SECURITY AGREEMENT

THIS SECURITY AGREEMENT, dated as of March 6, 2007 (this "Agreement"), is made by Advanced Photonix, Inc., a Delaware corporation (the "Borrower"), Silicon Sensors, Inc., a Delaware corporation ("SSI"), and Picometrix, LLC, a Delaware limited liability company ("PI")(collectively, with their respective successors and permitted assigns the "Debtors" and each a "Debtor" ), in favor of Fifth Third Bank (the "Bank").

A.   The Borrower has entered into a Business Loan Agreement dated of even date herewith (as amended, supplemented, extended, restated or otherwise modified from time to time, including any agreement entered into in substitution therefor, the "Loan Agreement"), with the Bank pursuant to which the Bank may make Loans (as defined therein) to the Borrower. Each of SSI and PI have entered into a Guaranty dated of even date herewith pursuant to which they guaranteed all of the obligations and liabilities of the Borrower to the Bank.

B.   Under the terms of the Loan Agreement, the Debtors are required to grant to the Bank, a first-priority security interest, subject only to security interests expressly permitted by the Loan Agreement, in and to the Collateral hereinafter described.

Accordingly, the parties hereto agree as follows:

1.1 Terms . The following terms herein used shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof):

"Bank" is defined in the recitals to this Agreement.

"Borrower" is defined in the recitals to this Agreement.

"Capital Stock" means (i) in the case of any corporation, all capital stock (whether common, preferred or any other type) and any securities exchangeable for or convertible into capital stock and any warrants, rights or other options to purchase or otherwise acquire capital stock or such securities or any other form of equity securities, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing Person.

“Collateral” is defined in Section 2.1.

"Debtor" and "Debtors" is defined in the preamble to this Agreement.

"Event of Default" means any failure to pay when due (whether at stated maturity, by acceleration or otherwise) any Secured Liabilities or the occurrence of any Event of Default under and as defined in the Loan Agreement.

"Loan Agreement " is defined in the recitals to this Agreement.

"Lien" means any pledge, assignment, hypothecation, mortgage, security interest, deposit arrangement, option, conditional sale or title retaining contract, sale and leaseback transaction, financing statement filing, lessor's or lessee's interest under any lease, subordination of any claim or right, or any other type of lien, charge, encumbrance, preferential arrangement or other claim or right.

"Loan Documents" means the Loan Agreement and all of the documents, agreements and instruments among the Debtors, any of their Subsidiaries, the Bank, or any of them, at any time evidencing or securing the repayment of, or otherwise pertaining to, the Secured Liabilities.

"Permitted Liens" means Liens permitted by the Loan Agreement .

"Receivables" means all accounts, payment intangibles, chattel paper and instruments.

“Secured Liabilities” means all loans, advances or other financial accommodations, including any renewals or extensions thereof, from the Bank to Borrower or any Guarantor and any and all liabilities and obligations of any and every kind and nature heretofore, now or hereafter owing from Borrower or any Guarantor to the Bank or any affiliate of Fifth Third Bancorp (including, without limitation, Fifth Third Securities, Inc.), however incurred or evidenced, whether primary, secondary, contingent or otherwise, whether arising under the Loan Agreement, under any other security agreement(s), promissory note(s), guaranty(s), mortgage(s), lease(s), instrument(s), document(s), contract(s), letter(s) of credit or similar agreement(s) heretofore, now or hereafter executed by Borrower or any Guarantor and delivered to the Bank, or by oral agreement or by operation of law plus all interest, costs, expenses and reasonable attorney fees which may be made or incurred by the Bank in the disbursement, administration or collection of such liabilities and obligations and in the protection, maintenance and liquidation of the Collateral.

“UCC” means the Uniform Commercial Code as in effect from time to time in the State of Michigan; provided, that if, with respect to any UCC financing statement or by reason of any provisions of law, the perfection or the effect of perfection or non-perfection of the security interests granted to the Bank is governed by the Uniform Commercial Code as in effect in a jurisdiction of the United States other than Michigan, then “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of any UCC financing statement relating to such perfection or effect of perfection or non-perfection.

1.2   Loan Agreement Definitions . Unless otherwise defined herein or the context otherwise requires, terms used in this Agreement, including its preamble and recitals, have the meanings provided in the Loan Agreement .

