SECURITY AGREEMENT

SECURITY AGREEMENT

This Security Agreement (this “Agreement”) is entered into as of October 31, 2005 by and between (i) Exabyte Corporation, a Delaware corporation (“Grantor”), and (ii) the purchasers of Grantor’s 10% Secured Convertible Subordinated Notes due September 30, 2010 (the “Notes”) listed on the signature pages hereto and their successors in interest (collectively, “Secured Party”). Capitalized terms used and not defined herein have the respective meanings set forth in the Notes.

In consideration of Secured Party’s provision of financing in the principal amount of at least $8,000,000 and not more than $11,000,000 to Grantor pursuant to a purchase of the Notes, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor and Secured Party agree as follows:

(a)            As security for the obligations of Grantor under the Notes, this Agreement and the related security documents (collectively, the “Obligations”), Grantor hereby grants to Secured Party a security interest in all of Grantor’s assets and property, whether now owned or existing or hereafter acquired or arising regardless of where located, including, without limitation, the collateral set forth on Exhibit A to this Agreement (collectively, the “Collateral”).

(b)            This Agreement and the security interests granted in this Agreement shall continue and be in full force and effect until the Obligations have been paid in full in cash or are otherwise no longer outstanding.

(c)            Grantor hereby irrevocably authorizes Secured Party to file any financing statement executed by Grantor pursuant to the Agreement. Until the termination of this Agreement, Grantor shall perform any and all steps reasonably requested by Secured Party to perfect, maintain and protect Secured Party’s security interest in the Collateral, including, without limitation, executing and filing financing and continuation statements in form and substance reasonably satisfactory to Secured Party and taking such steps as deemed necessary by Secured Party to protect Secured Party’s interest in the Collateral. Secured Party may file one or more financing statements disclosing Secured Party’s security interest under this Agreement without Grantor’s signature appearing on such financing statements and Grantor shall pay the costs of, or incidental to, any recording or filing of any financing statements concerning the Collateral. Grantor agrees that a carbon, photographic or other reproduction of this Agreement or of a financing statement is sufficient as a financing statement.

(d)            Grantor shall pay or cause to be paid all material taxes, assessments and governmental charges levied or assessed or imposed upon or with respect to the Collateral or any part thereof; provided , however , that no such taxes, assessments or governmental charges need be paid during such period as they are being contested in good faith by Grantor, in appropriate proceedings promptly commenced and diligently

prosecuted, if adequate reserves in accordance with generally accepted accounting principles have been set aside on Grantor’s books.

(e)            In order to protect or perfect the security interest which Secured Party is granted under this Agreement, Secured Party may, in its sole discretion, discharge any lien or encumbrance or bond on the Collateral, pay any insurance, maintain guards, pay any service bureau and obtain any record and charge the same to Grantor’s account as an advance under this Agreement and part of the Obligations, payable on demand and secured by the Collateral.

(f)           Secured Party shall have no duty of care with respect to the Collateral, except that Secured Party shall exercise reasonable care with respect to the Collateral in Secured Party’s custody. Secured Party shall be deemed to have exercised reasonable care if such property is accorded treatment substantially equal to that which Secured Party accords its own property, or if Secured Party takes such action with respect to the Collateral as Grantor shall request in writing. No failure to comply with any such request of Grantor nor any omission to do any such act requested by Grantor shall be deemed a failure to exercise reasonable care, nor shall Secured Party’s failure to take steps to preserve rights against any parties or property be deemed to be failure to exercise reasonable care with respect to the Collateral in Secured Party’s custody.

2.              Set-Off and Related Matters . All moneys, securities and other properties of Grantor and the proceeds thereof now or hereafter held or received by Secured Party from or for the account of Grantor, including any and all deposits (general or special), account balances and credits of Grantor with Secured Party at any time existing, shall be deemed Collateral under this Agreement and held as security for the Obligations and may be set-off and applied against any Obligations. The rights given to Secured Party under this Agreement are cumulative with Secured Party’s other rights and remedies, including other rights of set-off. Secured Party will promptly notify Grantor of Secured Party’s receipt of such funds for application against the Obligations, but failure to do so will not affect the validity or enforceability of any such application.

