Exhibit 10.2

SECURITY AGREEMENT

     This SECURITY AGREEMENT, dated as of July 16, 2008 (this “Agreement”), is
among Valcent Products Inc., corporation organized under the laws of Alberta,
Canada (the “Company”), all of the subsidiaries of the Company (such
subsidiaries, the “Guarantors” and together with the Company, the “Debtors”),
and Platinum Long Term Growth VI, LLC (together with its successors and assigns,
the “Secured Party”), as collateral agent for the investors identified in the
Purchase Agreement (the “Lenders”), which Lenders are the holders of the
Company’s Senior Secured Convertible Promissory Notes, issued on July 16, 2008
in the aggregate original principal amount of $2,428,160 (the “Notes”).

W I T N E S S E T H:

     WHEREAS, pursuant to the Notes, the Lenders have agreed to extend the loans
to the Company evidenced by the Notes;

     WHEREAS, pursuant to a certain Guaranty, dated as of the date hereof (the
“Guaranty”), the Guarantors have jointly and severally agreed to guarantee and
act as surety for payment of such Notes; and

     WHEREAS, in order to induce the Secured Party to extend the loans evidenced
by the Notes, each Debtor has agreed to execute and deliver to the Secured Party
this Agreement and to grant the Secured Party a security interest, for the
benefit of the Lenders, in certain property of such Debtor to secure the prompt
payment, performance and discharge in full of all of the Company’s obligations
under the Notes and the Guarantors’ obligations under the Guaranty.

     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 (including
the terms “account”, “chattel paper”, “commercial tort claim”, “deposit
account”, “document”, “equipment”, “fixtures”, “general intangibles”, “goods”,
“instruments”, “inventory”, “investment property”, “letter-of-credit rights”,
“proceeds”, “securities” 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 Party is granted
a security interest by this Agreement and which shall include the following
personal property of the Debtors, 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

 

 

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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 any Debtor’s businesses and all improvements thereto; and (B)
all inventory, including all materials, work in process and finished goods;

(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 any 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;

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

 

 

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

     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 Guarantor, including, without limitation,
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 any 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 9408 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.

 

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(c)     ‘’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 Secured Party may reasonably request.

(d)     “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, of any Debtor
to the Secured Party under this Agreement, the Notes, the Purchase Agreement,
the Guaranty 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 the Secured Party 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 Notes and the loans
extended pursuant thereto; (ii) any and all other fees, indemnities, costs,
obligations and liabilities of the Debtors from time to time under or in
connection with this Agreement, the Notes, the Purchase Agreement, the Guaranty
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 any Debtor.

(e)     “Organizational Documents” means, with respect to any Debtor, the
documents by which such Debtor 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 such Debtor (such as bylaws, a partnership agreement or an
operating, limited liability or members agreement).

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

(g)     “Purchase Agreement” means the Note and Warrant Purchase Agreement,
dated as of the date hereof, between the Company and the Lenders.

(h)     “UCC” means the Uniform Commercial Code of the State of New York and/or
any other applicable law of any state or states which have 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

 

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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
Lenders to extend the loans as evidenced by the Notes and to secure the complete
and timely payment, performance and discharge in full, as the case may be, of
all of the Obligations, each Debtor hereby unconditionally and irrevocably
pledges, grants and hypothecates to the Secured Party a security interest in and
to, a lien upon, and a right of set-off against, all of its respective right,
title and interest of whatsoever kind and nature in and. to the Collateral (a
“Security Interest” and collectively, the “Security Interests”). To the extent
there is at any time more than one Secured Party hereunder, the Collateral will
secure the Obligations to the Secured Party on a pari passu basis, based on the
then outstanding amount of such Obligations.

3.     Delivery of Certain Collateral. Contemporaneously with or prior to the
execution of this Agreement, each Debtor shall deliver or cause to be delivered
to the Secured Party (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 Debtors
are, contemporaneously with the execution hereof, delivering to the Secured
Party, or have previously delivered to the Secured Party, a true and correct
copy of each Organizational Document governing any of the Pledged Securities.

