SECURITY AGREEMENT

1.1

For value received, the Debtor grants and creates the security constituted by this Security Agreement and agrees to the terms, covenants, agreements, conditions, provisos and other matters set out in this Security Agreement.

1.2

As general and continuing security for the Obligations (defined in clause 2.1 hereof), the Debtor hereby grants to the Secured Party a security interest in all presently owned and hereafter acquired personal property of the Debtor of whatsoever nature and kind and wheresoever situate and all proceeds thereof and therefrom, including Cash Proceeds and Proceeds, renewals thereof, Accessions thereto and substitutions therefor (all of which are herein collectively called the “ Collateral ”), including, without limiting the generality of the foregoing, all the presently owned or held and hereafter acquired right, title and interest of the Debtor in and to all Accounts, Goods (including all accessories, attachments, additions and Accessions thereto) Chattel Paper, Deposit accounts, Documents (whether negotiable or not), Instruments, Intangibles and General Intangibles, Investment Property, Money, Securities and Software, and all:

(a)

Inventory of whatsoever nature and kind and wheresoever situate;

(b)

Equipment (other than Inventory) of whatsoever nature and kind and wheresoever situate, including, without limitation, all machinery, tools, apparatus, plant, furniture, fixtures and vehicles of whatsoever nature and kind;

(c)

book accounts and book debts and all Accounts, debts, dues, claims, choses in action and demands of every nature and kind howsoever arising or secured, including letters of guarantee and advices of credit which are now due, owing or accruing or growing due to or owned by or which may

(d)

deeds, documents, writings, papers, books of account and other books relating to or being records of Debts, Chattel Paper or Documents or by which such are or may hereafter be secured, evidenced, acknowledged or made payable;

(e)

contractual rights and insurance claims and all goodwill, patents, trademarks, copyrights and other intellectual or industrial property;

(f)

monies other than trust monies lawfully belonging to others;

(g)

right, title and interest of the Debtor in and to leasehold property; and

(h)

goodwill of the Debtor.

1.3

In this Security Agreement:

1.3.1

any reference to “ Debtor ” and the personal pronoun “ it ” or “ its ” and any verb relating thereto and used therewith shall be read and construed as required by and in accordance with the context in which such words are used depending upon whether the Debtor is one or more corporations;

1.3.2

any reference to “ Northrim Encumbrances ” shall mean the indebtedness or claims arising under, or relating to, the Contract of Sale and Security Agreement between Debtor and Northrim Funding Services dated as of November 16, 2006;

1.3.3

any reference to “ Note ” shall mean that certain senior subordinated note made by Debtor to Secured Party of even date herewith;

1.3.4

any reference to “ Permitted Senior Encumbrances ” shall mean the Northrim Encumbrances and those encumbrances listed and described on Schedule A hereto.

1.3.5

any reference to “ Security Agreement ” shall, unless the context otherwise requires, be deemed a reference to this Security Agreement as amended from time to time by written agreement together with any schedules attached hereto pursuant to the provisions hereof;

1.3.6

any reference to “ UCC ” shall mean the Uniform Commercial Code of the State of Washington as amended from time to time, including any amendments thereto and any Act substituted therefor and amendments thereto;

1.3.7

any reference to “ Warrant ” shall mean that certain warrant issued by Debtor to Secured Party pursuant to the Note; and

1.3.8

the terms “ Goods ”, “ Chattel Paper ”, “ Documents ”, “ Equipment ”, “ Accounts ” “ Consumer Goods ”, “ Instruments ”, “ Intangibles ”, “ General Intangibles ”, “ Investment Property ”, “ Securities ”, “ Proceeds ”, “ Inventory ”, “ Software ”, “ Deposit accounts ” and “ Accessions ” and other words and expressions which have been defined in the UCC shall be interpreted in accordance with their respective meanings given in the UCC (either in the singular or plural thereof), as the context requires unless otherwise defined herein or unless the context otherwise requires.

2.1

The security constituted by this Security Agreement is general and continuing security for payment, performance and satisfaction of each and every obligation, indebtedness and liability of the Debtor to the Secured Party under the Note (including interest thereon), present or future, direct or indirect, absolute or contingent, matured or not, extended or renewed, wheresoever and howsoever incurred, and any ultimate unpaid balance thereof, and whether the Debtor be bound alone or with another or others and whether as principal or surety (all of which obligations, indebtedness and liabilities are herein collectively called the “ Obligations ”).

2.2

This Security Agreement and the security constituted hereby are in addition to and not in substitution for any other security or securities which the Secured Party may now or from time to time hold or take from the Debtor or from any other person whosoever.

3.1

The Debtor represents and warrants that:

3.1.1

this Security Agreement has been authorized, executed and delivered in accordance with resolutions of the directors of the Debtor and all other matters and things have been done and performed so as to authorize and make the execution and delivery of this Security Agreement, the creation of the security constituted hereby and the performance of the Debtor’s obligations hereunder legal, valid and binding;

3.1.2

the Collateral is genuine and is owned by the Debtor free of all security interests, mortgages, liens, claims, charges and other encumbrances (herein collectively called “ Encumbrances ”), save for the security constituted by this Security Agreement and the Permitted Senior Encumbrances; and

3.1.3

the Debtor has good and lawful authority to create the security in the Collateral constituted by this Security Agreement.

