HPL TECHNOLOGIES INC
EXHIBIT 10.2
<DOCUMENT>
<TYPE>EX-10.2
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<FILENAME>a2063526zex-10_2.htm
<DESCRIPTION>EXHIBIT 10.2
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<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="ki2571_exhibit_10.2"> </A>
<A NAME="toc_ki2571_1"> </A>
<BR></FONT><FONT SIZE=2><B>Exhibit&nbsp;10.2    <BR>  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ki2571_security_agreement"> </A>
<A NAME="toc_ki2571_2"> </A>
<BR></FONT><FONT SIZE=2><B>SECURITY AGREEMENT    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Security Agreement ("Agreement") is made this 21&nbsp;day of September, 2001 (the "Effective Date"), by and between Philip Gruebele, a California
resident ("Borrower"), and HPL Technologies,&nbsp;Inc., a Delaware corporation ("Lender"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement is entered into in connection with Lender's loan to Borrower of up to $2,745,133.49 (the "Loan") pursuant to a Secured Promissory Note dated the Effective Date (the
"Note"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Borrower
wishes to borrow up to the sum of $2,745,133.49 in order to satisfy federal income tax obligations in connection with Borrower's exercise of options to purchase 1,301,422
shares of Lender's common stock pursuant to a stock option agreement (the "Stock Option Agreement"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lender
is willing to provide the Loan to Borrower subject to certain terms and conditions described below. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lender
and Borrower agree as follows: </FONT></P>