3.             Secured Party as Grantor’s Attorney . Upon the occurrence of an Event of Default, Grantor hereby appoints Secured Party, or any other person or entity whom Secured Party may designate, as Grantor’s lawful attorney, with power to: (a) endorse Grantor’s name on any checks or other forms of payment or security; (b) sign Grantor’s name on any invoice or bill of lading for any account or drafts against account debtors, (c) make, settle and adjust all claims under Grantor’s insurance policies; (d) settle disputes and adjust disputes and claims about the accounts directly with account debtors, for amounts and on terms Secured Party determines reasonable; (e) transfer the Collateral into the name of Secured Party or a third party as permitted under applicable law, and (f) do all other things necessary to perfect Secured Party’s security interest in the Collateral, to preserve and protect the Collateral and to otherwise carry out this Agreement. All such acts shall be at the cost of Grantor, and Grantor hereby ratifies and approves all acts of such attorney. Neither Secured Party nor the attorney will be liable for any acts or omissions or for any error of judgment or mistake of fact or law. This

power, being coupled with an interest, is irrevocable until the Obligations have been fully satisfied and this Agreement terminated. Grantor agrees to execute and deliver promptly to Secured Party all instruments necessary or appropriate, as determined in Secured Party’s sole discretion, to further Secured Party’s exercise of the rights and powers granted it in this Section 3.

4.             Examination of Collateral and Records . Secured Party shall, upon reasonable prior written notice to Grantor and during normal business hours, have access to and the right to examine and inspect the Collateral and all of Grantor’s books and records relating to the Collateral. Notwithstanding the foregoing, upon the occurrence of an Event of Default, Secured Party shall at all times thereafter have access to and the right to examine and inspect the Collateral and all of Grantor’s books and records relating thereto.

5.             Representations and Warranties . Grantor represents and warrants that:

(a)            Except as set forth on Exhibit B hereto, Grantor has good, indefeasible and merchantable title to and ownership of the Collateral, free and clear of all liens, mortgages, charges, security interests and other encumbrances.

(b)          Grantor has executed financing statements, containing sufficient legal descriptions of the Collateral and otherwise in form and substance sufficient for filing in every governmental, municipal or other office in every jurisdiction necessary to perfect Secured Party’s security interest in the Collateral. When the financing statements or security agreements with respect thereto have been filed for record in all public offices wherein such filing is necessary to perfect, fully preserve and protect the lien of Secured Party hereunder against creditors, Secured Party shall have a perfected security interest in the Collateral specifically described therein.

(c)           Except as set forth on Exhibit B, the security interest in the Collateral granted to Secured Party hereunder has priority over all other security interests granted by Grantor in the Collateral.

(d)            Other than Grantor’s current name, Grantor has not used any names during the last five years (either as a company name, trade name, assumed name, business name, fictitious name or otherwise), and Grantor has no present plans to use any such names.

(e)            The Company’s is duly incorporated and validly existing as a corporation in good standing under the laws of the State of Delaware. The Company’s federal employer identification number is 84-0988566.

6.             Covenants . Until the Obligations are fully paid, performed and satisfied and this Agreement is terminated, Grantor covenants that it shall:

(a)            Defend in good faith the Collateral against the claims and demands of all persons;

(b)            Advise Secured Party in writing, at least thirty (30) days prior thereto, of any change in Grantor’s jurisdiction of incorporation, principal place of business, registered office or other places of business, or the opening of any new places of business, or any change in Grantor’s name or the adoption by Grantor of trade names, assumed names or fictitious names, and, in such event, Grantor shall promptly execute and deliver to Secured Party (and Grantor agrees that Secured Party may execute and deliver the same as Grantor’s irrevocable attorney-in-fact) new financing statements describing the Collateral specified in this Agreement and otherwise in form and substance sufficient for recordation wherever necessary or appropriate, as determined in Secured Party’s sole discretion, to perfect or continue perfected Secured Party’