrant shall have been exercised in part, the Company shall, at the request
      of
      a Holder and upon surrender of this Warrant certificate, at the time of delivery
      of the certificate or certificates representing Warrant Shares, deliver to
      Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased
      Warrant Shares called for by this Warrant, which new Warrant shall in all other
      respects be identical with this Warrant.

    

    iii. Rescission
      Rights.
      If the
      Company fails to cause the Transfer Agent to transmit to the Holder a
      certificate or the certificates representing the Warrant Shares pursuant to
      Section 2(e)(i) by the Warrant Share Delivery Date, then, the Holder will have
      the right to rescind such exercise.

    

    iv. Compensation
      for Buy-In on Failure to Timely Deliver Certificates Upon
      Exercise.
      In
      addition to any other rights available to the Holder, if the Company fails
      to
      cause the Transfer Agent to transmit to the Holder a certificate or the
      certificates representing the Warrant Shares pursuant to an exercise on or
      before the Warrant Share Delivery Date, and if after such date the Holder is
      required by its broker to purchase (in an open market transaction or otherwise)
      or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to
      deliver in satisfaction of a sale by the Holder of the Warrant Shares which
      the
      Holder anticipated receiving upon such exercise (a “Buy-In”),
      then
      the Company shall (A) pay in cash to the Holder the amount by which (x) the
      Holder’s total purchase price (including brokerage commissions, if any) for the
      shares of Common Stock so purchased exceeds (y) the amount obtained by
      multiplying (1) the number of Warrant Shares that the Company was required
      to
      deliver to the Holder in connection with the exercise at issue times (2) the
      price at which the sell order giving rise to such purchase obligation was
      executed, and (B) at the option of the Holder, either reinstate the portion
      of
      the Warrant and equivalent number of Warrant Shares for which such exercise
      was
      not honored or deliver to the Holder the number of shares of Common Stock that
      would have been issued had the Company timely complied with its exercise and
      delivery obligations hereunder. For example, if the Holder purchases Common
      Stock having a total purchase price of $11,000 to cover a Buy-In with respect
      to
      an attempted exercise of shares of Common Stock with an aggregate sale price
      giving rise to such purchase obligation of $10,000, under clause (A) of the
      immediately preceding sentence the Company shall be required to pay the Holder
      $1,000. The Holder shall provide the Company written notice indicating the
      amounts payable to the Holder in respect of the Buy-In and, upon request of
      the
      Company, evidence of the amount of such loss. Nothing herein shall limit a
      Holder’s right to pursue any other remedies available to it hereunder, at law or
      in equity including, without limitation, a decree of specific performance and/or
      injunctive relief with respect to the Company’s failure to timely deliver
      certificates representing shares of Common Stock upon exercise of the Warrant
      as
      required pursuant to the terms hereof.

     

    
      
        
        

      

      
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    v. No
      Fractional Shares or Scrip.
      No
      fractional shares or scrip representing fractional shares shall be issued upon
      the exercise of this Warrant. As to any fraction of a share which Holder would
      otherwise be entitled to purchase upon such exercise, the Company shall, at
      its
      election, either pay a cash adjustment in respect of such final fraction in
      an
      amount equal to such fraction multiplied by the Exercise Price or round up
      to
      the next whole share.

    

    vi. Charges,
      Taxes and Expenses.
      Issuance of certificates for Warrant Shares shall be made without charge to
      the
      Holder for any issue or transfer tax or other incidental expense in respect
      of
      the issuance of such certificate, all of which taxes and expenses shall be
      paid
      by the Company, and such certificates shall be issued in the name of the Holder
      or in such name or names as may be directed by the Holder; provided,
      however,
      that in
      the event certificates for Warrant Shares are to be issued in a name other
      than
      the name of the Holder, this Warrant when surrendered for exercise shall be
      accompanied by the Assignment Form attached hereto duly executed by the Holder
      and the Company may require, as a condition thereto, the payment of a sum
      sufficient to reimburse it for any transfer tax incidental thereto.

    

    vii. Closing
      of Books.
      The
      Company will not close its stockholder books or records in any manner which
      prevents the timely exercise of this Warrant, pursuant to the terms
      hereof.

    

    Section
      3. Certain
      Adjustments.

    

    a) Stock
      Dividends and Splits.
      If the
      Company, at any time while this Warrant is outstanding: (i) pays a stock
      dividend or otherwise make a distribution or distributions on shares of its
      Common Stock or any other equity or equity equivalent securities payable in
      shares of Common Stock (which, for avoidance of doubt, shall not include any
      shares of Common Stock issued by the Company upon exercise of this Warrant),
      (ii) subdivides outstanding shares of Common Stock into a larger number of
      shares, (iii) combines (including by way of reverse stock split) outstanding
      shares of Common Stock into a smaller number of shares or (iv) issues by
      reclassification of shares of the Common Stock any shares of capital stock
      of
      the Company, then in each case the Exercise Price shall be multiplied by a
      fraction of which the numerator shall be the number of shares of Common Stock
      (excluding treasury shares, if any) outstanding immediately before such event
      and of which the denominator shall be the number of shares of Common Stock
      outstanding immediately after such event and the number of shares issuable
      upon
      exercise of this Warrant shall be proportionately adjusted such that the
      aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment
      made pursuant to this Section 3(a) shall become effective immediately after
      the
      record date for the determination of stockholders entitled to receive such
      dividend or distribution and shall become effective immediately after the
      effective date in the case of a subdivision, combination or
      re-classification.

     

    
      
        
        

      

      
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    b) Subsequent
      Equity Sales.
      If the
      Company or any Subsidiary thereof, as applicable, at any time while this Warrant
      is outstanding, shall sell or grant any option to purchase, or sell or grant
      any
      right to reprice, or otherwise dispose of or issue (or announce any offer,
      sale,
      grant or any option to purchase or other disposition) any Common Stock or Common
      Stock Equivalents entitling any Person to acquire shares of Common Stock, at
      an
      effective price per share less than the then Exercise Price (such lower price,
      the “Base
      Share Price”
and
      such issuances collectively, a “Dilutive
      Issuance”)
      (if
      the holder of the Common Stock or Common Stock Equivalents so issued shall
      at
      any time, whether by operation of purchase price adjustments, reset provisions,
      floating conversion, exercise or exchange prices or otherwise, or due to
      warrants, options or rights per share which are issued in connection with such
      issuance, be entitled to receive shares of Common Stock at an effective price
      per share which is less than the Exercise Price, such issuance shall be deemed
      to have occurred for less than the Exercise Price on such date of the Dilutive
      Issuance), then, the Exercise Price shall be reduced and only reduced to equal
      the Base Share Price and the number of Warrant Shares issuable hereunder shall
      be increased such that the aggregate Exercise Price payable hereunder, after
      taking into account the decrease in the Exercise Price, shall be equal to the
      aggregate Exercise Price prior to such adjustment. Such adjustment shall be
      made
      whenever such Common Stock or Common Stock Equivalents are issued.
      Notwithstanding the foregoing, no adjustments shall be made, paid or issued
      under this Section 3(b) in respect of an Exempt Issuance. The Company shall
      notify the Holder, in writing, no later than the Trading Day following the
      issuance of any Common Stock or Common Stock Equivalents subject to this Section
      3(b), indicating therein the applicable issuance price, or applicable reset
      price, exchange price, conversion price and other pricing terms (such notice,
      the “Dilutive
      Issuance Notice”).
      For
      purposes of clarification, whether or not the Company provides a Dilutive
      Issuance Notice pursuant to this Section 3(b), upon the occurrence of any
      Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
      entitled to receive a number of Warrant Shares based upon the Base Share Price
      regardless of whether the Holder accurately refers to the Base Share Price
      in
      the Notice of Exercise.

     

    
      
        
        

      

      
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    c) Subsequent
      Rights Offerings.
      If the
      Company, at any time while the Warrant is outstanding, shall issue rights,
      options or warrants to all holders of Common Stock (and not to Holders)
      entitling them to subscribe for or purchase shares of Common Stock at a price
      per share less than the VWAP at the record date mentioned below, then, unless
      waived in writing by Holders holding Warrants at least equal to 67% of the
      Warrant Shares issuable upon exercise of all then outstanding Warrants, the
      Exercise Price shall be multiplied by a fraction, of which the denominator
      shall
      be the number of shares of the Common Stock outstanding on the date of issuance
      of such rights or warrants plus the number of additional shares of Common Stock
      offered for subscription or purchase, and of which the numerator shall be the
      number of shares of the Common Stock outstanding on the date of issuance of
      such
      rights or warrants plus the number of shares which the aggregate offering price
      of the total number of shares so offered (assuming receipt by the Company in
      full of all consideration payable upon exercise of such rights, options or
      warrants) would purchase at such VWAP. Such adjustment shall be made whenever
      such rights or warrants are issued, and shall become effective immediately
      after
      the record date for the determination of stockholders entitled to receive such
      rights, options or warrants. 

     

    d) Pro
      Rata Distributions.
      If the
      Company, at any time while this Warrant is outstanding, shall distribute to
      all
      holders of Common Stock (and not to Holders of the Warrants) evidences of its
      indebtedness or assets (including cash and cash dividends) or rights or warrants
      to subscribe for or purchase any security other than the Common Stock (which
      shall be subject to Section 3(b)), then in each such case the Exercise Price
      shall be adjusted by multiplying the Exercise Price in effect immediately prior
      to the record date fixed for determination of stockholders entitled to receive
      such distribution by a fraction of which the denominator shall be the VWAP
      determined as of the record date mentioned above, and of which the numerator
      shall be such VWAP on such record date less the then per share fair market
      value
      at such record date of the portion of such assets or evidence of indebtedness
      so
      distributed applicable to one outstanding share of the Common Stock as
      determined by the Board of Directors in good faith. In either case the
      adjustments shall be described in a statement provided to the Holder of the
      portion of assets or evidences of indebtedness so distributed or such
      subscription rights applicable to one share of Common Stock. Such adjustment
      shall be made whenever any such distribution is made and shall become effective
      immediately after the record date mentioned above.

     

    
      
        
        

      

      
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    e) Fundamental
      Transaction.
      If, at
      any time while this Warrant is outstanding, (i) the Company effects any merger
      or consolidation of the Company with or into another Person, (ii) the Company
      effects any sale of all or substantially all of its assets in one or a series
      of
      related transactions, (iii) any tender offer or exchange offer (whether by
      the
      Company or another Person) is completed pursuant to which holders of Common
      Stock are permitted to tender or exchange their shares for other securities,
      cash or property or (iv) the Company effects any reclassification of the Common
      Stock or any compulsory share exchange pursuant to which the Common Stock is
      effectively converted into or exchanged for other securities, cash or property
      (each “Fundamental
      Transaction”),
      then,
      upon any subsequent exercise of this Warrant, the Holder shall have the right
      to
      receive, for each Warrant Share that would have been issuable upon such exercise
      immediately prior to the occurrence of such Fundamental Transaction, the number
      of shares of Common Stock of the successor or acquiring corporation or of the
      Company, if it is the surviving corporation, and any additional consideration
      (the “Alternate
      Consideration”)
      receivable as a result of such merger, consolidation or disposition of assets
      by
      a holder of the number of shares of Common Stock for which this Warrant is
      exercisable immediately prior to such event. For purposes of any such exercise,
      the determination of the Exercise Price shall be appropriately adjusted to
      apply
      to such Alternate Consideration based on the amount of Alternate Consideration
      issuable in respect of one share of Common Stock in such Fundamental
      Transaction, and the Company shall apportion the Exercise Price among the
      Alternate Consideration in a reasonable manner reflecting the relative value
      of
      any different components of the Alternate Consideration. If holders of Common
      Stock are given any choice as to the securities, cash or property to be received
      in a Fundamental Transaction, then the Holder shall be given the same choice
      as
      to the Alternate Consideration it receives upon any exercise of this Warrant
      following such Fundamental Transaction. To the extent necessary to effectuate
      the foregoing provisions, any successor to the Company or surviving entity
      in
      such Fundamental Transaction shall issue to the Holder a new warrant consistent
      with the foregoing provisions and evidencing the Holder’s right to exercise such
      warrant into Alternate Consideration. The terms of any agreement pursuant to
      which a Fundamental Transaction is effected shall include terms requiring any
      such successor or surviving entity to comply with the provisions of this Section
      3(e) and insuring that this Warrant (or any such replacement security) will
      be
      similarly adjusted upon any subsequent transaction analogous to a Fundamental
      Transaction. Notwithstanding anything to the contrary, in the event of a
      Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3
      transaction” as defined in Rule 13e-3 under the Exchange Act, or (3) a
      Fundamental Transaction involving a person or entity not traded on a national
      securities exchange, the Nasdaq Global Select Market, the Nasdaq Global Market,
      or the Nasdaq Capital Market, the Company or any successor entity shall pay
      at
      the Holder’s option, exercisable at any time concurrently with or within 30 days
      after the consummation of the Fundamental Transaction, an amount of cash equal
      to the value of this Warrant as determined in accordance with the Black Scholes
      Option Pricing Model obtained from the “OV” function on Bloomberg L.P. using (A)
      a price per share of Common Stock equal to the VWAP of the Common Stock for
      the
      Trading Day immediately preceding the date of consummation of the applicable
      Fundamental Transaction, (B) the risk-free interest rate corresponding to the
      U.S. Treasury rate for a period equal to the remaining term of this Warrant
      as
      of the date of consummation of the applicable Fundamental Transaction, (C)
      an
      expected volatility equal to the 100 day volatility obtained from the “HVT”
function on Bloomberg L.P. determined as of the Trading Day immediately
      following the public announcement of the applicable Fundamental Transaction
      and
      (D) a remaining option time equal to the time between the date of the public
      announcement of such transaction and the Termination Date. 