<DL compact>
<DT><FONT SIZE=2>A.</FONT></DT><DD><FONT SIZE=2><B>Definitions.</B></FONT>
<DL compact>
<DT><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2><B>"Affiliate."&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Affiliate means, as applied to any Person, any other Person directly or indirectly controlling,
controlled by, or under common control with, that Person. For purposes of this definition, "control" as applied to any Person means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by contract, or otherwise.
<BR><BR></FONT></DD><DT><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2><B>"Collateral."&nbsp;&nbsp;</B></FONT><FONT SIZE=2>The Collateral shall consist of the 1,301,422 shares of Lender's common stock, par value $.001 per
share (the "Pledge Shares") plus any stock dividend, stock split, distribution of capital or other distribution or payment declared upon the Pledge Shares.
<BR><BR></FONT></DD><DT><FONT SIZE=2>3.</FONT></DT><DD><FONT SIZE=2><B>"Fair Market Value."&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Fair market value means the average closing price of Lender's common stock as reported on NASDAQ
for the 20 trading days immediately prior to an Event of Default.
<BR><BR></FONT></DD><DT><FONT SIZE=2>4.</FONT></DT><DD><FONT SIZE=2><B>"Obligations."&nbsp;&nbsp;</B></FONT><FONT SIZE=2>This Agreement secures the following: </FONT>
<DL compact>
<DT><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2>Borrower's
obligations under the Note;
<BR><BR></FONT></DD><DT><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2>the
repayment of (a)&nbsp;any amounts that Lender may advance or spend for the maintenance or preservation of the Collateral, and (b)&nbsp;any other expenditures that Lender
may make under the provisions of this Agreement or for the benefit of Borrower;
<BR><BR></FONT></DD><DT><FONT SIZE=2>(iii)</FONT></DT><DD><FONT SIZE=2>all
amounts owed under any modifications, renewals or extensions of any of the foregoing obligations; and
<BR><BR></FONT></DD><DT><FONT SIZE=2>(iv)</FONT></DT><DD><FONT SIZE=2>any
of the foregoing that arises after the filing of a petition by or against Borrower under the Bankruptcy Code, even if the obligations do not accrue because of the automatic
stay under Bankruptcy Code &sect;362 or otherwise. </FONT></DD></DL>
</DD></DL>
</DD></DL>
<UL>
<DL compact>
<DT><FONT SIZE=2>5.</FONT></DT><DD><FONT SIZE=2><B>"Person."&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Person means and includes natural persons, corporations, limited liability companies, limited partnerships,
general partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political
subdivisions thereof.
<BR><BR></FONT></DD><DT><FONT SIZE=2>6.</FONT></DT><DD><FONT SIZE=2><B>"UCC."&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Any term used in the Uniform Commercial Code ("ucc") and not defined in this Agreement has the meaning given
to the term in the ucc. </FONT></DD></DL>
</UL>
<BR>
<DL compact>
<DT><FONT SIZE=2>B.</FONT></DT><DD><FONT SIZE=2><B>The Loan and Terms of Payment.</B></FONT>
<DL compact>
<DT><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2><B>The Loan.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Subject to all of the terms and conditions of this Agreement, Lender will loan Borrower up to
$2,745,133.49, as requested by Borrower. </FONT></DD></DL>
</DD></DL>
<HR NOSHADE>
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<DT><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2><B>The Note.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>The loan will be evidenced by a Secured Promissory Note in the form attached hereto as </FONT> <FONT SIZE=2><I>Exhibit&nbsp;A</I></FONT><FONT SIZE=2>.
Borrower agrees to execute the Note in the amount advanced from time to time by the Lender. The Note shall be a
non-recourse Note, and Borrower shall have no liability for any amounts under the Note except to the extent of the Collateral.
<BR><BR></FONT></DD><DT><FONT SIZE=2>3.</FONT></DT><DD><FONT SIZE=2><B>Interest.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>The amount advanced by Lender under this Agreement shall bear interest on the unpaid principal balance at
an annual rate of 5.00%, compounded monthly. Interest shall be computed on the basis of a year of 365&nbsp;days for the actual number of days elapsed. Interest on the outstanding principal amount
shall be payable in arrears, and the first payment shall be due one year from the Effective Date, and thereafter, every three months in arrears. The final interest payment of all remaining accrued and
unpaid interest shall be due and payable on the Maturity Date, as defined below.
<BR><BR></FONT></DD><DT><FONT SIZE=2>4.</FONT></DT><DD><FONT SIZE=2><B>Payments.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>The aggregate unpaid principal amount advanced under the Note shall become due and payable on
September&nbsp;21, 2003, (the "Maturity Date"), together with any unpaid and accrued interest. Borrower may prepay the Note, without premium or penalty, in whole at any time or from time to time in
part, with accrued interest to the date of such prepayment on the amount prepaid. Any partial prepayments of the loan will be applied first to accrued interest and then to principal.
<BR><BR></FONT></DD><DT><FONT SIZE=2>5.</FONT></DT><DD><FONT SIZE=2><B>Use of Collateral to Repay Loan.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Subject to this Agreement, upon Borrower's request, Lender will release from its
control, the number of Pledge Shares necessary to fully repay the Loan and all accrued interest thereon. Borrower shall comply with the conditions set forth in Section&nbsp;B.6. to ensure that
Lender's security interest will not be released prior to Lender's receipt of indefeasible payment of the Loan.
<BR><BR></FONT></DD><DT><FONT SIZE=2>6.</FONT></DT><DD><FONT SIZE=2><B>Sale of Pledge Shares.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Subject to any restriction imposed by applicable law or otherwise, Borrower may effect a sale
of the Pledge Shares, or a portion thereof, to repay the Loan under the following conditions: </FONT>
<DL compact>
<DT><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2>Borrower
may sell or otherwise dispose of the Pledge Shares only through a broker who is a member of the NASD (the "Broker");
<BR><BR></FONT></DD><DT><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2>Borrower
shall assign to Lender the right to receive the proceeds from the sale of the Pledge Shares up to the principal amount of the Note and accrued interest then outstanding
(the "Proceeds") and shall instruct the Broker to transfer the Proceeds directly to a bank account designated by Lender;
<BR><BR></FONT></DD><DT><FONT SIZE=2>(iii)</FONT></DT><DD><FONT SIZE=2>prior
to the sale or disposition of the Pledge Shares, Borrower shall deliver to Lender an irrevocable written undertaking by the Broker to transfer the Proceeds directly to a
bank account designated by Lender; and
<BR><BR></FONT></DD><DT><FONT SIZE=2>(iv)</FONT></DT><DD><FONT SIZE=2>Borrower
shall notify Lender in writing prior to any sale or disposition of the Pledge Shares. </FONT></DD></DL>
</DD></DL>
</UL>
<BR>
<DL compact>
<DT><FONT SIZE=2>C.</FONT></DT><DD><FONT SIZE=2><B>Conditions; Term of Agreement.</B></FONT>
<DL compact>
<DT><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2><B>Conditions Precedent to Advancement of Funds Under Section&nbsp;B.1.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>The obligation of Lender to advance the funds
under Section&nbsp;B.1. of this Agreement is subject to the fulfillment, to the satisfaction of Lender and its counsel, of each of the following conditions: </FONT>
<DL compact>
<DT><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2>all
other documents and legal matters in connection with the transactions contemplated by the Stock Option Agreement and this Agreement shall have been delivered or executed or
recorded and shall be in form and substance satisfactory to Lender and its counsel;
<BR><BR></FONT></DD><DT><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2>the
representations and warranties contained in this Agreement, including those incorporated by reference, shall be true and correct in all respects on and as of the date </FONT></DD></DL>
</DD></DL>
</DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