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

(a)     Each 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 each Debtor of this Agreement and the filings contemplated therein have been
duly authorized by all necessary action on the part of such Debtor and no
further action is required by such Debtor. This Agreement has been duly executed
by each Debtor. This Agreement constitutes the legal, valid and binding
obligation of each Debtor, enforceable against each 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.

(b)     The Debtors have no place of business or offices where their respective
books of account and records are kept (other than temporarily at the offices of
their attorneys or accountants) or places where Collateral is stored or located,
except as set

 

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forth on Schedule A attached hereto. The Debtors own of record, subject only to
Permitted Liens (as defined in the Notes), the real property where such
Collateral is located, as identified on Schedule A. 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 Debtors are the sole owners of the Collateral, free and
clear of any liens, security interests, encumbrances, rights or claims, and are
fully authorized to grant the Security Interests. Except with respect to
Permitted Liens and except as set forth on Schedule B attached hereto, 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 Party pursuant to this Agreement) covering or affecting any
of the Collateral. Except with respect to Permitted Liens, except as set forth
on Schedule B attached hereto and except pursuant to this Agreement, as long as
this Agreement shall be in effect, the Debtors shall not execute and shall not
knowingly permit to be on file in any such office or agency any other financing
statement or other similar document or instrument (except to the extent filed or
recorded in favor of the Secured Party pursuant to the terms of this Agreement).

(d)     No written claim has been received by any Debtor that any Collateral or
Debtor’s use of any Collateral violates the rights of any third party. There has
been no adverse decision to any Debtor’s claim of ownership rights in or
exclusive rights to use the Collateral in any jurisdiction or to any 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 any
Debtor, threatened before any court, judicial body, administrative or regulatory
agency, arbitrator or other governmental authority.

(e)     Each Debtor shall at all times maintain its books of account and records
relating to the Collateral at its principal place of business (except when
temporarily kept at the offices of its attorneys or accountants) 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 Party 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 Party, subject to Permitted Liens, a valid,
perfected and continuing perfected first priority lien in the Collateral.

(f)     This Agreement creates in favor of the Secured Party a valid, security
interest in the Collateral, subject only to Permitted Liens (as defined in the
Notes), securing the payment and performance of the Obligations. Upon making the
filings described in the immediately following paragraph, all security interests
created

 

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hereunder in any Collateral which may be perfected by filing UCC financing
statements shall have been duly perfected. Except for the filing of the UCC
financing statements referred to in the immediately following paragraph, the
recordation of the Intellectual Property Security Agreement (as defined below)
with respect to copyrights and copyright applications in the United States
Copyright Office referred to in paragraph (P), 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 and the recordation of said Intellectual Property Security
Agreement, 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 Secured Party hereunder.

(g)     Each Debtor hereby authorizes the Secured Party 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, which UCC financing statement may describe the collateral as “All assets”.

(h)     The execution, delivery and performance of this Agreement by the Debtors
do not (i) violate any of the provisions of any Organizational Documents of any
Debtor or any judgment, decree, order or award of any court, governmental body
or arbitrator or any applicable law, rule or regulation applicable to any 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 any Debtor’s debt or otherwise) or other understanding to
which any Debtor is a party or by which any property or asset of any Debtor is
bound or affected. If any, all required consents (including, without limitation,
from stockholders or creditors of any Debtor) necessary for any 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 in and to the Guarantors and the other subsidiaries of the Company,
and represent all capital stock and other equity interests owned, directly or
indirectly, by the Company. All of the Pledged Securities are validly issued,
fully paid and nonassessable, and the Company 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. Each Debtor shall cause the pledge and security
interest of the Secured Party to be duly noted in its corporate books and
records.

 

 

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(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.

(k)     Except for Permitted Liens (as defined in the Notes), each Debtor shall
at all times maintain the liens and Security Interests provided for hereunder as
valid and perfected first priority liens and security interests in the
Collateral in favor of the Secured Party until this Agreement and the Security
Interests hereunder shall be terminated pursuant to Section 14 hereof. Each
Debtor hereby agrees to use commercially reasonable efforts to defend the same
against the claims of any and all persons and entities and to safeguard and
protect all Collateral for the account of the Secured Party. At the reasonable
request of the Secured Party, each Debtor will sign and deliver to the Secured
Party at any time or from time to time one or more financing statements pursuant
to the UCC in form reasonably satisfactory to the Secured Party and will pay the
cost of filing the same in all public offices wherever filing is necessary to
effect the rights and obligations provided for herein. Without limiting the
generality of the foregoing, each Debtor shall pay all fees, taxes and other
amounts necessary to maintain the Collateral and the Security Interests
hereunder, and each Debtor shall obtain and furnish to the Secured Party from
time to time, upon demand, such releases and/or subordinations of claims and
liens which may be required to maintain in accordance with this Agreement the
priority of the Security Interests hereunder.