1.3   UCC Definitions . Unless otherwise defined herein or in the Loan Agreement or the context otherwise requires, and whether or not capitalized, terms for which meanings are provided in Article 8 or Article 9 of the UCC are used in this Agreement, including its preamble and recitals, with such meanings. Without limiting the foregoing, accounts, chattel paper, commercial tort claims, certificated security, control, deposit accounts, documents, farm products, fixtures, electronic chattel paper, equipment, general intangibles, goods, instruments, inventory, investment property, letter-of-credit rights, negotiable instruments, payment intangibles, securities and software, whether or not capitalized, shall have the meanings ascribed thereto in the UCC.

2.1 Grant of Security Interest . To secure the prompt and complete payment of all Secured Liabilities, for value received and pursuant to the Loan Agreement, each of the Debtors hereby grants, assigns and transfers to the Bank a first-priority security interest, subject only to Permitted Liens, in and to the following described assets whether now owned or existing or hereafter acquired or arising and wherever located (all of which is herein collectively called the "Collateral"):

(a)   All of each Debtor's accounts, documents, instruments, general intangibles (including without limitation all tax refund claims, payment intangibles and software, but excluding any intellectual property owned, in-licensed or otherwise controlled by any Debtor), deposit accounts, letter-of-credit rights and chattel paper, further including, but without limitation, all supporting obligations and all monies and claims for money due or to become due to any Debtor, all security held or granted to any Debtor;

(b)   All of each Debtor's investment property (including without limitation all Capital Stock and other securities, securities entitlements, securities accounts, commodity contracts and commodity accounts);

(c)   All of each Debtor's equipment, inventory, farm products, fixtures and all other goods, whether used by any Debtor or any other person, or leased by any Debtor to any person and whether the interest of Debtors is as owner, lessor, lessee or otherwise;

(e)   All other present and future personal property of each Debtor (whether tangible or intangible), including but not limited to all products and proceeds, accessions, stock rights, stock dividends, liquidating dividends, new securities, payments, distributions and proceeds (including cash dividends and sale proceeds) of or relating to any of the property described in this Section 2.1, other property to which any Debtor may become entitled by reason of the ownership of any of the property described in this Section 2.1, all books, records, databases, information and other property relating to, evidencing, or embodying any of the property described in this Section 2.1, all payments under insurance (whether or not the Bank is named as a loss payee thereof) and any other amount payable with respect to any of the property described in this Section 2.1.

The Debtors further represent, warrant, covenant, and agree with the Bank as follows:

3.1   Ownership of Collateral; Security Interest Priority .  At the time any Collateral becomes subject to a security interest of the Bank hereunder, unless the Bank shall otherwise consent, the Debtors shall be deemed to have represented and warranted that (a) a Debtor is the lawful owner of such Collateral or has the power to transfer the Collateral and have the right and authority to subject the same to the security interest of the Bank; and (b) other than Permitted Liens, none of the Collateral is subject to any Lien other than that in favor of the Bank and there is no effective financing statement or other filing covering any of the Collateral on file in any public office, other than in favor of the Bank. Upon filing of financing statements in the appropriate jurisdictions, this Agreement creates in favor of the Bank a valid first-priority perfected security interest, subject only to Permitted Liens, in the Collateral in which a security interest may be perfected by the filing of a financing statement, enforceable against each Debtor and all third parties and securing the payment of the Secured Liabilities. The Debtors authorize the Bank to file financing statements describing the Collateral as determined by the Bank and if requested will execute and deliver to the Bank all documents and take such other actions as may from time to time be requested by the Bank in order to maintain a first perfected security interest in, and if applicable, possession and control of, the Collateral. The Debtors further ratify and consent to the filing of any financing statement by the Bank which may have been filed prior to the date hereof. The Debtors will keep the Collateral free at all times from any and all Liens other than Permitted Liens. The Debtors will not, without the prior written consent of the Bank, sell, lease, license, transfer, assign or otherwise dispose, or permit or suffer to be sold, leased, licensed, transferred, assigned or otherwise disposed, any of the Collateral, except for, prior to an Event of Default only (notwithstanding any other agreement), any assets permitted to be sold, leased, licensed, transferred, assigned or otherwise disposed under the Loan Agreement. The Bank or its attorneys may at any and all reasonable times inspect the Collateral and for such purpose upon reasonable notice to the Debtors may enter upon any and all premises where the Collateral is or might be kept or located, subject to any limitations, if any, in the Loan Agreement.