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<UL>
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<P><FONT SIZE=2>of
the Note as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date); </FONT></P>

</UL>
<DL compact>
<DT><FONT SIZE=2>(iii)</FONT></DT><DD><FONT SIZE=2>no
Event of Default (as defined below) or event which with the giving of notice or passage of time would constitute an Event of Default shall have occurred and be continuing on
the date of the Note, nor shall either result from the making thereof; and
<BR><BR></FONT></DD><DT><FONT SIZE=2>(iv)</FONT></DT><DD><FONT SIZE=2>no
injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the making of such advance shall have been issued and remain in force by
any governmental authority against Borrower, Lender, or any of their Affiliates. </FONT></DD></DL>
</UL>
</UL>
<UL>
<DL compact>
<DT><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2><B>Term.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>This Agreement shall become effective upon the execution and delivery hereof by Borrower and Lender and shall
continue in full force and effect until all Obligations have been fully and finally discharged.
<BR><BR></FONT></DD><DT><FONT SIZE=2>3.</FONT></DT><DD><FONT SIZE=2><B>Effect of Termination.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Upon an Even of Default, but not later than the Maturity Date, all Obligations immediately
shall become due and payable without notice or demand. No termination of this Agreement, however, shall relieve or discharge Borrower of Borrower's duties, Obligations, or covenants hereunder, and
Lender's continuing security interest in the Collateral shall remain in effect until all Obligations have been fully and finally discharged. </FONT></DD></DL>
</UL>
<DL compact>
<DT><FONT SIZE=2>D.</FONT></DT><DD><FONT SIZE=2><B>Grant of Security Interest.</B></FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Borrower
grants a security interest in the Collateral to Lender to secure the payment or performance of the Obligations. </FONT></P>

<DL compact>
<DT><FONT SIZE=2>E.</FONT></DT><DD><FONT SIZE=2><B>Perfection of Security Interests.</B></FONT>
<DL compact>
<DT><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2><B>Filing of financing statement.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Borrower authorizes Lender to file&nbsp;a financing statement (the "Financing
Statement") describing the Collateral.
<BR><BR></FONT></DD><DT><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2><B>Possession.</B></FONT></DD></DL>
</DD></DL>
<UL>
<UL>

<P><FONT SIZE=2>Lender
shall have possession of the Collateral. </FONT></P>

</UL>
<DL compact>
<DT><FONT SIZE=2>3.</FONT></DT><DD><FONT SIZE=2><B>Control.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Borrower will cooperate with Lender in obtaining control with respect to the Collateral. Borrower will
execute an assignment separate from certificate in blank in the form attached hereto as Exhibit&nbsp;B. </FONT></DD></DL>
</UL>
<DL compact>
<DT><FONT SIZE=2>F.</FONT></DT><DD><FONT SIZE=2><B>Post-Closing Covenants and Rights Concerning the Collateral.</B></FONT>
<DL compact>
<DT><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2><B>Personal Property.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>The Collateral shall remain personal property at all times.
<BR><BR></FONT></DD><DT><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2><B>Limitations on Obligations Concerning Maintenance of Collateral.</B></FONT>
<DL compact>
<DT><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2><B>Risk of Loss.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Borrower has the risk of loss of the Collateral.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2><B>No Collection Obligation.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Lender has no duty to collect any income accruing on the Collateral or to preserve any
rights relating to the Collateral. However, nothing shall prevent Borrower from exercising its administrative rights to ensure its receipt of any stock dividend, stock split, distribution of capital
or
other distribution or payment declared on the Pledge Shares which shall then become part of the Collateral. </FONT></DD></DL>
</DD></DL>
</DD></DL>
<UL>
<DL compact>
<DT><FONT SIZE=2>3.</FONT></DT><DD><FONT SIZE=2><B>No Disposition of Collateral.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Except as set forth in Section&nbsp;B.6., Lender does not authorize, and Borrower may
not: </FONT>
<DL compact>
<DT><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2>offer
to sell, or sell any of the Collateral;
<BR><BR></FONT></DD><DT><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2>transfer
any rights in the Collateral; or
<BR><BR></FONT></DD><DT><FONT SIZE=2>(iii)</FONT></DT><DD><FONT SIZE=2>grant
any other security interest in the Collateral. </FONT></DD></DL>
</DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