     

    f) Calculations.
      All
      calculations under this Section 3 shall be made to the nearest cent or the
      nearest 1/100th of a share, as the case may be. For purposes of this Section
      3,
      the number of shares of Common Stock deemed to be issued and outstanding as
      of a
      given date shall be the sum of the number of shares of Common Stock (excluding
      treasury shares, if any) issued and outstanding.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    g) Notice
      to Holder.
      

    

    i. Adjustment
      to Exercise Price.
      Whenever the Exercise Price is adjusted pursuant to any provision of this
      Section 3, the Company shall promptly mail to the Holder a notice setting forth
      the Exercise Price after such adjustment and setting forth a brief statement
      of
      the facts requiring such adjustment. If the Company enters into a Variable
      Rate
      Transaction, despite the prohibition thereon in the Purchase Agreement, the
      Company shall be deemed to have issued Common Stock or Common Stock Equivalents
      at the lowest possible conversion or exercise price at which such securities
      may
      be converted or exercised. 

    

    ii. Notice
      to Allow Exercise by Holder.
      If (A)
      the Company shall declare a dividend (or any other distribution in whatever
      form) on the Common Stock, (B) the Company shall declare a special nonrecurring
      cash dividend on or a redemption of the Common Stock, (C) the Company shall
      authorize the granting to all holders of the Common Stock rights or warrants
      to
      subscribe for or purchase any shares of capital stock of any class or of any
      rights, (D) the approval of any stockholders of the Company shall be required
      in
      connection with any reclassification of the Common Stock, any consolidation
      or
      merger to which the Company is a party, any sale or transfer of all or
      substantially all of the assets of the Company, of any compulsory share exchange
      whereby the Common Stock is converted into other securities, cash or property,
      or (E) the Company shall authorize the voluntary or involuntary dissolution,
      liquidation or winding up of the affairs of the Company, then, in each case,
      the
      Company shall cause to be mailed to the Holder at its last address as it shall
      appear upon the Warrant Register of the Company, at least 20 calendar days
      prior
      to the applicable record or effective date hereinafter specified, a notice
      stating (x) the date on which a record is to be taken for the purpose of such
      dividend, distribution, redemption, rights or warrants, or if a record is not
      to
      be taken, the date as of which the holders of the Common Stock of record to
      be
      entitled to such dividend, distributions, redemption, rights or warrants are
      to
      be determined or (y) the date on which such reclassification, consolidation,
      merger, sale, transfer or share exchange is expected to become effective or
      close, and the date as of which it is expected that holders of the Common Stock
      of record shall be entitled to exchange their shares of the Common Stock for
      securities, cash or other property deliverable upon such reclassification,
      consolidation, merger, sale, transfer or share exchange; provided that the
      failure to mail such notice or any defect therein or in the mailing thereof
      shall not affect the validity of the corporate action required to be specified
      in such notice. The Holder is entitled to exercise this Warrant during the
      period commencing on the date of such notice to the effective date of the event
      triggering such notice.

    

    Section
      4. Transfer
      of Warrant.

    

    a) Transferability.
      Subject
      to compliance with any applicable securities laws and the conditions set forth
      in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase
      Agreement, this Warrant and all rights hereunder (including, without limitation,
      any registration rights) are transferable, in whole or in part, upon surrender
      of this Warrant at the principal office of the Company or its designated agent,
      together with a written assignment of this Warrant substantially in the form
      attached hereto duly executed by the Holder or its agent or attorney and funds
      sufficient to pay any transfer taxes payable upon the making of such transfer.
      Upon such surrender and, if required, such payment, the Company shall execute
      and deliver a new Warrant or Warrants in the name of the assignee or assignees,
      as applicable, and in the denomination or denominations specified in such
      instrument of assignment, and shall issue to the assignor a new Warrant
      evidencing the portion of this Warrant not so assigned, and this Warrant shall
      promptly be cancelled. The Warrant, if properly assigned, may be exercised
      by a
      new holder for the purchase of Warrant Shares without having a new Warrant
      issued. 

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    b) New
      Warrants.
      This
      Warrant may be divided or combined with other Warrants upon presentation hereof
      at the aforesaid office of the Company, together with a written notice
      specifying the names and denominations in which new Warrants are to be issued,
      signed by the Holder or its agent or attorney. Subject to compliance with
      Section 4(a), as to any transfer which may be involved in such division or
      combination, the Company shall execute and deliver a new Warrant or Warrants
      in
      exchange for the Warrant or Warrants to be divided or combined in accordance
      with such notice. All Warrants issued on transfers or exchanges shall be dated
      the original Issue Date and shall be identical with this Warrant except as
      to
      the number of Warrant Shares issuable pursuant thereto. 

    

    c) Warrant
      Register.
      The
      Company shall register this Warrant, upon records to be maintained by the
      Company for that purpose (the “Warrant
      Register”),
      in
      the name of the record Holder hereof from time to time. The Company may deem
      and
      treat the registered Holder of this Warrant as the absolute owner hereof for
      the
      purpose of any exercise hereof or any distribution to the Holder, and for all
      other purposes, absent actual notice to the contrary.

    

    d) Transfer
      Restrictions.
      If,
      at the
time
      of
      the surrender of this Warrant in connection with any transfer of this Warrant,
      the transfer of this Warrant shall not be either (i) registered pursuant to
      an
      effective registration
      statement under the Securities Act
      and
under
      applicable state securities or blue sky laws or (ii) eligible for resale without
      volume or manner-of-sale restrictions pursuant to Rule 144, the Company may
      require, as a condition of allowing such transfer, that the Holder or transferee
      of this Warrant, as the case may be, comply
      with the provisions of Section 5.7 of the Purchase Agreement.

    

    Section
      5. Miscellaneous.

    

    a) No
      Rights as Stockholder Until Exercise.
      This
      Warrant does not entitle the Holder to any voting rights or other rights as
      a
      stockholder of the Company prior to the exercise hereof as set forth in Section
      2(e)(i). 

    

    b) Loss,
      Theft, Destruction or Mutilation of Warrant.
      The
      Company covenants that upon receipt by the Company of evidence reasonably
      satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
      or any stock certificate relating to the Warrant Shares, and in case of loss,
      theft or destruction, of indemnity or security reasonably satisfactory to it
      (which, in the case of the Warrant, shall not include the posting of any bond),
      and upon surrender and cancellation of such Warrant or stock certificate, if
      mutilated, the Company will make and deliver a new Warrant or stock certificate
      of like tenor and dated as of such cancellation, in lieu of such Warrant or
      stock certificate.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    c) Saturdays,
      Sundays, Holidays, etc.
      If the
      last or appointed day for the taking of any action or the expiration of any
      right required or granted herein shall not be a Business Day, then, such action
      may be taken or such right may be exercised on the next succeeding Business
      Day.

    

    d) Authorized
      Shares.
      

    

    The
      Company covenants that, during the period the Warrant is outstanding, it will
      reserve from its authorized and unissued Common Stock a sufficient number of
      shares to provide for the issuance of the Warrant Shares upon the exercise
      of
      any purchase rights under this Warrant. If, on any date, the number of
      authorized but unissued (and otherwise unreserved) shares of Common Stock is
      less than the Required Minimum on such date, then the Company shall not be
      deemed in default of its covenants hereunder if the Board of Directors uses
      commercially reasonable efforts to amend the Company’s certificate or articles
      of incorporation to increase the number of authorized but unissued shares of
      Common Stock to at least the Required Minimum at such time, as soon as possible
      and in any event not later than the 75th day after such date. The Company
      further covenants that its issuance of this Warrant shall constitute full
      authority to its officers who are charged with the duty of executing stock
      certificates to execute and issue the necessary certificates for the Warrant
      Shares upon the exercise of the purchase rights under this Warrant. The Company
      will take all such reasonable action as may be necessary to assure that such
      Warrant Shares may be issued as provided herein without violation of any
      applicable law or regulation, or of any requirements of the Trading Market
      upon
      which the Common Stock may be listed. The Company covenants that all Warrant
      Shares which may be issued upon the exercise of the purchase rights represented
      by this Warrant will, upon exercise of the purchase rights represented by this
      Warrant, be duly authorized, validly issued, fully paid and nonassessable and
      free from all taxes, liens and charges created by the Company in respect of
      the
      issue thereof (other than taxes in respect of any transfer occurring
      contemporaneously with such issue). 

    

    Except
      and to the extent as waived or consented to by the Holders in accordance with
      Section 5(l) hereof, the Company shall not by any action, including, without
      limitation, amending its certificate of incorporation or through any
      reorganization, transfer of assets, consolidation, merger, dissolution, issue
      or
      sale of securities or any other voluntary action, avoid or seek to avoid the
      observance or performance of any of the terms of this Warrant, but will at
      all
      times in good faith assist in the carrying out of all such terms and in the
      taking of all such actions as may be necessary or appropriate to protect the
      rights of Holder as set forth in this Warrant against impairment. Without
      limiting the generality of the foregoing, the Company will (i) not increase
      the
      par value of any Warrant Shares above the amount payable therefor upon such
      exercise immediately prior to such increase in par value, (ii) take all such
      action as may be necessary or appropriate in order that the Company may validly
      and legally issue fully paid and nonassessable Warrant Shares upon the exercise
      of this Warrant and (iii) use commercially reasonable efforts to obtain all
      such
      authorizations, exemptions or consents from any public regulatory body having
      jurisdiction thereof, as may be, necessary to enable the Company to perform
      its
      obligations under this Warrant.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Before
      taking any action which would result in an adjustment in the number of Warrant
      Shares for which this Warrant is exercisable or in the Exercise Price, the
      Company shall obtain all such authorizations or exemptions thereof, or consents
      thereto, as may be necessary from any public regulatory body or bodies having
      jurisdiction thereof.

    

    e) Jurisdiction.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Warrant shall be determined in accordance with the provisions of the
      Purchase Agreement.

    

    f) Restrictions.
      The
      Holder acknowledges that the Warrant Shares acquired upon the exercise of this
      Warrant, if not registered, will have restrictions upon resale imposed by state
      and federal securities laws.

    

    g) Nonwaiver
      and Expenses.
      No
      course of dealing or any delay or failure to exercise any right hereunder on
      the
      part of Holder shall operate as a waiver of such right or otherwise prejudice
      Holder’s rights, powers or remedies, notwithstanding the fact that all rights
      hereunder terminate on the Termination Date. If the Company willfully and
      knowingly fails to comply with any provision of this Warrant, which results
      in
      any material damages to the Holder, the Company shall pay to Holder such amounts
      as shall be sufficient to cover any costs and expenses including, but not
      limited to, reasonable attorneys’ fees, including those of appellate
      proceedings, incurred by Holder in collecting any amounts due pursuant hereto
      or
      in otherwise enforcing any of its rights, powers or remedies
      hereunder.

    

    h) Notices.
      Any
      notice, request or other document required or permitted to be given or delivered
      to the Holder by the Company shall be delivered in accordance with the notice
      provisions of the Purchase Agreement.

    

    i) Limitation
      of Liability.
      No
      provision hereof, in the absence of any affirmative action by Holder to exercise
      this Warrant to purchase Warrant Shares, and no enumeration herein of the rights
      or privileges of Holder, shall give rise to any liability of Holder for the
      purchase price of any Common Stock or as a stockholder of the Company, whether
      such liability is asserted by the Company or by creditors of the
      Company.

    

    j) Remedies.
      The
      Holder, in addition to being entitled to exercise all rights granted by law,
      including recovery of damages, will be entitled to specific performance of
      its
      rights under this Warrant. The Company agrees that monetary damages would not
      be
      adequate compensation for any loss incurred by reason of a breach by it of
      the
      provisions of this Warrant and hereby agrees to waive and not to assert the
      defense in any action for specific performance that a remedy at law would be
      adequate.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    k) Successors
      and Assigns.
      Subject
      to applicable securities laws, this Warrant and the rights and obligations
      evidenced hereby shall inure to the benefit of and be binding upon the
      successors of the Company and the successors and permitted assigns of Holder.
      The provisions of this Warrant are intended to be for the benefit of all Holders
      from time to time of this Warrant and shall be enforceable by the Holder or
      holder of Warrant Shares.

    

    l) Amendment.
      This
      Warrant may be modified or amended or the provisions hereof waived with the
      written consent of the Company and Holders holding Warrants at least equal
      to
      67% of the Warrant Shares issuable upon exercise of all then outstanding
      Warrants. Any amendment or waiver effected in accordance with this Section
      5(l)
      shall be binding upon the Company, the Holder and all other holders of the
      Debentures, and their transferees, successors and assigns.