3.2   Names; Locations . Each Debtor represents and warrants that Schedule 2 sets forth the following for each Debtor: (a) the jurisdiction in which each Debtor is located for purposes of Sections 9-301 and 9-307 of the UCC; (b) the address of each Debtor's chief executive office; (c) each location a secured party would have filed a UCC financing statement to perfect a security interest in equipment, inventory and general intangibles owned by each Debtor in the past five years; (d) each trade name or other name (other than its name set forth on the signature page hereto) used by each Debtor; and (e) each Debtor’s federal taxpayer identification number (and, during the four months preceding the date hereof, such Debtor has not had any other federal taxpayer identification number) and state organizational number. During the past four months preceding the date hereof, no Debtor has been known by any legal name different from the one set forth on the signature page hereto, nor has such Debtor been the subject of any merger or other corporate reorganization during the past five years. The name set forth on the signature page is the true and correct name of such Debtor. No Debtor will change its name or place of incorporation or organization or federal taxpayer identification number except upon 30 days’ prior written notice to the Bank.

3.3   Insurance .  The Debtors shall keep the tangible Collateral insured at all times against loss by theft, fire and other casualties. Said insurance shall be issued by a company rated A or better by Best and shall be in amounts sufficient to protect the Bank against any and all loss or damage to the Collateral. The policy or policies which evidence said insurance shall be delivered to the Bank upon request, shall contain a lender loss payable clause in favor of the Bank, shall name the Bank as an additional insured, as its interest may appear, shall not permit amendment, cancellation or termination without giving the Bank at least 30 days prior written notice thereof, and shall otherwise be in form and substance satisfactory to the Bank. Reimbursement under any liability insurance maintained by the Debtors pursuant to this Section 3.3 may be paid directly to the person who shall have incurred liability covered by such insurance. In the case of any loss to tangible Collateral, the proceeds shall be paid and used as follows:

(a)   if there is any Event of Default (whether before or after any event which caused any reimbursement under any insurance) has occurred and is continuing, such reimbursement shall be paid to the Bank for application to the Secured Liabilities.

(b)   if no Event of Default (whether before or after any event which caused any reimbursement under any insurance) has occurred and is continuing and such reimbursement is less than $250,000, the Debtors may use the proceeds of such insurance solely to repair or replace the property damaged, provided that if such repair or replacement cannot be accomplished within 180 days after such reimbursement amount is received or if the reimbursement amount is greater than $250,000, the proceeds of such insurance shall be paid to the Bank for application to the Secured Liabilities; and, provided, further, if the amount of such reimbursement is greater than $100,000, upon the request of the Bank, such insurance proceeds that are allowed to be used to repair or replace hereunder may be held by the Bank in a cash collateral account, and disbursed by the Bank as and when needed to pay for such allowed replacements and repairs (or applied to the Secured Obligations if Event of Default occurs).

The Debtors hereby appoint the Bank or any employee or agent of the Bank as Debtors' attorney-in-fact, which appointment is coupled with an interest and irrevocable, and, if such insurance claims or proceeds are required to be paid to the Bank, authorize the Bank or any employee or agent of the Bank, on behalf of the Debtors, to adjust and compromise any loss under said insurance and to endorse any check or draft payable to the Debtors in connection with returned or unearned premiums on said insurance or the proceeds of said insurance, and any amount so collected may be applied toward satisfaction of the Secured Liabilities, provided, however, that the Bank shall not be required hereunder so to act.

3.4   Taxes, Etc .  The Debtors will pay promptly, and within the time that they can be paid without interest or penalty, any taxes, assessments and similar imposts and charges, not being contested in good faith, which are now or hereafter may become a Lien upon any of the Collateral. If the Debtors fail to pay any such taxes, assessments or other imposts or charges in accordance with this Section, the Bank shall have the option to do so and the Debtors agree to repay forthwith all amounts so expended by the B