<HR NOSHADE>
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<DL compact>
<DT><FONT SIZE=2>G.</FONT></DT><DD><FONT SIZE=2><B>Borrower's Representations and Warranties.  </B></FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Borrower warrants and represents that: </FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2><B>Title to and transfer of Collateral.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>It has rights in or the power to transfer the Collateral and its title to the
Collateral is free of all adverse claims, liens, security interests and restrictions on transfer or pledge except as created by this Agreement and the Stock Option Agreement.
<BR><BR></FONT></DD><DT><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2><B>Location and Name of Borrower.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Borrower's: </FONT>
<DL compact>
<DT><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2>residence
is located in the state of California; and
<BR><BR></FONT></DD><DT><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2>exact
legal name is as set forth in the first paragraph of this Agreement. </FONT></DD></DL>
</DD></DL>
</UL>
<UL>
<DL compact>
<DT><FONT SIZE=2>3.</FONT></DT><DD><FONT SIZE=2><B>Authority.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Borrower has the authority to enter into and perform this Agreement, the Note and related instruments
(collectively, the "Documents") and to execute all documents and perform all other acts as may be necessary to perform all of Borrower's obligations under the Documents.
<BR><BR></FONT></DD><DT><FONT SIZE=2>4.</FONT></DT><DD><FONT SIZE=2><B>Valid and Binding Obligation.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Each of the Documents is a valid and binding obligation of Borrower enforceable in
accordance with its respective terms.
<BR><BR></FONT></DD><DT><FONT SIZE=2>5.</FONT></DT><DD><FONT SIZE=2><B>No Approvals or Consents.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>No approval or consent not previously obtained by any person or entity is necessary in
connection with the execution of the Documents by Borrower or the performance of Borrower's obligations under the Documents. The consummation of the transactions contemplated by the Documents does not
and will not violate any statute, law, ordinance or regulation.
<BR><BR></FONT></DD><DT><FONT SIZE=2>6.</FONT></DT><DD><FONT SIZE=2><B>No Violation of Other Obligations.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Neither the Documents nor anything provided to be done under the Documents
violates or shall violate, or shall cause the acceleration of any debt or obligation of Borrower under, any contract, document, understanding, agreement or instrument to which Borrower is a party or
by which it may be bound. </FONT></DD></DL>
</UL>
<DL compact>
<DT><FONT SIZE=2>H.</FONT></DT><DD><FONT SIZE=2><B>Events of Default.</B></FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
occurrence of any of the following shall, at the option of Lender, constitute an event of default (each, an "Event of Default") under this Agreement: </FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2>Borrower
fails to pay any portion of the Obligations under this Agreement, whether of principal or interest (including any interest which, but for the provisions of the Bankruptcy
Code, would have accrued on such amounts) when due and payable or when declared due and payable;
<BR><BR></FONT></DD><DT><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2>Borrower's
failure to comply with any of the provisions, conditions, covenants, or agreements in, or the incorrectness of any representation or warranty contained in, this
Agreement, the Note or in any of the other Obligations;
<BR><BR></FONT></DD><DT><FONT SIZE=2>3.</FONT></DT><DD><FONT SIZE=2>If
there is a material impairment of the prospect of repayment of any portion of the Obligation owing to Lender or a material impairment of priority of Security Party's security
interest in the Collateral;
<BR><BR></FONT></DD><DT><FONT SIZE=2>4.</FONT></DT><DD><FONT SIZE=2>Transfer
or disposition of any of the Collateral or any interest in the Collateral, except as expressly permitted by this Agreement;
<BR><BR></FONT></DD><DT><FONT SIZE=2>5.</FONT></DT><DD><FONT SIZE=2>Attachment,
execution, or levy on any of the Collateral;
<BR><BR></FONT></DD><DT><FONT SIZE=2>6.</FONT></DT><DD><FONT SIZE=2>Borrower
voluntarily or involuntarily becoming subject to any proceeding under (a)&nbsp;the Bankruptcy Code or (b)&nbsp;any similar remedy under state statutory or common law;
or </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