    

    m) Severability.
      Wherever possible, each provision of this Warrant shall be interpreted in such
      manner as to be effective and valid under applicable law, but if any provision
      of this Warrant shall be prohibited by or invalid under applicable law, such
      provision shall be ineffective to the extent of such prohibition or invalidity,
      without invalidating the remainder of such provisions or the remaining
      provisions of this Warrant.

    

    n) Headings.
      The
      headings used in this Warrant are for the convenience of reference only and
      shall not, for any purpose, be deemed a part of this Warrant.

    

    

    ********************

    

    

    (Signature
      Pages Follow)

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

    

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
      officer thereunto duly authorized as of the date first above
      indicated.

    

    

      
        	 	
                QPC
                  LASERS, INC.

              	 
	 	 	 	 
	 	 	 	 
	 	
                By:

              	            
                	 
	
                 

              	
                 

              	
                Name:

              	 
	
                 

              	 	
                Title:

              	 

      

    

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    NOTICE
      OF EXERCISE

    

    TO: QPC
      LASERS, INC.

    

    (1) The
      undersigned hereby elects to purchase ________ Warrant Shares of the Company
      pursuant to the terms of the attached Warrant (only if exercised in full),
      and
      tenders herewith payment of the exercise price in full, together with all
      applicable transfer taxes, if any.

    

    (2) Payment
      shall take the form of (check applicable box):

    

    o
      in lawful money of the
      United States; or

    

    o
      [if permitted] the cancellation of such
      number of Warrant Shares as is necessary, in accordance with the formula set
      forth in subsection 2(c), to exercise this Warrant with respect to the maximum
      number of Warrant Shares purchasable pursuant to the cashless exercise procedure
      set forth in subsection 2(c).

    

    (3) Please
      issue a certificate or certificates representing said Warrant Shares in the
      name
      of the undersigned or in such other name as is specified below:

    

    _______________________________

     

    

    The
      Warrant Shares shall be delivered to the following DWAC Account Number or by
      physical delivery of a certificate to:

    

    _______________________________

     

    _______________________________

     

    _______________________________

    

    (4)
      Accredited
      Investor.
      The
      undersigned is an “accredited investor” as defined in Regulation D promulgated
      under the Securities Act of 1933, as amended.

    

    [SIGNATURE
      OF HOLDER]

     

    Name
      of
      Investing Entity:
      ________________________________________________________________________

    Signature
      of Authorized Signatory of Investing Entity:
      _________________________________________________

    Name
      of
      Authorized Signatory:
      ___________________________________________________________________

    Title
      of
      Authorized Signatory:
      ____________________________________________________________________

    Date:
      ________________________________________________________________________________________

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ASSIGNMENT
      FORM

    

    (To
      assign the foregoing warrant, execute

    this
      form
      and supply required information. 

    Do
      not
      use this form to exercise the warrant.)

    

    

    

    FOR
      VALUE
      RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
      rights evidenced thereby are hereby assigned to

    

    

    _______________________________________________
      whose address is

    

    _______________________________________________________________.

    

    

    

    _______________________________________________________________

    

    Dated:
      ______________, _______

    

    

    
      	
            	Holder’s
              Signature:	
              _____________________________

            

    

    

    
      	
            	Holder’sAddress:	
              _____________________________

            

    

     

    _____________________________

    

    

    

    Signature
      Guaranteed: ___________________________________________

    

    

    NOTE:
      The
      signature to this Assignment Form must correspond with the name as it appears
      on
      the face of the Warrant, without alteration or enlargement or any change
      whatsoever, and must be guaranteed by a bank or trust company. Officers of
      corporations and those acting in a fiduciary or other representative capacity
      should file proper evidence of authority to assign the foregoing
      Warrant.EXHIBIT
      10.41

    

    SECURITY
      AGREEMENT

    

    This
      SECURITY AGREEMENT, dated as of May __, 2008 (this “Agreement”),
      is
      among QPC
      Lasers, Inc., a Nevada corporation (the
      “Debtor”)
      and
      the holders of the Debtor’s 10% Original Issue Discount Secured Convertible
      Debentures due three years following their issuance (collectively, the
“Debentures”)
      signatory hereto, their endorsees, transferees and assigns (collectively, the
      “Secured
      Parties”).

    

    WITNESSETH:

    

    WHEREAS,
      pursuant to the Purchase Agreement (as defined in the Debentures), the Secured
      Parties have severally agreed to extend the loans to the Debtor evidenced by
      the
      Debentures; 

    WHEREAS,
      in order to induce the Secured Parties to extend the loans evidenced by the
      Debentures, the Debtor has agreed to execute and deliver to the Secured Parties
      this Agreement and to grant the Secured Parties, pari passu
      with
      each other Secured Party and through the Agent (as defined in Section 18
      hereof), a security interest in certain property of Debtor to secure the prompt
      payment, performance and discharge in full of all of its obligations under
      the
      Debentures.

    

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

    

    1.
      Certain
      Definitions.
      As used
      in this Agreement, the following terms shall have the meanings set forth in
      this
      Section 1. Terms used but not otherwise defined in this Agreement that are
      defined in Article 9 of the UCC (such as “account”, “chattel paper”, “commercial
      tort claim”, “deposit account”, “document”, “equipment”, “fixtures”, “general
      intangibles”, “goods”, “instruments”, “inventory”, “investment property”,
“letter-of-credit rights”, “proceeds” and “supporting obligations”) shall have
      the respective meanings given such terms in Article 9 of the UCC.

    

    (a)
       “Collateral”
means
      the collateral in which the Secured Parties are granted a security interest
      by
      this Agreement and which shall include the following personal property of the
      Debtor, whether presently owned or existing or hereafter acquired or coming
      into
      existence, wherever situated, and all additions and accessions thereto and
      all
      substitutions and replacements thereof, and all proceeds, products and accounts
      thereof, including, without limitation, all proceeds from the sale or transfer
      of the Collateral and of insurance covering the same and of any tort claims
      in
      connection therewith,
      and all
      dividends, interest, cash, notes, securities, equity interest or other property
      at any time and from time to time acquired, receivable or otherwise distributed
      in respect of, or in exchange for, any or all of the Pledged Securities (as
      defined below):

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (i)
      All
      goods, including, without limitation, (A) all machinery, equipment, computers,
      motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special
      and
      general tools, fixtures, test and quality control devices and other equipment
      of
      every kind and nature and wherever situated, together with all documents of
      title and documents representing the same, all additions and accessions thereto,
      replacements therefor, all parts therefor, and all substitutes for any of the
      foregoing and all other items used and useful in connection with the Debtor’s
      business and all improvements thereto; and (B) all inventory;

    

    (ii)
       All
      contract rights and other general intangibles, including, without limitation,
      all partnership interests, membership interests, stock or other securities,
      rights
      under any of the Organizational Documents, agreements related to the Pledged
      Securities, licenses,
      distribution and other agreements, computer software (whether “off-the-shelf”,
      licensed from any third party or developed by the Debtor), computer software
      development rights, leases, franchises, customer lists, quality control
      procedures, grants and rights, goodwill, trademarks, service marks, trade
      styles, trade names, patents, patent applications, copyrights, and income tax
      refunds; 

    (iii)
       All
      accounts, together with all instruments, all documents of title representing
      any
      of the foregoing, all rights in any merchandising, goods, equipment, motor
      vehicles and trucks which any of the same may represent, and all right, title,
      security and guaranties with respect to each account, including any right of
      stoppage in transit; 

    

    (iv)
       All
      documents, letter-of-credit rights, instruments and chattel paper;

    

    (v) All
      commercial tort claims;

    

    (vi) All
      deposit accounts and all cash (whether or not deposited in such deposit
      accounts);

    

    (vii) All
      investment property;

    

    (viii) All
      supporting obligations; and

    

    (ix) All
      files, records, books of account, business papers, and computer programs;
      and

    

    (x) the
      products and proceeds of all of the foregoing Collateral set forth in clauses
      (i)-(ix) above.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    Without
      limiting the generality of the foregoing, the “Collateral”
shall
      include all investment property and general intangibles respecting ownership
      and/or other equity interests in each subsidiary of Debtor, including, without
      limitation, the Debtor’s equity interest in QPC, the shares of capital stock and
      the other equity interests listed on Schedule
      H
      hereto
      (as the same may be modified from time to time pursuant to the terms hereof)
      and
      any other shares of capital stock and/or other equity interests of any other
      direct or indirect subsidiary of the Debtor obtained in the future, and, in
      each
      case, all certificates representing such shares and/or equity interests and,
      in
      each case, all rights, options, warrants, stock, other securities and/or equity
      interests that may hereafter be received, receivable or distributed in respect
      of, or exchanged for, any of the foregoing and all rights arising under or
      in
      connection with the Pledged Securities, including, but not limited to, all
      dividends, interest and cash.

     

    Notwithstanding
      the foregoing, nothing herein shall be deemed to constitute an assignment of
      any
      asset which, in the event of an assignment, becomes void by operation of
      applicable law or the assignment of which is otherwise prohibited by applicable
      law (in each case to the extent that such applicable law is not overridden
      by
      Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
      provided,
      however,
      that to
      the extent permitted by applicable law, this Agreement shall create a valid
      security interest in such asset and, to the extent permitted by applicable
      law,
      this Agreement shall create a valid security interest in the proceeds of such
      asset.

    

    (b)
       “Intellectual
      Property”
means
      the collective reference to all rights, priorities and privileges relating
      to
      intellectual property, whether arising under United States, multinational or
      foreign laws or otherwise, including, without limitation, (i) all copyrights
      arising under the laws of the United States, any other country or any political
      subdivision thereof, whether registered or unregistered and whether published
      or
      unpublished, all registrations and recordings thereof, and all applications
      in
      connection therewith, including, without limitation, all registrations,
      recordings and applications in the United States Copyright Office, (ii) all
      letters patent of the United States, any other country or any political
      subdivision thereof, all reissues and extensions thereof, and all applications
      for letters patent of the United States or any other country and all divisions,
      continuations and continuations-in-part thereof, (iii) all trademarks, trade
      names, corporate names, company names, business names, fictitious business
      names, trade dress, service marks, logos, domain names and other source or
      business identifiers, and all goodwill associated therewith, now existing or
      hereafter adopted or acquired, all registrations and recordings thereof, and
      all
      applications in connection therewith, whether 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, or
      otherwise, and all common law rights related thereto, (iv) all trade secrets
      arising under the laws of the United States, any other country or any political
      subdivision thereof, (v) all rights to obtain any reissues, renewals or
      extensions of the foregoing, (vi) all licenses for any of the foregoing, and
      (vii) all causes of action for infringement of the foregoing.

    

    (c) “Majority
      in Interest”
means,
      at any time of determination, the majority in interest (based on
      then-outstanding principal amounts of Debentures at the time of such
      determination) of the Secured Parties.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (d) “Necessary
      Endorsement”
means
      undated stock powers endorsed in blank or other proper instruments of assignment
      duly executed and such other instruments or documents as the Agent (as that
      term
      is defined below) may reasonably request.

    

    (e)
       “Obligations”
means
      all of the liabilities
      and obligations (primary, secondary, direct, contingent, sole, joint or several)
      due or to become due, or that are now or may be hereafter contracted or
      acquired, or owing to, of the Debtor to the Secured Parties, including, without
      limitation, all
      obligations under this Agreement, the Debentures, and any other instruments,
      agreements or other documents executed and/or delivered in connection herewith
      or therewith, in each case, whether now or hereafter existing, voluntary or
      involuntary, direct or indirect, absolute or contingent, liquidated or
      unliquidated, whether or not jointly owed with others, and whether or not from
      time to time decreased or extinguished and later increased, created or incurred,
      and all or any portion of such obligations or liabilities that are paid, to
      the
      extent all or any part of such payment is avoided or recovered directly or
      indirectly from any of the Secured Parties as a preference, fraudulent transfer
      or otherwise as such obligations may be amended, supplemented, converted,
      extended or modified from time to time. Without limiting the generality of
      the
      foregoing, the term “Obligations” shall include, without limitation: (i)
      principal of, and interest on the Debentures and the loans extended pursuant
      thereto; (ii) any and all other fees, indemnities, costs, obligations and
      liabilities of the Debtor from time to time under or in connection with this
      Agreement, the Debentures, and any other instruments, agreements or other
      documents executed and/or delivered in connection herewith or therewith; and
      (iii) all amounts (including but not limited to post-petition interest) in
      respect of the foregoing that would be payable but for the fact that the
      obligations to pay such amounts are unenforceable or not allowable due to the
      existence of a bankruptcy, reorganization or similar proceeding involving the
      Debtor.

    

    (f)
       “Organizational
      Documents”
means
      with respect to the Debtor or QPC, the documents by which the Debtor or QPC
      was
      organized (such as a certificate of incorporation, certificate of limited
      partnership or articles of organization, and including, without limitation,
      any
      certificates of designation for preferred stock or other forms of preferred
      equity) and which relate to the internal governance of the Debtor or QPC (such
      as bylaws, a partnership agreement or an operating, limited liability or members
      agreement).