(l)     Except for Permitted Liens (as defined in the Notes), no Debtor will
transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose of
any of the Collateral (except for sub-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 the Secured Party.

(m)     Each 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)     Except as provided in Schedule I, each Debtor shall maintain with
financially sound and reputable insurers, insurance with respect to the
Collateral, including Collateral hereafter acquired, against loss or damage of
the kinds and in the amounts customarily insured against by entities of
established reputation having similar properties similarly situated and in such
amounts as are customarily carried under similar circumstances by other such
entities and otherwise as is prudent for entities engaged in similar businesses
but in any event sufficient to cover the full replacement cost thereof. Each
Debtor shall cause each insurance policy issued in connection herewith to
provide, and the insurer issuing such policy to certify to the Secured Patty
that (a) the Secured Party will be named as lender loss payee and additional
insured under each such insurance policy; (b) if such insurance be

 

 

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proposed to be cancelled or materially changed for any reason whatsoever, such
insurer will promptly notify the Secured Party and such cancellation or change
shall not be effective as to the Secured Party for at least thirty (30) days
after receipt by the Secured Party of such notice, unless the effect of such
change is to extend or increase coverage under the policy; and (c) the Secured
Party will have the right (but no obligation) at its election to remedy any
default in the payment of premiums within thirty (30) days of notice from the
insurer of such default. If no Event of Default (as defined in the Notes) exists
and if the proceeds arising out of any claim or series of related claims do not
exceed $100,000, loss payments in each instance will be applied by the
applicable Debtor to the repair and/or replacement of property with respect to
which the loss was incurred to the extent reasonably feasible, and any loss
payments or the balance thereof remaining, to the extent not so applied, shall
be payable to the applicable Debtor, provided, however, that payments received
by any Debtor after an Event of Default occurs and is continuing or in excess of
$1 00,000 for any occurrence or series of related occurrences shall be paid to
the Secured Party and, if received by such Debtor, shall be held in trust for
the Secured Party and promptly paid over to the Secured Party unless otherwise
directed in writing by the Secured Party. Copies of such policies or the related
certificates, in each case, naming the Secured Party as lender loss payee and
additional insured shall be delivered to the Secured Party at least annually and
at the time any new policy of insurance is issued.

(o)     Each Debtor shall, within ten (10) days of obtaining knowledge thereof,
advise the Secured Party 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 Party’s
security interest therein.

(p)     Each Debtor shall promptly execute and deliver to the Secured Party such
further deeds, mortgages, assignments, security agreements, financing statements
or other instruments, documents, certificates and assurances and take such
further action as the Secured Party may from time to time request as necessary
to perfect, protect or enforce the Secured Party’s security interest in the
Collateral (including, without limitation, the execution and delivery of a
separate security agreement with respect to each Debtor’s Intellectual Property
(“Intellectual Property Security Agreement”) to be delivered on the date hereof)
in which the Secured Party has been granted a security interest hereunder,
substantially in a form reasonably acceptable to the Secured Party.

(q)     Each Debtor shall permit the Secured Party and its representatives and
agents reasonable access to inspect the Collateral during normal business hours,
upon reasonable prior notice and without undue interference with such Debtor’s
business operations, and to make copies of records pertaining to the Collateral
as may be reasonably requested by the Secured Party from time to time.

 

 

 

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(r)     Each 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)     Each Debtor shall promptly notify the Secured Party 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
such Debtor that would have a material adverse effect on the value of the
Collateral, the Security Interest or the rights and remedies of the Secured
Party hereunder.

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

(u)     The Debtors shall at all times preserve and keep in full force and
effect their respective valid existence and good standing and any rights and
franchises material to their respective businesses.