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<DL compact>
<DT><FONT SIZE=2>7.</FONT></DT><DD><FONT SIZE=2>Borrower
shall fail to comply with, or become subject to any administrative or judicial proceeding under any federal, state or local (a)&nbsp;hazardous waste or environmental law,
(b)&nbsp;asset forfeiture or similar law which can result in the forfeiture of property, or (c)&nbsp;other law, where noncompliance may have any significant effect on the Collateral. </FONT></DD></DL>
</UL>
<DL compact>
<DT><FONT SIZE=2>I.</FONT></DT><DD><FONT SIZE=2><B>Default Costs</B></FONT><FONT SIZE=2>. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Should
an Event of Default occur, Borrower will pay to Lender all costs reasonably incurred by the Lender for the purpose of enforcing its rights hereunder, including: </FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2>costs
of foreclosure;
<BR><BR></FONT></DD><DT><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2>costs
of obtaining money damages; and
<BR><BR></FONT></DD><DT><FONT SIZE=2>3.</FONT></DT><DD><FONT SIZE=2>a
reasonable fee for the services of an attorney employed by Lender for any purpose related to this Agreement or the Obligations, including consultation, drafting documents, sending
notices or instituting, prosecuting or defending litigation or arbitration. </FONT></DD></DL>
</UL>
<DL compact>
<DT><FONT SIZE=2>J.</FONT></DT><DD><FONT SIZE=2><B>Remedies Upon Default.</B></FONT>
<DL compact>
<DT><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2><B>General.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Upon any Event of Default, Lender may pursue any remedy available at law (including those available under
the provisions of the UCC), or in equity to collect, enforce, or satisfy any Obligations then owing, whether by acceleration or otherwise.
<BR><BR></FONT></DD><DT><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2><B>Concurrent Remedies.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Upon an Event of Default, the Lender shall have the right to pursue any of the following
remedies separately, successively, or simultaneously: </FONT>
<DL compact>
<DT><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2>File
suit and obtain judgment, and, in conjunction with any action, Lender may seek any ancillary remedies provided by law, including levy of attachment and garnishment.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2>Take
possession of any Collateral if not already in its possession without demand and without legal process.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(iii)</FONT></DT><DD><FONT SIZE=2>Sell
or otherwise dispose of the Collateral at public or private sale in accordance with the UCC.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(iv)</FONT></DT><DD><FONT SIZE=2>Return
to its Treasury as Treasury stock, the number of Pledge Shares equal to the Fair Market Value of such Pledge Shares that equals the value of the Loan outstanding plus any
accrued but unpaid interest on the date that an Event of Default occurs. Lender shall return to Borrower the remaining Pledge Shares not returned to Treasury. </FONT></DD></DL>
</DD></DL>
</DD></DL>
<DL compact>
<DT><FONT SIZE=2>K.</FONT></DT><DD><FONT SIZE=2><B>Foreclosure Procedures.</B></FONT>
<DL compact>
<DT><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2><B>No Waiver.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>No delay or omission by the Lender to exercise any right or remedy accruing upon any Event of Default
shall (a)&nbsp;impair any right or remedy, (b)&nbsp;waive any default or operate as an acquiescence to the Event of Default, or (c)&nbsp;affect any subsequent default of the same or of a
different nature.
<BR><BR></FONT></DD><DT><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2><B>Notices.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Lender shall give Borrower such notice of any private or public sale as may be required by the UCC.
<BR><BR></FONT></DD><DT><FONT SIZE=2>3.</FONT></DT><DD><FONT SIZE=2><B>No Obligation to Pursue Others.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Lender has no obligation to attempt to satisfy the Obligations by collecting them
from any other person liable for them and Lender may release, modify or waive any collateral provided by any other person to secure any of the Obligations, all without affecting Lender's rights
against Borrower. Borrower waives any right it may have to require Lender to pursue any third person for any of the Obligations.
<BR><BR></FONT></DD><DT><FONT SIZE=2>4.</FONT></DT><DD><FONT SIZE=2><B>Compliance With Laws.&nbsp;&nbsp;</B></FONT><FONT SIZE=2> Lender may comply with any applicable state or federal law requirements in connection with a
disposition of the Collateral and compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. </FONT></DD></DL>
</DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