    

    (g)
       “Pledged
      Interests”
shall
      have the meaning ascribed to such term in Section 4(j).

    

    (h)
       “Pledged
      Securities”
shall
      have the meaning ascribed to such term in Section 4(i).

    

    (i) “QPC”
means
      Quintessence Photonics Corporation, a Delaware corporation.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (j) “UCC”
means
      the Uniform Commercial Code of the State of New York and or any other applicable
      law of any state or states which has jurisdiction with respect to all, or any
      portion of, the Collateral or this Agreement, from time to time. It is the
      intent of the parties that defined terms in the UCC should be construed in
      their
      broadest sense so that the term “Collateral” will be construed in its broadest
      sense. Accordingly if there are, from time to time, changes to defined terms
      in
      the UCC that broaden the definitions, they are incorporated herein and if
      existing definitions in the UCC are broader than the amended definitions, the
      existing ones shall be controlling. 

    

    2. Grant
      of Security Interest in Collateral.
      As an
      inducement for the Secured Parties to extend the loans as evidenced by the
      Debentures and to secure the complete and timely payment, performance and
      discharge in full, as the case may be, of all of the Obligations, the Debtor
      hereby unconditionally and irrevocably pledges, grants and hypothecates to
      the
      Secured Parties a security interest in and to, a lien upon and a right of
      set-off against all of their respective right, title and interest of whatsoever
      kind and nature in and to, the Collateral (a “Security
      Interest”
and,
      collectively, the “Security
      Interests”).
      The
      Security Interests granted hereby shall be subordinated and subject to all
      Existing Liens. For purposes of this Agreement, “Existing
      Liens”
means
      all Liens granted in favor of (a) the holders of the Debtor’s 10% Secured
      Convertible Debentures due May 22, 2009 and (b) the holders of the Debtor’s 10%
      Secured Convertible Debentures due April 16, 2009.

    

    3. Delivery
      of Certain Collateral.
      Contemporaneously or prior to the execution of this Agreement, the Debtor shall
      deliver or cause to be delivered to the Agent (a) any and all certificates
      and
      other instruments representing or evidencing the Pledged Securities, and (b)
      any
      and all certificates and other instruments or documents representing any of
      the
      other Collateral, in each case, together with all Necessary Endorsements. The
      Debtor is, contemporaneously with the execution hereof, delivering to Agent,
      or
      has previously delivered to Agent, a true and correct copy of each
      Organizational Document governing any of the Pledged Securities.

    

     4. Representations,
      Warranties, Covenants and Agreements of the Debtor.
      Except
      as set forth under the corresponding section of the disclosure schedules
      delivered to the Secured Parties concurrently herewith (the “Disclosure
      Schedules”),
      which
      Disclosure Schedules shall be deemed a part hereof, the Debtor represents and
      warrants to, and covenants and agrees with, the Secured Parties as
      follows:

    

    (a)
      The
      Debtor has the requisite corporate, partnership, limited liability company
      or
      other power and authority to enter into this Agreement and otherwise to carry
      out its obligations hereunder. The execution, delivery and performance by the
      Debtor of this Agreement and the filings contemplated therein have been duly
      authorized by all necessary action on the part of Debtor and no further action
      is required by Debtor. This Agreement has been duly executed by the Debtor.
      This
      Agreement constitutes the legal, valid and binding obligation of the Debtor,
      enforceable against the Debtor in accordance with its terms except as such
      enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization and similar laws of general application relating to or affecting
      the rights and remedies of creditors and by general principles of
      equity.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (b)
       The
      Debtor has no place of business or offices where its books of account and
      records are kept (other than temporarily at the offices of its attorneys or
      accountants) or places where Collateral is stored or located, except as set
      forth on Schedule
      A
      attached
      hereto. Except as specifically set forth on Schedule
      A,
      the
      Debtor is the record owner of the real property where such Collateral is
      located, and there exist no mortgages or other liens on any such real property
      except for Permitted Liens. Except as disclosed on Schedule
      A,
      none of
      such Collateral is in the possession of any consignee, bailee, warehouseman,
      agent or processor.

    

    (c)
       Except
      for Permitted Liens and except as set forth on Schedule
      B
      attached
      hereto, the Debtor is the sole owner of the Collateral (except for non-exclusive
      licenses granted by the Debtor in the ordinary course of business), free and
      clear of any liens, security interests, encumbrances, rights or claims, and
      are
      fully authorized to grant the Security Interests. Except as set forth on
Schedule
      C
      attached
      hereto or in connection with a Permitted Lien, there is not on file in any
      governmental or regulatory authority, agency or recording office an effective
      financing statement, security agreement, license or transfer or any notice
      of
      any of the foregoing (other than those that will be filed in favor of the
      Secured Parties pursuant to this Agreement) covering or affecting any of the
      Collateral. Except as set forth on Schedule
      C
      attached
      hereto or in connection with a Permitted Lien and except pursuant to this
      Agreement, without the written consent of the Secured Parties holding at least
      67% of the principal amount of the Debentures then outstanding, as long as
      this
      Agreement shall be in effect, the Debtor shall not execute and shall not
      knowingly permit to be on file in any such office or agency any other financing
      statement or other document or instrument (except to the extent filed or
      recorded in favor of the Secured Parties pursuant to the terms of this
      Agreement).

    

    (d)
       No
      written claim has been received that any Collateral or the Debtor's use of
      any
      Collateral violates the rights of any third party. There has been no adverse
      decision to the Debtor's claim of ownership rights in or exclusive rights to
      use
      the Collateral in any jurisdiction or to the Debtor's right to keep and maintain
      such Collateral in full force and effect, and there is no proceeding involving
      said rights pending or, to the best knowledge of the Debtor, threatened before
      any court, judicial body, administrative or regulatory agency, arbitrator or
      other governmental authority.

    

    (e)
       Debtor
      shall at all times maintain its books of account and records relating to the
      Collateral at its principal place of business and its Collateral at the
      locations set forth on Schedule
      A
      attached
      hereto and may not relocate such books of account and records or tangible
      Collateral unless it delivers to the Secured Parties at least 30 days prior
      to
      such relocation (i) written notice of such relocation and the new location
      thereof (which must be within the United States) and (ii) evidence that
      appropriate financing statements under the UCC and other necessary documents
      have been filed and recorded and other steps have been taken to perfect the
      Security Interests to create in favor of the Secured Parties a valid, perfected
      and continuing perfected first priority lien in the Collateral (subject only
      to
      Permitted Liens).

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (f)
       This
      Agreement creates in favor of the Secured Parties a valid security interest
      in
      the Collateral, subject only to Permitted Liens securing the payment and
      performance of the Obligations. Upon making the filings described in the
      immediately following paragraph, all security interests created hereunder in
      any
      Collateral which may be perfected by filing Uniform Commercial Code financing
      statements shall have been duly perfected. Except for the filing of the Uniform
      Commercial Code financing statements referred to in the immediately following
      paragraph, the recordation of the Intellectual Property Security Agreement
      (as
      defined in Section 4(p) hereof) with respect to copyrights and copyright
      applications in the United States Copyright Office referred to in paragraph
      (m),
the
      execution and delivery of deposit account control agreements satisfying the
      requirements of Section 9-104(a)(2) of the UCC with respect to each deposit
      account of the Debtor,
      and the
      delivery of the certificates and other instruments provided in Section
      3,
      no
      action is necessary to create, perfect or protect the security interests created
      hereunder. Without limiting the generality of the foregoing, except for the
      filing of said financing statements, the recordation of said Intellectual
      Property Security Agreement, and the execution and delivery of said deposit
      account control agreements, no consent of any third parties and no
      authorization, approval or other action by, and no notice to or filing with,
      any
      governmental authority or regulatory body is required for (i) the execution,
      delivery and performance of this Agreement, (ii) the creation or perfection
      of
      the Security Interests created hereunder in the Collateral or (iii) the
      enforcement of the rights of the Agent and the Secured Parties
      hereunder.

    

    (g)
       Debtor
      hereby authorizes the Agent to file one or more financing statements under
      the
      UCC, with respect to the Security Interests, with the proper filing and
      recording agencies in any jurisdiction deemed proper by it.

    

     (h)
       The
      execution, delivery and performance of this Agreement by the Debtor does not
      (i)
      violate any of the provisions of any Organizational Documents of the Debtor
      or
      any judgment, decree, order or award of any court, governmental body or
      arbitrator or any applicable law, rule or regulation applicable to the Debtor
      or
      (ii) conflict with, or constitute a default (or an event that with notice or
      lapse of time or both would become a default) under, or give to others any
      rights of termination, amendment, acceleration or cancellation (with or without
      notice, lapse of time or both) of, any agreement, credit facility, debt or
      other
      instrument (evidencing the Debtor's debt or otherwise) or other understanding
      to
      which the Debtor is a party or by which any property or asset of the Debtor
      is
      bound or affected. If any, all required consents (including, without limitation,
      from stockholders or creditors of the Debtor) necessary for the Debtor to enter
      into and perform its obligations hereunder have been obtained.

    

     (i)
       The
      capital stock and other equity interests listed on Schedule
      H
      hereto
      (the “Pledged
      Securities”)
      represent all of the capital stock and other equity interests of the QPC, and
      represent all capital stock and other equity interests owned, directly or
      indirectly, by the Debtor. All of the Pledged Securities are validly issued,
      fully paid and nonassessable, and the Debtor is the legal and beneficial owner
      of the Pledged Securities, free and clear of any lien, security interest or
      other encumbrance except for the security interests created by this Agreement
      and other Permitted Liens.
      

    

    (j)
       The
      ownership and other equity interests in partnerships and limited liability
      companies (if any)
      included
      in the Collateral
      (the
“Pledged
      Interests”)
      by
      their express terms do not provide that they are securities governed by Article
      8 of the UCC and are not held in a securities account or by any financial
      intermediary.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (k)
       Except
      for Permitted Liens, the Debtor shall at all times maintain the liens and
      Security Interests provided for hereunder as valid and perfected first priority
      liens (to the extent such perfection and priority can be achieved with the
      filing of financing statements under the UCC or the delivery of the certificates
      representing the Pledged Interests) and security interests in the Collateral
      in
      favor of the Secured Parties until this Agreement and the Security Interest
      hereunder shall be terminated pursuant to Section 14 hereof. Debtor hereby
      agrees to defend the same against the claims of any and all persons and
      entities. Debtor shall safeguard and protect all Collateral for the account
      of
      the Secured Parties. At the request of the Agent, the Debtor will sign and
      deliver to the Agent on behalf of the Secured Parties at any time or from time
      to time one or more financing statements pursuant to the UCC in form reasonably
      satisfactory to the Agent and will pay the cost of filing the same in all public
      offices wherever filing is, or is deemed by the Agent to be, necessary or
      desirable to effect the rights and obligations provided for herein. Without
      limiting the generality of the foregoing, the Debtor shall pay all fees, taxes
      and other amounts necessary to maintain the Collateral and the Security
      Interests hereunder, and the Debtor shall obtain and furnish to the Agent from
      time to time, upon demand, such releases and/or subordinations of claims and
      liens which may be required to maintain the priority of the Security Interests
      hereunder.

    

    (l)
       The
      Debtor will not transfer, pledge, hypothecate, encumber, license, sell or
      otherwise dispose of any of the Collateral (except for non-exclusive licenses
      granted by a Debtor in its ordinary course of business and sales of inventory
      by
      a Debtor in its ordinary course of business) without the prior written consent
      of a Majority
      in Interest.

    

    (m) Debtor
      shall keep and preserve its equipment, inventory and other tangible Collateral
      in good condition, repair and order and shall not operate or locate any such
      Collateral (or cause to be operated or located) in any area excluded from
      insurance coverage.

    

    (n) INTENTIONALLY
      OMITTED.

    

    (o)
       Debtor
      shall, within ten (10) days of obtaining knowledge thereof, advise the Secured
      Parties promptly, in sufficient detail, of any material adverse change in the
      Collateral, and of the occurrence of any event which would have a material
      adverse effect on the value of the Collateral or on the Secured Parties’
security interest, through the Agent, therein.

    

    (p)
       Debtor
      shall promptly execute and deliver to the Agent such further deeds, mortgages,
      assignments, security agreements, financing statements or other instruments,
      documents, certificates and assurances and take such further action as the
      Agent
      may from time to time request and may in its sole discretion deem necessary
      to
      perfect, protect or enforce the Secured Parties’ security interest in the
      Collateral including, without limitation, if applicable, the execution and
      delivery of a separate security agreement with respect to the Debtor’s
      Intellectual Property (“Intellectual
      Property Security Agreement”)
      in
      which the Secured Parties have been granted a security interest hereunder,
      substantially in a form reasonably acceptable to the Agent, which Intellectual
      Property Security Agreement, other than as stated therein, shall be subject
      to
      all of the terms and conditions hereof.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (q)
       Debtor
      shall permit the Agent and its representatives and agents to inspect the
      Collateral during normal business hours and upon reasonable prior notice, and
      to
      make copies of records pertaining to the Collateral as may be reasonably
      requested by the Agent from time to time.