4.1

The Debtor covenants and agrees that at all times while this Security Agreement remains in effect the Debtor will:

4.1.1

defend the Collateral for the benefit of the Secured Party against the claims and demands of all other persons;

4.1.2

not, without the prior written consent of the Secured Party create or permit to exist any Encumbrance against any of the Collateral which ranks or could in any event rank in priority to or pari passu with the security constituted by this Security Agreement, save for (i) Permitted Senior Encumbrances and (ii) Encumbrances approved in writing by the Secured Party prior to creation or assumption;

4.1.3

fully and effectively maintain and keep maintained valid and effective the security constituted by this Security Agreement;

4.1.4

notify the Secured Party promptly of:

(a)

any change in the Debtor’s name, jurisdiction of organization or legal form; and

(b)

any material loss or damage to the Collateral not covered by insurance;

4.1.5

keep the Collateral generally in good order, condition and repair and not use any material amount of the Collateral in violation of the provisions of this Security Agreement or any other agreement relating to the Collateral or any policy insuring the Collateral or any applicable statute, law, by-law, rule, regulation or ordinance;

4.1.6

carry on and conduct the business of the Debtor in a commercially reasonable manner and so as to protect and preserve the Collateral and to keep, in accordance with generally accepted accounting principles, consistently applied, proper books of account for the Debtor’s business as well as accurate and complete records concerning the Collateral and, at the Secured Party’s request, mark any and all such records and the Collateral so as to indicate the security constituted by this Security Agreement;

4.1.7

forthwith pay when due:

(a)

all obligations to its employees and all obligations to others which relate to its employees when due, including, without limitation, all taxes, duties, levies, government fees, claims and dues related to its employees;

(b)

all taxes, assessments, rates, duties, levies, government fees, claims and dues lawfully levied, assessed or imposed upon it or the Collateral when

due, unless the Debtor shall in good faith contest its obligations so to pay and shall furnish such security as the Secured Party may require; and

(c)

all Encumbrances which rank or could in any event rank in priority to or pari passu with the security constituted by this Security Agreement, including the Permitted Senior Encumbrances;

4.1.8

Debtor, at its own cost and expense, will keep all of the Collateral comprising insurable property continuously insured in such amounts, with such responsible and reputable insurance companies or associations, against such risks, and in such form, as are generally consistent with the Debtor’s insurance policies in effect on the date hereof or as otherwise reasonably satisfactory to Secured Party. Promptly following the occurrence of any loss of, or damage to, any material part of the Collateral comprising insurable property, Debtor will give to Secured Party notice of such loss or damage;

4.1.9

forthwith pay when due all reasonable costs, charges, expenses and legal fees and disbursements which may be incurred by the Secured Party in:

(a)

inspecting the Collateral upon or after the occurrence of an Event of Default;

(b)

taking, recovering, keeping possession of and insuring the Collateral upon or after the occurrence of an Event of Default; and

(c)

all other actions and proceedings taken in connection with the preservation of the Collateral under the terms of this Security Agreement and the confirmation, perfection and enforcement of this Security Agreement; and

4.1.10

at the Secured Party’s request at any time and from time to time execute and deliver such further and other documents and instruments and do all other acts and things as the Secured Party reasonably requires in order to give effect to this Security Agreement or to confirm and perfect, and maintain perfection of, the security constituted by this Security Agreement in favor of the Secured Party.

5.1

Subject to the rights of the holders of the Permitted Senior Encumbrances, after default under this Security Agreement, the Secured Party may notify all or any debtors on any Account (“ Account Debtors ”) of the security constituted by this Security Agreement and may also direct such Account Debtors to make all payments on the Collateral to the Secured Party.

6.1

The Debtor hereby authorizes the Secured Party to file such financing statements and other documents and do such acts, matters and things, consistent with the terms and conditions of this Security Agreement, as the Secured Party may deem appropriate to perfect and continue the security constituted hereby, to protect and preserve the Collateral and to realize upon the security constituted hereby. The Debtor hereby irrevocably constitutes and appoints the Secured Party the true and lawful attorney of the Debtor, with full power of substitution to do any of the foregoing in the name of the Debtor whenever and wherever it may be deemed necessary or expedient by the Secured Party following the occurrence and during the continuation of an event of default under this Security Agreement.

6.2

If the Debtor fails to perform any of its Obligations hereunder, the Secured Party may, after written notice to Debtor, but shall not be obliged to, perform any or all of such Obligations without prejudice to any other rights and remedies of the Secured Party hereunder, and any payments made and any reasonable costs, charges, expenses and legal fees and disbursements incurred in connection therewith shall be payable by the Debtor to the Secured Party forthwith with interest until paid at the highest rate borne by any of the Obligations and such amounts shall form part of the Obligations and constitute a charge upon the Collateral in favor of the Secured Party prior to all claims subsequent t