<HR NOSHADE>
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<UL>
<UL>
</UL>
<DL compact>
<DT><FONT SIZE=2>5.</FONT></DT><DD><FONT SIZE=2><B>Warranties.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Lender may sell the Collateral without giving any warranties as to the Collateral. Lender may
specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.
<BR><BR></FONT></DD><DT><FONT SIZE=2>6.</FONT></DT><DD><FONT SIZE=2><B>Return of Collateral to Treasury Stock.&nbsp;&nbsp;</B></FONT><FONT SIZE=2> In the event Lender returns any of the Pledge Shares to its Treasury as
Treasury Stock to satisfy the Obligations, Lender will credit all of the Obligations of Borrower and return the balance of the Pledge Shares to Borrower.
<BR><BR></FONT></DD><DT><FONT SIZE=2>7.</FONT></DT><DD><FONT SIZE=2><B>No Marshaling.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Lender has no obligation to marshal any assets in favor of Borrower, or against or in payment of: </FONT>
<DL compact>
<DT><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2>the
Note,
<BR><BR></FONT></DD><DT><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2>any
of the other Obligations, or
<BR><BR></FONT></DD><DT><FONT SIZE=2>(iii)</FONT></DT><DD><FONT SIZE=2>any
other obligation owed to Lender by Borrower or any other person. </FONT></DD></DL>
</DD></DL>
</UL>
<DL compact>
<DT><FONT SIZE=2>L.</FONT></DT><DD><FONT SIZE=2><B>Miscellaneous.</B></FONT>
<DL compact>
<DT><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2><B>Assignment.  </B></FONT>
<DL compact>
<DT><FONT SIZE=2><B>(i)</B></FONT></DT><DD><FONT SIZE=2><B> Binds Assignees.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>This Agreement shall bind and shall inure to the benefit of the heirs, legatees, executors, administrators, successors, and
assigns of Lender and shall bind all persons who become bound as a Borrower to this Agreement.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2><B>No Assignments by Borrower.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Lender does not consent to any assignment by Borrower except as expressly provided in
this Agreement.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(iii)</FONT></DT><DD><FONT SIZE=2><B>Lender Assignments.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Lender may assign its right or interest under this Agreement. If an assignment is made,
Borrower shall render performance under this Agreement to the assignee. Borrower waives and will not assert against any assignee any claims, defenses, or setoffs which Borrower could assert against
Lender except defenses which cannot be waived. </FONT></DD></DL>
</DD></DL>
</DD></DL>
<UL>
<DL compact>
<DT><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2><B>Severability.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Should any provision of this Agreement be found to be void, invalid or unenforceable by a court or
panel of arbitrators of competent jurisdiction, that finding shall only affect the provisions found to be void, invalid or unenforceable and shall not affect the remaining provisions of this
Agreement.
<BR><BR></FONT></DD><DT><FONT SIZE=2>3.</FONT></DT><DD><FONT SIZE=2><B>Notices.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Any notices required by this Agreement shall be deemed to be delivered when a record has been
(a)&nbsp;deposited in any United States postal box if postage is prepaid, and the notice properly addressed to the intended recipient, (b)&nbsp;received by telecopy, (c)&nbsp;received through
the Internet, and (d)&nbsp;when personally delivered. </FONT></DD></DL>
<UL>

<P><FONT SIZE=2>If
to Borrower: </FONT></P>

<UL>

<P><FONT SIZE=2>Philip
Gruebele<BR>
1821 Harris Avenue<BR>
San Jose, California 95124<BR>
Telephone: (408)&nbsp;205-8714 </FONT></P>

</UL>

<P><FONT SIZE=2>If
to Lender: </FONT></P>

<UL>

<P><FONT SIZE=2>HPL
Technologies,&nbsp;Inc.<BR>
2033 Gateway Place<BR>
San Jose, California 95110<BR>
Attn: David Lepejian, President<BR>
Telephone: (408)&nbsp;501-9235<BR>
Facsimile: (408)&nbsp;501-9240<BR>
e-mail: DYL@HPL.com </FONT></P>