    

    (r)
       Debtor
      shall take all steps reasonably necessary to diligently pursue and seek to
      preserve, enforce and collect any rights, claims, causes of action and accounts
      receivable in respect of the Collateral.

    

    (s)
       Debtor
      shall promptly notify the Secured Parties in sufficient detail upon becoming
      aware of any attachment, garnishment, execution or other legal process levied
      against any Collateral and of any other information received by Debtor that
      may
      materially affect the value of the Collateral, the Security Interest or the
      rights and remedies of the Secured Parties hereunder.

    

    (t)
       All
      information heretofore, herein or hereafter supplied to the Secured Parties
      by
      or on behalf of the Debtor with respect to the Collateral is accurate and
      complete in all material respects as of the date furnished.

    

    (u)
       The
      Debtor shall at all times preserve and keep in full force and effect its valid
      existence and good standing and any rights and franchises material to its
      business.

    

    (v)
       The
      Debtor will not change its name, type of organization, jurisdiction of
      organization, organizational identification number (if it has one), legal or
      corporate structure, or identity, or add any new fictitious name unless it
      provides at least 30 days prior written notice to the Secured Parties of such
      change and, at the time of such written notification, Debtor provides any
      financing statements or fixture filings necessary to perfect and continue the
      perfection of the Security Interests granted and evidenced by this
      Agreement.

    

    (w) Except
      in
      the ordinary course of business, the Debtor may not consign any of its inventory
      or sell any of its inventory on bill and hold, sale or return, sale on approval,
      or other conditional terms of sale without the consent of the
      Agent
      which shall not be unreasonably withheld.

    

    (x)
       The
      Debtor may not relocate its chief executive office to a new location without
      providing 30 days prior written notification thereof to the Secured Parties
      and
      so long as, at the time of such written notification, Debtor provides any
      financing statements or fixture filings necessary to perfect and continue the
      perfection of the Security Interests granted and evidenced by this
      Agreement.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (y) Debtor
      was organized and remains organized solely under the laws of the state set
      forth
      next to Debtor’s name in Schedule
      D
      attached
      hereto, which Schedule
      D
      sets
      forth the Debtor’s organizational identification number or, if the Debtor does
      not have one, states that one does not exist.

    

    (z) 
      (i) The
      actual name of the Debtor is the name set forth in Schedule
      D
      attached
      hereto; (ii) the Debtor does not have any trade names except as set forth on
      Schedule
      E
      attached
      hereto; (iii) the Debtor has not used any name other than that stated in the
      preamble hereto or as set forth on Schedule
      E
      for the
      preceding five years; and (iv) no entity has merged into the Debtor or been
      acquired by the Debtor within the past five years except as set forth on
Schedule
      E.

    

    (aa) At
      any
      time and from time to time that any Collateral consists of instruments,
      certificated securities or other items that require or permit possession by
      the
      secured party to perfect the security interest created hereby, the Debtor shall
      deliver such Collateral to the Agent upon the Agent’s reasonable
      request.

    

    (bb)
       Debtor,
      in its capacity as issuer, hereby agrees to comply with any and all orders
      and
      instructions of Agent regarding the Pledged Interests consistent with the terms
      of this Agreement without the further consent of the Debtor as contemplated
      by
      Section 8-106 (or any successor section) of the UCC. Further, the Debtor agrees
      that it shall not enter into a similar agreement (or one that would confer
      “control” within the meaning of Article 8 of the UCC) with any other person or
      entity.

    

    (cc) Upon
      the
      Agent’s reasonable request, the Debtor shall cause all tangible chattel paper
      constituting Collateral to be delivered to the Agent, or, if such delivery
      is
      not possible, then to cause such tangible chattel paper to contain a legend
      noting that it is subject to the security interest created by this Agreement.
      To
      the extent that any Collateral consists of electronic chattel paper, upon the
      Agent’s written request, the Debtor shall cause the underlying chattel paper to
      be “marked” within the meaning of Section 9-105 of the UCC (or successor section
      thereto).

    

    (dd) If
      there
      is any investment property or deposit account included as Collateral that can
      be
      perfected by “control” through an account control agreement, upon the Agent’s
      reasonable request, the Debtor shall cause such an account control agreement,
      in
      form and substance in each case satisfactory to the Agent, to be entered into
      and delivered to the Agent for the benefit of the Secured Parties; provided
      that
      the parties agree that the Debtor shall not be required to deliver an account
      control agreement with respect to any deposit account with an average daily
      closing balance of less than $10,000.

    

    (ee)
       To
      the
      extent that any Collateral consists of letter-of-credit rights, the Debtor
      shall
      cause the issuer of each underlying letter of credit to consent to an assignment
      of the proceeds thereof to the Secured Parties.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (ff)
       To
      the
      extent that any Collateral is in the possession of any third party, the Debtor
      shall join with the Agent in notifying such third party of the Secured Parties’
security interest in such Collateral and shall use its best efforts to obtain
      an
      acknowledgement and agreement from such third party with respect to the
      Collateral, in form and substance reasonably satisfactory to the
      Agent.

    

    (gg) If
      the
      Debtor shall at any time hold or acquire a commercial tort claim, Debtor shall
      promptly notify the Secured Parties in a writing signed by Debtor of the
      particulars thereof and grant to the Secured Parties in such writing a security
      interest therein and in the proceeds thereof, all upon the terms of this
      Agreement, with such writing to be in form and substance satisfactory to the
      Agent.

    

    (hh) The
      Debtor shall immediately provide written notice to the Secured Parties of any
      and all accounts which arise out of contracts with any governmental authority
      and, to the extent necessary to perfect or continue the perfected status of
      the
      Security Interests in such accounts and proceeds thereof, shall execute and
      deliver to the Agent an assignment of claims for such accounts and cooperate
      with the Agent in taking any other steps required, in its judgment, under the
      Federal Assignment of Claims Act or any similar federal, state or local statute
      or rule to perfect or continue the perfected status of the Security Interests
      in
      such accounts and proceeds thereof.

    

    (ii) The
      Debtor shall cause each subsidiary
      of
      Debtor to immediately become a party hereto (an “Additional
      Debtor”),
      by
      executing and delivering an Additional Debtor Joinder in substantially the
      form
      of Annex
      A
      attached
      hereto and comply with the provisions hereof applicable to the Debtor;
provided,
      however,
      this
      Section 4(ii) shall not apply to QPC and any subsidiary that is created solely
      through a contribution of assets by QPC, including, but not limited to, QPC
      Medical Lasers, Inc. Concurrent therewith, the Additional Debtor shall deliver
      replacement schedules for, or supplements to all other Schedules to (or referred
      to in) this Agreement, as applicable, which replacement schedules shall
      supersede, or supplements shall modify, the Schedules then in effect. The
      Additional Debtor shall also deliver such opinions of counsel, authorizing
      resolutions, good standing certificates, incumbency certificates, organizational
      documents, financing statements and other information and documentation as
      the
      Agent may reasonably request. Upon delivery of the foregoing to the Agent,
      the
      Additional Debtor shall be and become a party to this Agreement with the same
      rights and obligations as the Debtor, for all purposes hereof as fully and
      to
      the same extent as if it were an original signatory hereto and shall be deemed
      to have made the representations, warranties and covenants set forth herein
      as
      of the date of execution and delivery of such Additional Debtor Joinder, and
      all
      references herein to the “Debtor” shall be deemed to include each Additional
      Debtor.

    

    (jj)
       Debtor
      shall vote the Pledged Securities to comply with the covenants and agreements
      set forth herein and in the Debentures.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (kk) Debtor
      shall register the pledge of the applicable Pledged Securities on the books
      of
      Debtor. Debtor shall notify each issuer of Pledged Securities to register the
      pledge of the applicable Pledged Securities in the name of the Secured Parties
      on the books of such issuer. Further, except with respect to certificated
      securities delivered to the Agent, the Debtor shall deliver to Agent an
      acknowledgement of pledge (which, where appropriate, shall comply with the
      requirements of the relevant UCC with respect to perfection by registration)
      signed by the issuer of the applicable Pledged Securities, which acknowledgement
      shall confirm that: (a) it has registered the pledge on its books and records;
      and (b) at any time directed by Agent during the continuation of an Event of
      Default, such issuer will transfer the record ownership of such Pledged
      Securities into the name of any designee of Agent, will take such steps as
      may
      be necessary to effect the transfer, and will comply with all other instructions
      of Agent regarding such Pledged Securities without the further consent of the
      Debtor.

    

    (ll)
      In
      the
      event that, upon an occurrence of an Event of Default, Agent shall sell all
      or
      any of the Pledged Securities to another party or parties (herein called the
      “Transferee”)
      or
      shall purchase or retain all or any of the Pledged Securities, the Debtor shall,
      to the extent applicable: (i) deliver to Agent or the Transferee, as the case
      may be, the articles of incorporation, bylaws, minute books, stock certificate
      books, corporate seals, deeds, leases, indentures, agreements, evidences of
      indebtedness, books of account, financial records and all other Organizational
      Documents and records of the Debtor and its direct and indirect subsidiaries;
      (ii) use its best efforts to obtain resignations of the persons then serving
      as
      officers and directors of the Debtor and its direct and indirect subsidiaries,
      if so requested; and (iii) use its best efforts to obtain any approvals that
      are
      required by any governmental or regulatory body in order to permit the sale
      of
      the Pledged Securities to the Transferee or the purchase or retention of the
      Pledged Securities by Agent and allow the Transferee or Agent to continue the
      business of the Debtor and its direct and indirect subsidiaries.

    (mm) Without
      limiting the generality of the other obligations of the Debtor hereunder, the
      Debtor shall promptly (i) cause to be registered at the United States Copyright
      Office all of its material copyrights, (ii) cause the security interest
      contemplated hereby with respect to all Intellectual Property registered at
      the
      United States Copyright Office or United States Patent and Trademark Office
      to
      be duly recorded at the applicable office, and (iii) give the Agent notice
      whenever it acquires (whether absolutely or by license) or creates any
      additional material Intellectual Property.

    

    (nn) Debtor
      will from time to time, at its expense, promptly execute and deliver all such
      further instruments and documents, and take all such further action as may
      be
      necessary or desirable, or as the Agent may reasonably request, in order to
      perfect and protect any security interest granted or purported to be granted
      hereby or to enable the Secured Parties to exercise and enforce their rights
      and
      remedies hereunder and with respect to any Collateral or to otherwise carry
      out
      the purposes of this Agreement.

    

    (oo) Schedule
      F
      attached
      hereto lists all of the patents, patent applications, trademarks, trademark
      applications, registered copyrights, and domain names owned by the Debtor as
      of
      the date hereof. Schedule
      F
      lists
      all material licenses in favor of the Debtor for the use of any patents,
      trademarks, copyrights and domain names as of the date hereof. All material
      patents and trademarks of the Debtor have been duly recorded at the United
      States Patent and Trademark Office and all material copyrights of the Debtor
      have been duly recorded at the United States Copyright Office.

     

    
      
        
        

      

      
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    (pp) Except
      as
      set forth on Schedule
      G
      attached
      hereto, none of the account debtors or other persons or entities obligated
      on
      any of the Collateral is a governmental authority covered by the Federal
      Assignment of Claims Act or any similar federal, state or local statute or
      rule
      in respect of such Collateral.

    

    5. Effect
      of Pledge on Certain Rights. If
      any of
      the Collateral subject to this Agreement consists of nonvoting equity or
      ownership interests (regardless of class, designation, preference or rights)
      that may be converted into voting equity or ownership interests upon the
      occurrence of certain events (including, without limitation, upon the transfer
      of all or any of the other stock or assets of the issuer), it is agreed that
      the
      pledge of such equity or ownership interests pursuant to this Agreement or
      the
      enforcement of any of Agent’s rights hereunder shall not be deemed to be the
      type of event which would trigger such conversion rights notwithstanding any
      provisions in the Organizational Documents or agreements to which the Debtor
      is
      subject or to which the Debtor is party.

    

    6.
      Defaults.
      The
      following events shall be “Events
      of Default”:

    

    (a)
      The
      occurrence of an Event of Default (as defined in the Debentures) under the
      Debentures;

    

    (b)
      Any
      representation or warranty of the Debtor in this Agreement shall prove to have
      been incorrect in any material respect when made;

    

    (c)
      The
      failure by the Debtor to observe or perform any of its obligations hereunder
      for
      five (5) days after delivery to Debtor of notice of such failure by or on behalf
      of a Secured Party unless such default is capable of cure but cannot be cured
      within such time frame and Debtor is using best efforts to cure same in a timely
      fashion; or

    

    (d)
      If
      any provision of this Agreement shall at any time for any reason be declared
      to
      be null and void, or the validity or enforceability thereof shall be contested
      by the Debtor, or a proceeding shall be commenced by the Debtor, or by any
      governmental authority having jurisdiction over the Debtor, seeking to establish
      the invalidity or unenforceability thereof, or the Debtor shall deny that the
      Debtor has any liability or obligation purported to be created under this
      Agreement.

    

     7. Duty
      To Hold In Trust.
      

    

    (a) Upon
      the
      occurrence of any Event of Default and at any time thereafter, the Debtor shall,
      upon receipt of any revenue, income,
      dividend, interest
      or other
      sums subject to the Security Interests, whether payable pursuant to the
      Debentures or otherwise, or of any check, draft, note, trade acceptance or
      other
      instrument evidencing an obligation to pay any such sum, hold the same in trust
      for the Secured Parties and shall forthwith endorse and transfer any such sums
      or instruments, or both, to the Secured Parties, pro-rata in proportion to
      their
      respective then-currently outstanding principal amount of Debentures for
      application to the satisfaction of the Obligations (and if any Debenture is
      not
      outstanding, pro-rata in proportion to the initial purchases of the remaining
      Debentures). 

     

    
      
        
        

      

      
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    (b) If
      the
      Debtor shall become entitled to receive or shall receive any securities or
      other
      property (including, without limitation, shares of Pledged Securities or
      instruments representing Pledged Securities acquired after the date hereof,
      or
      any options, warrants, rights or other similar property or certificates
      representing a dividend, or any distribution in connection with any
      recapitalization, reclassification or increase or reduction of capital, or
      issued in connection with any reorganization of Debtor or any of its direct
      or
      indirect subsidiaries) in respect of the Pledged Securities (whether as an
      addition to, in substitution of, or in exchange for, such Pledged Securities
      or
      otherwise), Debtor agrees to (i) accept the same as the agent of the Secured
      Parties; (ii) hold the same in trust on behalf of and for the benefit of the
      Secured Parties; and (iii) to deliver any and all certificates or instruments
      evidencing the same to Agent on or before the close of business on the fifth
      business day following the receipt thereof by Debtor, in the exact form received
      together with the Necessary Endorsements, to be held by Agent subject to the
      terms of this Agreement as Collateral.

    

     8.  Rights
      and Remedies Upon Default.
      

    

    (a) Upon
      the
      occurrence of any Event of Default and at any time thereafter, the Secured
      Parties, acting through the Agent, shall have the right to exercise all of
      the
      remedies conferred hereunder and under the Debentures, and the Secured Parties
      shall have all the rights and remedies of a secured party under the UCC. Without
      limitation, the Agent, for the benefit of the Secured Parties, shall have the
      following rights and powers:

    

    (i)
      The
      Agent shall have the right to take possession of the Collateral and, for that
      purpose, enter, with the aid and assistance of any person, any premises where
      the Collateral, or any part thereof, is or may be placed and remove the same,
      and the Debtor shall assemble the Collateral and make it available to the Agent
      at places which the Agent shall reasonably select, whether at Debtor's premises
      or elsewhere, and make available to the Agent, without rent, all of Debtor’s
      respective premises and facilities for the purpose of the Agent taking
      possession of, removing or putting the Collateral in saleable or disposable
      form.

    

    (ii) Upon
      notice to the Debtor by Agent, all rights of the Debtor to exercise the voting
      and other consensual rights which it would otherwise be entitled to exercise
      and
      all rights of the Debtor to receive the dividends and interest which it would
      otherwise be authorized to receive and retain, shall cease. Upon such notice,
      Agent shall have the right to receive, for the benefit of the Secured Parties,
      any interest, cash dividends or other payments on the Collateral and, at the
      option of Agent, to exercise in such Agent’s discretion all voting rights
      pertaining thereto. Without limiting the generality of the foregoing, Agent
      shall have the right (but not the obligation) to exercise all rights with
      respect to the Collateral as it were the sole and absolute owner thereof,
      including, without limitation, to vote and/or to exchange, at its sole
      discretion, any or all of the Collateral in connection with a merger,
      reorganization, consolidation, recapitalization or other readjustment concerning
      or involving the Collateral or the Debtor or any of its direct or indirect
      subsidiaries.

     

    
      
        
        

      

      
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    (iii)
      The
      Agent shall have the right to operate the business of the Debtor using the
      Collateral and shall have the right to assign, sell, lease or otherwise dispose
      of and deliver all or any part of the Collateral, at public or private sale
      or
      otherwise, either with or without special conditions or stipulations, for cash
      or on credit or for future delivery, in such parcel or parcels and at such
      time
      or times and at such place or places, and upon such terms and conditions as
      the
      Agent may deem commercially reasonable, all without (except as shall be required
      by applicable statute and cannot be waived) advertisement or demand upon or
      notice to the Debtor or right of redemption of a Debtor, which are hereby
      expressly waived. Upon each such sale, lease, assignment or other transfer
      of
      Collateral, the Agent, for the benefit of the Secured Parties, may, unless
      prohibited by applicable law which cannot be waived, purchase all or any part
      of
      the Collateral being sold, free from and discharged of all trusts, claims,
      right
      of redemption and equities of the Debtor, which are hereby waived and
      released.

    

    (iv) The
      Agent
      shall have the right (but not the obligation) to notify any account debtors
      and
      any obligors under instruments or accounts to make payments directly to the
      Agent, on behalf of the Secured Parties, and to enforce the Debtor’ rights
      against such account debtors and obligors.

    

    (v) The
      Agent, for the benefit of the Secured Parties, may (but is not obligated to)
      direct any financial intermediary or any other person or entity holding any
      investment property to transfer the same to the Agent, on behalf of the Secured
      Parties, or its designee.

    

    (vi) The
      Agent
      may (but is not obligated to) transfer any or all Intellectual Property
      registered in the name of the Debtor at the United States Patent and Trademark
      Office and/or Copyright Office into the name of the Secured Parties or any
      designee or any purchaser of any Collateral.

    

    (b) The
      Agent
      shall comply with any applicable law in connection with a disposition of
      Collateral and such compliance will not be considered adversely to affect the
      commercial reasonableness of any sale of the Collateral. The Agent may sell
      the
      Collateral without giving any warranties and may specifically disclaim such
      warranties. If the Agent sells any of the Collateral on credit, the Debtor
      will
      only be credited with payments actually made by the purchaser. In addition,
      the
      Debtor waives any and all rights that it may have to a judicial hearing in
      advance of the enforcement of any of the Agent’s rights and remedies hereunder,
      including, without limitation, its right following an Event of Default to take
      immediate possession of the Collateral and to exercise its rights and remedies
      with respect thereto.

     

    
      
        
        

      

      
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    (c) For
      the
      purpose of enabling the Agent to further exercise rights and remedies under
      this
      Section 8 or elsewhere provided by agreement or applicable law, the Debtor
      hereby grants to the Agent, for the benefit of the Agent and the Secured
      Parties, an irrevocable, nonexclusive license (exercisable without payment
      of
      royalty or other compensation to Debtor) to use, license or sublicense following
      an Event of Default, any Intellectual Property now owned or hereafter acquired
      by Debtor, and wherever the same may be located, and including in such license
      access to all media in which any of the licensed items may be recorded or stored
      and to all computer software and programs used for the compilation or printout
      thereof.

    

     9. Applications
      of Proceeds.
      The
      proceeds of any such sale, lease or other disposition of the Collateral
      hereunder or from payments made on account of any insurance policy insuring
      any
      portion of the Collateral shall be applied first, to the expenses of retaking,
      holding, storing, processing and preparing for sale, selling, and the like
      (including, without limitation, any taxes, fees and other costs incurred in
      connection therewith) of the Collateral, to the reasonable attorneys’ fees and
      expenses incurred by the Agent in enforcing the Secured Parties’ rights
      hereunder and in connection with collecting, storing and disposing of the
      Collateral, and then to satisfaction of the Obligations pro rata among the
      Secured Parties (based on then-outstanding principal amounts of Debentures
      at
      the time of any such determination), and to the payment of any other amounts
      required by applicable law, after which the Secured Parties shall pay to the
      Debtor any surplus proceeds. If, upon the sale, license or other disposition
      of
      the Collateral, the proceeds thereof are insufficient to pay all amounts to
      which the Secured Parties are legally entitled, the Debtor will be liable for
      the deficiency, together with interest thereon, at the rate of 18% per annum
      or
      the lesser amount permitted by applicable law (the “Default
      Rate”),
      and
      the reasonable fees of any attorneys employed by the Secured Parties to collect
      such deficiency. To the extent permitted by applicable law, the Debtor waives
      all claims, damages and demands against the Secured Parties arising out of
      the
      repossession, removal, retention or sale of the Collateral, unless due solely
      to
      the gross negligence or willful misconduct of the Secured Parties as determined
      by a final judgment (not subject to further appeal) of a court of competent
      jurisdiction.

    

    10. Securities
      Law Provision.
      Debtor
      recognizes that Agent may be limited in its ability to effect a sale to the
      public of all or part of the Pledged Securities by reason of certain
      prohibitions in the Securities Act of 1933, as amended, or other federal or
      state securities laws (collectively, the “Securities
      Laws”),
      and
      may be compelled to resort to one or more sales to a restricted group of
      purchasers who may be required to agree to acquire the Pledged Securities for
      their own account, for investment and not with a view to the distribution or
      resale thereof. Debtor agrees that sales so made may be at prices and on terms
      less favorable than if the Pledged Securities were sold to the public, and
      that
      Agent has no obligation to delay the sale of any Pledged Securities for the
      period of time necessary to register the Pledged Securities for sale to the
      public under the Securities Laws. Debtor shall cooperate with Agent in its
      attempt to satisfy any requirements under the Securities Laws (including,
      without limitation, registration thereunder if requested by Agent) applicable
      to
      the sale of the Pledged Securities by Agent.

     

    
      
        
        

      

      
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    11. Costs
      and Expenses.
      Debtor
      agrees to pay all reasonable out-of-pocket fees, costs and expenses incurred
      in
      connection with any filing required hereunder, including without limitation,
      any
      financing statements pursuant to the UCC, continuation statements, partial
      releases and/or termination statements related thereto or any expenses of any
      searches reasonably required by the Agent. The Debtor shall also pay all other
      claims and charges which in the reasonable opinion of the Agent is reasonably
      likely to prejudice, imperil or otherwise affect the Collateral or the Security
      Interests therein. The Debtor will also, upon demand, pay to the Agent the
      amount of any and all reasonable expenses, including the reasonable fees and
      expenses of its counsel and of any experts and agents, which the Agent, for
      the
      benefit of the Secured Parties, may incur in connection with the creation,
      perfection, protection, satisfaction, foreclosure, collection or enforcement
      of
      the Security Interest and the preparation, administration, continuance,
      amendment or enforcement of this Agreement and pay to the Agent the amount
      of
      any and all reasonable expenses, including the reasonable fees and expenses
      of
      its counsel and of any experts and agents, which the Agent, for the benefit
      of
      the Secured Parties, and the Secured Parties may incur in connection with (i)
      the enforcement of this Agreement, (ii) the custody or preservation of, or
      the
      sale of, collection from, or other realization upon, any of the Collateral,
      or
      (iii) the exercise or enforcement of any of the rights of the Secured Parties
      under the Debentures. Unless paid within ten (10) days after written notice
      and
      delivery of any records substantiating such charges as may be reasonably
      requested by a Debtor from the Agent to Debtor, any fees payable hereunder
      shall
      be added to the principal amount of the Debentures and shall bear interest
      at
      the Default Rate.

    

    12.  Responsibility
      for Collateral.
      The
      Debtor assumes all liabilities and responsibility in connection with all
      Collateral, and the Obligations shall in no way be affected or diminished by
      reason of the loss, destruction, damage or theft of any of the Collateral or
      its
      unavailability for any reason. Without limiting the generality of the foregoing,
      (a) neither the Agent nor any Secured Party (i) has any duty (either before
      or
      after an Event of Default) to collect any amounts in respect of the Collateral
      or to preserve any rights relating to the Collateral, or (ii) has any obligation
      to clean-up or otherwise prepare the Collateral for sale, and (b) the Debtor
      shall remain obligated and liable under each contract or agreement included
      in
      the Collateral to be observed or performed by Debtor thereunder. Neither the
      Agent nor any Secured Party shall have any obligation or liability under any
      such contract or agreement by reason of or arising out of this Agreement or
      the
      receipt by the Agent or any Secured Party of any payment relating to any of
      the
      Collateral, nor shall the Agent or any Secured Party be obligated in any manner
      to perform any of the obligations of the Debtor under or pursuant to any such
      contract or agreement, to make inquiry as to the nature or sufficiency of any
      payment received by the Agent or any Secured Party in respect of the Collateral
      or as to the sufficiency of any performance by any party under any such contract
      or agreement, to present or file any claim, to take any action to enforce any
      performance or to collect the payment of any amounts which may have been
      assigned to the Agent or to which the Agent or any Secured Party may be entitled
      at any time or times.