</UL>
</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

<HR NOSHADE>
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<DT><FONT SIZE=2>4.</FONT></DT><DD><FONT SIZE=2><B>Headings.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Section headings used this Agreement are for convenience only. They are not a part of this Agreement and
shall not be used in construing it.
<BR><BR></FONT></DD><DT><FONT SIZE=2>5.</FONT></DT><DD><FONT SIZE=2><B>Governing Law.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>This Agreement is being executed and delivered and is intended to be performed in the State of
California and shall be construed and enforced in accordance with the laws of the State of California except to the extent that the UCC provides for the application of the law of any other state.
<BR><BR></FONT></DD><DT><FONT SIZE=2>6.</FONT></DT><DD><FONT SIZE=2><B>Venue, Jurisdiction; Waiver of Trial by Jury.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>EXCEPT TO THE EXTENT THAT THE UCC PROVIDES OTHERWISE, THE PARTIES AGREE
THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF SAN JOSE, STATE OF CALIFORNIA OR,
AT THE SOLE OPTION OF LENDER, IN ANY OTHER COURT
IN WHICH LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF BORROWER AND LENDER WAIVES, TO THE EXTENT PERMITTED
UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION L.6. BORROWER
AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE AGREEMENT OR THE NOTE OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER AND LENDER REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
<BR><BR></FONT></DD><DT><FONT SIZE=2>7.</FONT></DT><DD><FONT SIZE=2><B>Rules of Construction.</B></FONT>
<DL compact>
<DT><FONT SIZE=2>a.</FONT></DT><DD><FONT SIZE=2>No
reference to "proceeds" in this Agreement authorizes any sale, transfer, or other disposition of the Collateral by the Borrower.
<BR><BR></FONT></DD><DT><FONT SIZE=2>b.</FONT></DT><DD><FONT SIZE=2>"Includes"
and "including" are not limiting.
<BR><BR></FONT></DD><DT><FONT SIZE=2>c.</FONT></DT><DD><FONT SIZE=2>"Or"
is not exclusive.
<BR><BR></FONT></DD><DT><FONT SIZE=2>d.</FONT></DT><DD><FONT SIZE=2>"All"
includes "any" and "any" includes "all." </FONT></DD></DL>
</DD></DL>
</UL>
<BR>
<UL>
<DL compact>
<DT><FONT SIZE=2>8.</FONT></DT><DD><FONT SIZE=2><B>Integration and Modifications.</B></FONT>
<DL compact>
<DT><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2>This
Agreement is the entire agreement of the Borrower and Lender concerning its subject matter.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2>Any
modification to this Agreement must be made in writing and signed by the party adversely affected. </FONT></DD></DL>
</DD></DL>
</UL>
<UL>
<DL compact>
<DT><FONT SIZE=2>9.</FONT></DT><DD><FONT SIZE=2><B>Waiver.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Any party to this Agreement may waive the enforcement of any provision to the extent the provision is for its
benefit.
<BR><BR></FONT></DD><DT><FONT SIZE=2>10.</FONT></DT><DD><FONT SIZE=2><B>Further Assurances.&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Borrower agrees to execute any further documents, and to take any further actions, reasonably
requested by Lender to evidence or perfect the security interest granted herein, to maintain the first priority of the security interests, or to effectuate the rights granted to Lender herein. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
parties have signed this Agreement as of the day and year first above written. </FONT></P>

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<TD WIDTH="48%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>"Borrower"</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2><BR>
PHILIP GRUEBELE</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2><BR>
/s/&nbsp;</FONT><FONT SIZE=2>PHILIP GRUEBELE</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2><BR>
"Lender"</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2><BR>
HPL TECHNOLOGIES, INC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
By</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2><BR>
/s/&nbsp;</FONT><FONT SIZE=2>RITA RUBINSTEIN</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2><BR>
Its Vice President and Secretary</FONT><HR NOSHADE></TD>
</TR>
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<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

<HR NOSHADE>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="kk2571_exhibit_a_secured_promissory_note"> </A>
<A NAME="toc_kk2571_1"> </A>
<BR></FONT><FONT SIZE=2><B>EXHIBIT A    <BR>    <BR>    <U>SECURED PROMISSORY NOTE</U>    <BR>  </B></FONT></P>

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<TD WIDTH="49%"><FONT SIZE=2>$2,745,133.49</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="RIGHT"><FONT SIZE=2>San Jose, California<BR>
September 21, 2001</FONT></TD>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;FOR
VALUE RECEIVED, Philip Gruebele, a California resident ("Borrower"), hereby promises to pay to HPL TECHNOLOGIES,&nbsp;INC., a Delaware corporation ("Lender"), or order, the
principal sum of two million seven hundred forty five thousands one hundred thirty three Dollars and forty nine cents ($2,745,133.49) or so much as has been advanced to Borrower pursuant to the
Security Agreement (as defined below) (the "Loan Amount") on September&nbsp;21, 2003, (the "Maturity Date"), together with all accrued and unpaid interest at an annual rate of 5.00%. Interest shall
be computed on the basis of a year of 365&nbsp;days for the actual number of days elapsed. Interest on the outstanding principal amount shall be payable in arrears, on September&nbsp;21, 2002, and
thereafter, every three months in arrears. The final interest payment of all remaining accrued and unpaid interest shall be due and payable on the Maturity Date. All payments under this Note shall be
made in lawful currency of the United States of America in immediately available funds at 2033 Gateway Place, San Jose, California 95110. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Borrower
may prepay this Note, without premium or penalty, in whole and at any time or from time to time in part, with accrued interest to the date of such prepayment on the amount
prepaid. Any partial prepayments on this Note will be applied first to accrued interest and then to principal. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Borrower
waives diligence, presentment, protest and notice of protest, dishonor and nonpayment of this Note, and expressly agrees that this Note, or any payment under it, may be
extended and any security may be accepted, released or substituted by the holder from time to time without in any way affecting the liability of Borrower. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This
Note is issued pursuant to a Security Agreement dated as of this date between Borrower and Lender (the "Agreement"). The holder of this Note is entitled to the benefits of the
terms and conditions of the Agreement and is entitled to the rights in the Collateral (as defined in the Agreement). Upon the occurrence of any Event of Default specified in the Agreement, the entire
principal unpaid balance and all accrued interest shall immediately become due and payable without diligence, demand, presentment, protest or notice of any kind. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This
Note is a non-recourse Note, and Borrower shall have no liability for any amounts under this Note except to the extent of the Collateral pursuant to the Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Borrower
agrees to reimburse the holder of this Note for all costs of collection or enforcement of this Note, whether or not suit is filed (including, but not limited to, reasonable
attorneys' fees), incurred by the holder. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This
Note shall be governed by and construed in accordance with the laws, without regards to the laws as to choice or conflict of laws, of the State of California. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;EXECUTED
at San Jose, California. </FONT></P>