     

    
      
        
        

      

      
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    13.  Security
      Interests Absolute.
      All
      rights of the Secured Parties and all obligations of the Debtor hereunder,
      shall
      be absolute and unconditional, irrespective of: (a) any lack of validity or
      enforceability of this Agreement, the Debentures or any agreement entered into
      in connection with the foregoing, or any portion hereof or thereof; (b) any
      change in the time, manner or place of payment or performance of, or in any
      other term of, all or any of the Obligations, or any other amendment or waiver
      of or any consent to any departure from the Debentures or any other agreement
      entered into in connection with the foregoing; (c) any exchange, release or
      nonperfection of any of the Collateral, or any release or amendment or waiver
      of
      or consent to departure from any other collateral for, or any guarantee, or
      any
      other security, for all or any of the Obligations; (d) any action by the Secured
      Parties to obtain, adjust, settle and cancel in its sole discretion any
      insurance claims or matters made or arising in connection with the Collateral;
      or (e) any other circumstance which might otherwise constitute any legal or
      equitable defense available to a Debtor, or a discharge of all or any part
      of
      the Security Interests granted hereby. Until the Obligations shall have been
      paid and performed in full, the rights of the Secured Parties shall continue
      even if the Obligations are barred for any reason, including, without
      limitation, the running of the statute of limitations or bankruptcy. Debtor
      expressly waives presentment, protest, notice of protest, demand, notice of
      nonpayment and demand for performance. In the event that at any time any
      transfer of any Collateral or any payment received by the Secured Parties
      hereunder shall be deemed by final order of a court of competent jurisdiction
      to
      have been a voidable preference or fraudulent conveyance under the bankruptcy
      or
      insolvency laws of the United States, or shall be deemed to be otherwise due
      to
      any party other than the Secured Parties, then, in any such event, the Debtor’s
      obligations hereunder shall survive cancellation of this Agreement, and shall
      not be discharged or satisfied by any prior payment thereof and/or cancellation
      of this Agreement, but shall remain a valid and binding obligation enforceable
      in accordance with the terms and provisions hereof. Debtor waives all right
      to
      require the Secured Parties to proceed against any other person or entity
      or
to
      apply
      any Collateral which the Secured Parties may hold at any time, or to marshal
      assets, or to pursue any other remedy. Debtor waives any defense arising by
      reason of the application of the statute of limitations to any obligation
      secured hereby.

    

    14. Term
      of Agreement.
      This
      Agreement and the Security Interests shall terminate on the date on which all
      payments under the Debentures have been indefeasibly paid in full and all other
      Obligations have been paid or discharged; provided, however, that all
      indemnities of the Debtor contained in this Agreement (including, without
      limitation, Annex B hereto) shall survive and remain operative and in full
      force
      and effect regardless of the termination of this Agreement.

    

    15.
       Power
      of Attorney; Further Assurances.

    

    (a)
       Debtor
      authorizes the Agent, and does hereby make, constitute and appoint the Agent
      and
      its officers, agents, successors or assigns with full power of substitution,
      as
      Debtor’s true and lawful attorney-in-fact, with power, in the name of the Agent
      or Debtor, to, after the occurrence and during the continuance of an Event
      of
      Default, (i) endorse any note, checks, drafts, money orders or other instruments
      of payment (including payments payable under or in respect of any policy of
      insurance) in respect of the Collateral that may come into possession of the
      Agent; (ii) to sign and endorse any financing statement pursuant to the UCC
      or
      any invoice, freight or express bill, bill of lading, storage or warehouse
      receipts, drafts against debtors, assignments, verifications and notices in
      connection with accounts, and other documents relating to the Collateral; (iii)
      to pay or discharge taxes, liens, security interests or other encumbrances
      at
      any time levied or placed on or threatened against the Collateral; (iv) to
      demand, collect, receipt for, compromise, settle and sue for monies due in
      respect of the Collateral; (v) to transfer any Intellectual Property or provide
      licenses respecting any Intellectual Property; and (vi) generally, at the option
      of the Agent, and at the expense of the Debtor, at any time, or from time to
      time, to execute and deliver any and all documents and instruments and to do
      all
      acts and things which the Agent deems necessary to protect, preserve and realize
      upon the Collateral and the Security Interests granted therein in order to
      effect the intent of this Agreement and the Debentures all as fully and
      effectually as the Debtor might or could do; and the Debtor hereby ratifies
      all
      that said attorney shall lawfully do or cause to be done by virtue hereof.
      This
      power of attorney is coupled with an interest and shall be irrevocable for
      the
      term of this Agreement and thereafter as long as any of the Obligations shall
      be
      outstanding. The
      designation set forth herein shall be deemed to amend and supersede any
      inconsistent provision in the Organizational Documents or other documents or
      agreements to which the Debtor is subject or to which the Debtor is a party.
      Without
      limiting the generality of the foregoing, after the occurrence and during the
      continuance of an Event of Default, each Secured Party is specifically
      authorized to execute and file any applications for or instruments of transfer
      and assignment of any patents, trademarks, copyrights or other Intellectual
      Property with the United States Patent and Trademark Office and the United
      States Copyright Office.

     

    
      
        
        

      

      
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    (b)
       On
      a
      continuing basis, the Debtor will make, execute, acknowledge, deliver, file
      and
      record, as the case may be, with the proper filing and recording agencies in
      any
      jurisdiction, including, without limitation, the jurisdictions indicated on
      Schedule
      C
      attached
      hereto, all such instruments, and take all such action as may reasonably be
      deemed necessary or advisable, or as reasonably requested by the Agent, to
      perfect the Security Interests granted hereunder and otherwise to carry out
      the
      intent and purposes of this Agreement, or for assuring and confirming to the
      Agent the grant or perfection of a perfected security interest in all the
      Collateral under the UCC.

    

    (c)
       Debtor
      hereby irrevocably appoints the Agent as Debtor’s attorney-in-fact, with full
      authority in the place and instead of Debtor and in the name of Debtor, from
      time to time in the Agent’s discretion, to take any action and to execute any
      instrument which the Agent may deem necessary or advisable to accomplish the
      purposes of this Agreement, including the filing, in its sole discretion, of
      one
      or more financing or continuation statements and amendments thereto, relative
      to
      any of the Collateral without the signature of Debtor where permitted by law,
      which financing statements may (but need not) describe the Collateral as “all
      assets” or “all personal property” or words of like import, and ratifies all
      such actions taken by the Agent. This power of attorney is coupled with an
      interest and shall be irrevocable for the term of this Agreement and thereafter
      as long as any of the Obligations shall be outstanding.

    

    16. Notices.
      All
      notices, requests, demands and other communications hereunder shall be subject
      to the notice provision of the Purchase Agreement (as such term is defined
      in
      the Debentures).

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    17. Other
      Security.
      To the
      extent that the Obligations are now or hereafter secured by property other
      than
      the Collateral or by the guarantee, endorsement or property of any other person,
      firm, corporation or other entity, then the Agent shall have the right, in
      its
      sole discretion, to pursue, relinquish, subordinate, modify or take any other
      action with respect thereto, without in any way modifying or affecting any
      of
      the Secured Parties’ rights and remedies hereunder.

    

    18. Appointment
      of Agent.
      The
      Secured Parties hereby appoint [_____ to act as their agent (“[_____”
or
      “Agent”)
      for
      purposes of exercising any and all rights and remedies of the Secured Parties
      hereunder. Such appointment shall continue until revoked in writing by a
Majority
      in Interest, at which time a Majority in Interest
      shall
      appoint a new Agent, provided that [_____ may not be removed as Agent unless
      [______ shall then hold less than $[50,000] in principal amount of
      Debentures;
      provided,
      further,
      that
      such removal may occur only if each of the other Secured Parties shall then
      hold
      not less than an aggregate of $[50,000]
      in
      principal amount of Debentures. The
      Agent
      shall have the rights, responsibilities and immunities set forth in Annex
      B
      hereto.

     

     19.  Miscellaneous.

    

    (a)
       No
      course
      of dealing between the Debtor and the Secured Parties, nor any failure to
      exercise, nor any delay in exercising, on the part of the Secured Parties,
      any
      right, power or privilege hereunder or under the Debentures shall operate as
      a
      waiver thereof; nor shall any single or partial exercise of any right, power
      or
      privilege hereunder or thereunder preclude any other or further exercise thereof
      or the exercise of any other right, power or privilege.

    

    (b)
       All
      of
      the rights and remedies of the Secured Parties with respect to the Collateral,
      whether established hereby or by the Debentures or by any other agreements,
      instruments or documents or by law shall be cumulative and may be exercised
      singly or concurrently.

    

    (c)
       This
      Agreement,
      together with the exhibits and schedules hereto, contain the entire
      understanding of the parties with respect to the subject matter hereof and
      supersede all prior agreements and understandings, oral or written, with respect
      to such matters, which the parties acknowledge have been merged into this
      Agreement and the exhibits and schedules hereto.
      No
      provision of this Agreement may be waived, modified, supplemented or amended
      except in a written instrument signed by the Debtor and the Secured Parties
      holding at least 67% of the principal amount of the Debentures then outstanding
      at the time of such waiver, modification, supplement or amendment or such lesser
      percentage as expressly provided herein. Any waiver, modification, supplement
      or
      amendment effected in accordance with this Section 19(c) shall be binding upon
      the Debtor, the Secured Parties and their respective successors and permitted
      assigns.

    

    (d)
       If
      any
      term, provision, covenant or restriction of this Agreement is held by a court
      of
      competent jurisdiction to be invalid, illegal, void or unenforceable, the
      remainder of the terms, provisions, covenants and restrictions set forth herein
      shall remain in full force and effect and shall in no way be affected, impaired
      or invalidated, and the parties hereto shall use their commercially reasonable
      efforts to find and employ an alternative means to achieve the same or
      substantially the same result as that contemplated by such term, provision,
      covenant or restriction. It is hereby stipulated and declared to be the
      intention of the parties that they would have executed the remaining terms,
      provisions, covenants and restrictions without including any of such that may
      be
      hereafter declared invalid, illegal, void or unenforceable.

     

    
      
        
        

      

      
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    (e)
       No
      waiver
      of any default with respect to any provision, condition or requirement of this
      Agreement shall be deemed to be a continuing waiver in the future or a waiver
      of
      any subsequent default or a waiver of any other provision, condition or
      requirement hereof, nor shall any delay or omission of any party to exercise
      any
      right hereunder in any manner impair the exercise of any such
      right.

    

    (f)
       This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and permitted assigns. The Debtor may not assign this Agreement
      or any rights or obligations hereunder without the prior written consent of
      each
      Secured Party (other than by merger). Any Secured Party may assign any or all
      of
      its rights under this Agreement to any Person to whom such Secured Party assigns
      or transfers any Obligations, provided such transferee agrees in writing to
      be
      bound, with respect to the transferred Obligations, by the provisions of this
      Agreement that apply to the “Secured Parties.”

    

    (g)
       Each
      party shall take such further action and execute and deliver such further
      documents as may be necessary or appropriate in order to carry out the
      provisions and purposes of this Agreement.

    

    (h)
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the State of New York, without regard to the
      principles of conflicts of law thereof. Debtor agrees that all proceedings
      concerning the interpretations, enforcement and defense of the transactions
      contemplated by this Agreement and the Debentures (whether brought against
      a
      party hereto or its respective affiliates, directors, officers, shareholders,
      partners, members, employees or agents) shall be commenced exclusively in the
      state and federal courts sitting in the City of New York, Borough of Manhattan.
      Debtor hereby irrevocably submits to the exclusive jurisdiction of the state
      and
      federal courts sitting in the City of New York, Borough of Manhattan for the
      adjudication of any dispute hereunder or in connection herewith or with any
      transaction contemplated hereby or discussed herein, and hereby irrevocably
      waives, and agrees not to assert in any proceeding, any claim that it is not
      personally subject to the jurisdiction of any such court, that such proceeding
      is improper. Each party hereto hereby irrevocably waives personal service of
      process and consents to process being served in any such proceeding by mailing
      a
      copy thereof via registered or certified mail or overnight delivery (with
      evidence of delivery) to such party at the address in effect for notices to
      it
      under this Agreement and agrees that such service shall constitute good and
      sufficient service of process and notice thereof. Nothing contained herein
      shall
      be deemed to limit in any way any right to serve process in any manner permitted
      by law. Each party hereto hereby irrevocably waives, to the fullest extent
      permitted by applicable law, any and all right to trial by jury in any legal
      proceeding arising out of or relating to this Agreement or the transactions
      contemplated hereby. 

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    (i)
       This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed shall be deemed to be an original and, all of which taken together
      shall constitute one and the same Agreement. In the event that any signature
      is
      delivered by facsimile transmission, such signature shall create a valid binding
      obligation of the party executing (or on whose behalf such signature is
      executed) the same with the same force and effect as if such facsimile signature
      were the original thereof.

     

    (j) Debtor
      shall indemnify, reimburse and hold harmless the Agent and the Secured Parties
      and their respective partners, members, shareholders, officers, directors,
      employees and agents (and any other persons with other titles that have similar
      functions) (collectively, “Indemnitees”)
      from
      and against any and all losses, claims, liabilities, damages, penalties, suits,
      costs and expenses, of any kind or nature, (including fees relating to the
      cost
      of investigating and defending any of the foregoing) imposed on, incurred by
      or
      asserted against such Indemnitee in any way related to or arising from or
      alleged to arise from this Agreement or the Collateral, except any such losses,
      claims, liabilities, damages, penalties, suits, costs and expenses which result
      from the gross negligence or willful misconduct of the Indemnitee as determined
      by a final, nonappealable decision of a court of competent jurisdiction. This
      indemnification provision is in addition to, and not in limitation of, any
      other
      indemnification provision in the Debentures, the Purchase Agreement (as such
      term is defined in the Debentures) or any other agreement, instrument or other
      document executed or delivered in connection herewith or therewith.