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<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>PHILIP GRUEBELE</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><BR><HR NOSHADE></TD>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="km2571_exhibit_b"> </A>
<A NAME="toc_km2571_1"> </A>
<BR></FONT><FONT SIZE=2><B>EXHIBIT B    <BR>  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="km2571_stock_assignment_separate_from_certificate"> </A>
<A NAME="toc_km2571_2"> </A>
<BR></FONT><FONT SIZE=2><B>STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B>FOR VALUE RECEIVED </B></FONT><FONT SIZE=2>and pursuant to that certain Security Agreement, dated September&nbsp;21, 2001, between
Philip Gruebele and HPL Technologies,&nbsp;Inc. (the "Agreement"), undersigned hereby sell, assign and transfer unto:PL </FONT></P>

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<TR VALIGN="BOTTOM">
<TD WIDTH="35%" ALIGN="CENTER"><FONT SIZE=1>PLEASE INSERT SOCIAL SECURITY OR<BR>
OTHER<BR>
IDENTIFYING NUMBER OF ASSIGNEE</FONT><HR NOSHADE></TD>
<TD WIDTH="65%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=2 ALIGN="CENTER"><BR><HR NOSHADE></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=2 ALIGN="CENTER"><BR><HR NOSHADE></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=2 ALIGN="CENTER"><BR><HR NOSHADE></TD>
</TR>
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<TD WIDTH="47%" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="53%" VALIGN="BOTTOM"><FONT SIZE=2>) Shares of the Common Stock of HPL Technologies, Inc</FONT></TD>
</TR>
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<TD WIDTH="10%" VALIGN="BOTTOM"><FONT SIZE=2>standing in</FONT></TD>
<TD WIDTH="39%" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="50%" VALIGN="BOTTOM"><FONT SIZE=2>name(s) on the books of said Corporation represented</FONT></TD>
</TR>
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<TD WIDTH="22%" VALIGN="BOTTOM"><FONT SIZE=2>by certificate(s) No.</FONT></TD>
<TD WIDTH="38%" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="40%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<P><FONT SIZE=2>herewith and do hereby irrevocably constitute and appoint Rita Rubinstein attorney to transfer said stock on the books of </FONT></P>

<P><FONT SIZE=2>such
Corporation with full power of substitution. </FONT></P>

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<TD WIDTH="7%" VALIGN="BOTTOM"><FONT SIZE=2>Dated</FONT></TD>
<TD WIDTH="45%" VALIGN="BOTTOM"><HR NOSHADE></TD>
<TD WIDTH="3%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="45%" ALIGN="RIGHT" VALIGN="BOTTOM"><HR NOSHADE></TD>
</TR>
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<P><FONT SIZE=1>THE SIGNATURE(S) ON THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) ON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERNATION OR ENLARGEMENT OR ANY CHANGE. </FONT></P>

<P><FONT SIZE=1>THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND ANY EXHIBITS THERETO. </FONT></P>

<P><FONT SIZE=1>THE SIGNATURE(S) OF THE ASSIGNOR(S) MUST BE GUARANTEED HEREON. </FONT></P>

<HR NOSHADE>
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<BR>
<P><br><A NAME="01PAL2571_3">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<UL>
<FONT SIZE=2><A HREF="#toc_ki2571_1">Exhibit 10.2</A></FONT><BR>
</UL>
<FONT SIZE=2><A HREF="#toc_ki2571_2">SECURITY AGREEMENT</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_kk2571_1">EXHIBIT A SECURED PROMISSORY NOTE</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_km2571_1">EXHIBIT B</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_km2571_2">STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE</A></FONT><BR>
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</TEXT>
</DOCUMENT>