    

    (k) Nothing
      in this Agreement shall be construed to subject Agent or any Secured Party
      to
      liability as a partner in the Debtor or any if its direct or indirect
      subsidiaries that is a partnership or as a member in the Debtor or any of its
      direct or indirect subsidiaries that is a limited liability company, nor shall
      Agent or any Secured Party be deemed to have assumed any obligations under
      any
      partnership agreement or limited liability company agreement, as applicable,
      of
      any Debtor or any if its direct or indirect subsidiaries or otherwise, unless
      and until any such Secured Party exercises its right to be substituted for
      Debtor as a partner or member, as applicable, pursuant hereto.

    

    (l)
       To
      the
      extent that the grant of the security interest in the Collateral and the
      enforcement of the terms hereof require the consent, approval or action of
      any
      partner or member, as applicable, of the Debtor or any direct or indirect
      subsidiary of the Debtor or compliance with any provisions of any of the
      Organizational Documents, the Debtor hereby grants such consent and approval
      and
      waive any such noncompliance with the terms of said documents.

    

    [SIGNATURE
      PAGES FOLLOW]

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Security
      Agreement to be duly executed on the day and year first above
      written.

     

    

      
        	 	
                QPC
                  LASERS, INC.

              	 
	 	 	 	 
	 	 	 	 
	 	
                By:

              	     
	 
	
                 

              	
                 

              	
                Name:

              	 
	
                 

              	 	
                Title:

              	 

      

       

    

    

    [SIGNATURE
      PAGE OF HOLDERS FOLLOWS]

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    [SIGNATURE
      PAGE OF HOLDERS TO QPCI SA]

     

    Name
      of
      Investing Entity: __________________________

     

    Signature
      of Authorized Signatory of Investing entity:
      _________________________

     

    Name
      of
      Authorized Signatory: _________________________

     

    Title
      of
      Authorized Signatory: __________________________

     

     

    [SIGNATURE
      PAGE OF HOLDERS FOLLOWS]

    

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    SCHEDULE
      A

    

    

    Principal
      Place of Business of Debtor:

     

    Locations
      Where Collateral is Located or Stored:

     

    

    SCHEDULE
      B

     

    

    

    SCHEDULE
      C

    

     

    

    SCHEDULE
      D

    Legal
      Names and Organizational Identification Numbers

    

     

    

    SCHEDULE
      E

    Names;
      Mergers and Acquisitions

    

    

    

    SCHEDULE
      F

    Intellectual
      Property

    

    

    

    SCHEDULE
      G

    Account
      Debtors

    

    

    

    SCHEDULE
      H

    Pledged
      Securities

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    ANNEX
      A

    to

    SECURITY

    AGREEMENT

    

    FORM
      OF ADDITIONAL DEBTOR JOINDER

    

    Security
      Agreement dated as of May ___, 2008 made by

    QPC
      Lasers, Inc.

    and
      its
      subsidiaries party thereto from time to time, as Debtor

    to
      and in
      favor of

    the
      Secured Parties identified therein (the “Security
      Agreement”)

    

    Reference
      is made to the Security Agreement as defined above; capitalized terms used
      herein and not otherwise defined herein shall have the meanings given to such
      terms in, or by reference in, the Security Agreement.

    

    The
      undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
      to the Secured Parties referred to above, the undersigned shall (a) be an
      Additional Debtor under the Security Agreement, (b) have all the rights and
      obligations of the Debtor under the Security Agreement as fully and to the
      same
      extent as if the undersigned was an original signatory thereto and (c) be deemed
      to have made the representations and warranties set forth therein as of the
      date
      of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING
      THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE
      SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH
      IN
      THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL
      PROVISIONS SET FORTH THEREIN.

    

    Attached
      hereto are supplemental and/or replacement Schedules to the Security Agreement,
      as applicable.

    

    An
      executed copy of this Joinder shall be delivered to the Secured Parties, and
      the
      Secured Parties may rely on the matters set forth herein on or after the date
      hereof. This Joinder shall not be modified, amended or terminated without the
      prior written consent of the Secured Parties.

    

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
      the
      name and on behalf of the undersigned.

    

    
      	 	
              [Name
                of Additional Debtor]

              

              By:       

              Name:

              Title:

              

              Address:

            

    

    
 

    Dated:   

    

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    [ANNEX
      B

    to

    SECURITY

    AGREEMENT

    

    THE
      AGENT

    

    1.
      Appointment. The
      Secured Parties (all capitalized terms used herein and not otherwise defined
      shall have the respective meanings provided in the Security Agreement to which
      this Annex B is attached (the "Agreement")),
      by
      their acceptance of the benefits of the Agreement, hereby designate [_____
      (“[_____”
or
      “Agent”)
      as the
      Agent to act as specified herein and in the Agreement. Each Secured Party shall
      be deemed irrevocably to authorize the Agent to take such action on its behalf
      under the provisions of the Agreement and any other Transaction Document (as
      such term is defined in the Purchase Agreement) and to exercise such powers
      and
      to perform such duties hereunder and thereunder as are specifically delegated
      to
      or required of the Agent by the terms hereof and thereof and such other powers
      as are reasonably incidental thereto. The Agent may perform any of its duties
      hereunder by or through its agents or employees.

    

    2.
      Nature
      of Duties.
      The
      Agent shall have no duties or responsibilities except those expressly set forth
      in the Agreement. Neither the Agent nor any of its partners, members,
      shareholders, officers, directors, employees or agents shall be liable for
      any
      action taken or omitted by it as such under the Agreement or hereunder or in
      connection herewith or therewith, be responsible for the consequence of any
      oversight or error of judgment or answerable for any loss, unless caused solely
      by its or their gross negligence or willful misconduct as determined by a final
      judgment (not subject to further appeal) of a court of competent jurisdiction.
      The duties of the Agent shall be mechanical and administrative in nature; the
      Agent shall not have by reason of the Agreement or any other Transaction
      Document a fiduciary relationship in respect of the Debtor or any Secured Party;
      and nothing in the Agreement or any other Transaction Document, expressed or
      implied, is intended to or shall be so construed as to impose upon the Agent
      any
      obligations in respect of the Agreement or any other Transaction Document except
      as expressly set forth herein and therein.

    

    3.
      Lack
      of Reliance on the Agent.
      Independently and without reliance upon the Agent, each Secured Party, to the
      extent it deems appropriate, has made and shall continue to make (i) its own
      independent investigation of the financial condition and affairs of the Debtor
      and its subsidiaries in connection with such Secured Party’s investment in the
      Debtor, the creation and continuance of the Obligations, the transactions
      contemplated by the Transaction Documents, and the taking or not taking of
      any
      action in connection therewith, and (ii) its own appraisal of the
      creditworthiness of the Debtor and its subsidiaries, and of the value of the
      Collateral from time to time, and the Agent shall have no duty or
      responsibility, either initially or on a continuing basis, to provide any
      Secured Party with any credit, market or other information with respect thereto,
      whether coming into its possession before any Obligations are incurred or at
      any
      time or times thereafter. The Agent shall not be responsible to the Debtor
      or
      any Secured Party for any recitals, statements, information, representations
      or
      warranties herein or in any document, certificate or other writing delivered
      in
      connection herewith, or for the execution, effectiveness, genuineness, validity,
      enforceability, perfection, collectibility, priority or sufficiency of the
      Agreement or any other Transaction Document, or for the financial condition
      of
      the Debtor or the value of any of the Collateral, or be required to make any
      inquiry concerning either the performance or observance of any of the terms,
      provisions or conditions of the Agreement or any other Transaction Document,
      or
      the financial condition of the Debtor, or the value of any of the Collateral,
      or
      the existence or possible existence of any default or Event of Default under
      the
      Agreement, the Debentures or any of the other Transaction
      Documents.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4.
      Certain
      Rights of the Agent.
      The
      Agent shall have the right to take any action with respect to the Collateral,
      on
      behalf of all of the Secured Parties. To the extent practical, the Agent shall
      request instructions from the Secured Parties with respect to any material
      act
      or action (including failure to act) in connection with the Agreement or any
      other Transaction Document, and shall be entitled to act or refrain from acting
      in accordance with the instructions of a Majority in Interest; if such
      instructions are not provided despite the Agent’s request therefor, the Agent
      shall be entitled to refrain from such act or taking such action, and if such
      action is taken, shall be entitled to appropriate indemnification from the
      Secured Parties in respect of actions to be taken by the Agent; and the Agent
      shall not incur liability to any person or entity by reason of so refraining.
      Without limiting the foregoing, (a) no Secured Party shall have any right of
      action whatsoever against the Agent as a result of the Agent acting or
      refraining from acting hereunder in accordance with the terms of the Agreement
      or any other Transaction Document, and the Debtor shall have no right to
      question or challenge the authority of, or the instructions given to, the Agent
      pursuant to the foregoing and (b) the Agent shall not be required to take any
      action which the Agent believes (i) could reasonably be expected to expose
      it to
      personal liability or (ii) is contrary to this Agreement, the Transaction
      Documents or applicable law.

    

    5.
      Reliance.
      The
      Agent shall be entitled to rely, and shall be fully protected in relying, upon
      any writing, resolution, notice, statement, certificate, telex, teletype or
      telecopier message, cablegram, radiogram, order or other document or telephone
      message signed, sent or made by the proper person or entity, and, with respect
      to all legal matters pertaining to the Agreement and the other Transaction
      Documents and its duties thereunder, upon advice of counsel selected by it
      and
      upon all other matters pertaining to this Agreement and the other Transaction
      Documents and its duties thereunder, upon advice of other experts selected
      by
      it. Anything to the contrary notwithstanding, the Agent shall have no obligation
      whatsoever to any Secured Party to assure that the Collateral exists or is
      owned
      by the Debtor or is cared for, protected or insured or that the liens granted
      pursuant to the Agreement have been properly or sufficiently or lawfully
      created, perfected, or enforced or are entitled to any particular
      priority.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    6.
      Indemnification.
      To the
      extent that the Agent is not reimbursed and indemnified by the Debtor, the
      Secured Parties will jointly and severally reimburse and indemnify the Agent,
      in
      proportion to their initially purchased respective principal amounts of
      Debentures, from and against any and all liabilities, obligations, losses,
      damages, penalties, actions, judgments, suits, costs, expenses or disbursements
      of any kind or nature whatsoever which may be imposed on, incurred by or
      asserted against the Agent in performing its duties hereunder or under the
      Agreement or any other Transaction Document, or in any way relating to or
      arising out of the Agreement or any other Transaction Document except for those
      determined by a final judgment (not subject to further appeal) of a court of
      competent jurisdiction to have resulted solely from the Agent's own gross
      negligence or willful misconduct. Prior to taking any action hereunder as Agent,
      the Agent may require each Secured Party to deposit with it sufficient sums
      as
      it determines in good faith is necessary to protect the Agent for costs and
      expenses associated with taking such action.

    

    7.
      Resignation
      by the Agent.

     

    (a)
      The
      Agent may resign from the performance of all its functions and duties under
      the
      Agreement and the other Transaction Documents at any time by giving 30 days'
      prior written notice (as provided in the Agreement) to the Debtor and the
      Secured Parties. Such resignation shall take effect upon the appointment of
      a
      successor Agent pursuant to clauses (b) and (c) below.

    

    (b)
      Upon
      any such notice of resignation, the Secured Parties, acting by a Majority
      in Interest,
      shall
      appoint a successor Agent hereunder.

    

    (c)
      If a
      successor Agent shall not have been so appointed within said 30-day period,
      the
      Agent shall then appoint a successor Agent who shall serve as Agent until such
      time, if any, as the Secured Parties appoint a successor Agent as provided
      above. If a successor Agent has not been appointed within such 30-day period,
      the Agent may petition any court of competent jurisdiction or may interplead
      the
      Debtor and the Secured Parties in a proceeding for the appointment of a
      successor Agent, and all fees, including, but not limited to, extraordinary
      fees
      associated with the filing of interpleader and expenses associated therewith,
      shall be payable by the Debtor on demand.

    

    8.
      Rights
      with respect to Collateral.
      Each
      Secured Party agrees with all other Secured Parties and the Agent (i) that
      it
      shall not, and shall not attempt to, exercise any rights with respect to its
      security interest in the Collateral, whether pursuant to any other agreement
      or
      otherwise (other than pursuant to this Agreement), or take or institute any
      action against the Agent or any of the other Secured Parties in respect of
      the
      Collateral or its rights hereunder (other than any such action arising from
      the
      breach of this Agreement) and (ii) that such Secured Party has no other rights
      with respect to the Collateral other than as set forth in this Agreement and
      the
      other Transaction Documents. Upon the acceptance of any appointment as Agent
      hereunder by a successor Agent, such successor Agent shall thereupon succeed
      to
      and become vested with all the rights, powers, privileges and duties of the
      retiring Agent and the retiring Agent shall be discharged from its duties and
      obligations under the Agreement.  After any retiring Agent’s resignation or
      removal hereunder as Agent, the provisions of the Agreement including this
      Annex
      B shall inure to its benefit as to any actions taken or omitted to be taken
      by
      it while it was Agent.

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