(v)     No Debtor will 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 Party of such
change and, at the time of such written notification, such 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 and except for Permitted Liens
(as defined in the Notes), no Debtor may 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 Secured Party, which
shall not be unreasonably withheld.

(x)     No Debtor may relocate its chief executive office to a new location
without providing 30 days’ prior written notification thereof to the Secured
Party and so long as. at the time of such written notification, such 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.

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

(z)     (i) The actual name of each Debtor is the name set forth in Schedule D
attached hereto; (ii) no Debtor has any trade names except as set forth on
Schedule E attached hereto; (iii) no Debtor has used any name other than that
stated in the

 

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preamble hereto or as set forth on Schedule E for the preceding five years; and
(iv) no entity has merged into any Debtor or been acquired by any 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 applicable Debtor shall deliver such Collateral to the Secured Party.

(bb)   Each Debtor, in its capacity as issuer, hereby agrees to comply with any
and all reasonable orders and instructions of Secured Party regarding the
Pledged Interests consistent with the terms of this Agreement without the
further consent of any Debtor as contemplated by Section 8-106 (or any successor
section) of the UCC. Further, each 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)   Each Debtor shall cause all tangible chattel paper constituting
Collateral to be delivered to the Secured Party, 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, the applicable
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, the applicable Debtor shall cause such an account control agreement,
in form and substance in each case reasonably satisfactory to the Secured Party,
to be entered into and delivered to the Secured Party.

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

(ff)   To the extent that any Collateral is in the possession of any third
party, the applicable Debtor shall join with the Secured Party in notifying such
third party of the Secured Party’s security interest in such Collateral and
shall endeavor to obtain an acknowledgement and agreement from such third party
with respect to the Collateral, in form and substance reasonably satisfactory to
the Secured Party.

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

 

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Agreement, with such writing to be in form and substance reasonably satisfactory
to the Secured Party.

(hh) Each Debtor shall promptly provide written notice to the Secured Party 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 Secured Party an assignment of claims for such
accounts and cooperate with the Secured Party in taking any other steps required
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)    Each Debtor shall cause each subsidiary of such Debtor with operations
or material operations (which, if in doubt, shall be in the sole determination
of the Secured Party) 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 Debtors. As of the date hereof, the each Debtor
represents and warrants that none of its subsidiaries have any operations or
material assets (other than the Guarantors). 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 Secured Party may reasonably request. Upon
delivery of the foregoing to the Secured Party, the Additional Debtor shall be
and become a party to this Agreement with the same rights and obligations as the
Debtors, 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 “Debtors” shall be deemed to include each Additional Debtor.

(jj)     Each Debtor shall vote the Pledged Securities to comply with the
covenants and agreements set forth herein and in the Notes and the other
Transaction Documents (as defined in the Purchase Agreement).

(kk)   Each Debtor shall register the pledge of the applicable Pledged
Securities on the books of such Debtor. Each Debtor shall notify each issuer of
Pledged Securities to register the pledge of the applicable Pledged Securities
in the name of the Secured Party on the books of such issuer. Further, except
with respect to certificated securities delivered to the Secured Party, the
applicable Debtor shall endeavor to deliver to the Secured Party 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,

 

 

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which acknowledgement shall confirm that: (a) it has registered the pledge on
its books and records; and (b) at any time directed by the Secured Party 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 the
Secured Party, will take such steps as may be necessary to effect the transfer,
and will comply with all other reasonable instructions of the Secured Party
regarding such Pledged Securities without the further consent of the applicable
Debtor.

(ll)    In the event that, upon an occurrence of an Event of Default, the
Secured Party 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, each Debtor shall, to the extent applicable: (i)
deliver to the Secured Party 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 such 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 such 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 the Secured Party and allow the Transferee or Secured
Party to continue the business of such Debtor and its direct and indirect
subsidiaries.

(mm) Without limiting the generality of the other obligations of the Debtors
hereunder, each 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 Secured Party notice whenever it acquires (whether absolutely or by license)
or creates any additional material Intellectual Property.

(nn)   Each Debtor will from time to time, at the joint and several expense of
the Debtors, 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 Secured Party may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Secured Party to exercise and enforce its 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 any of the Debtors as of the date hereof. Schedule F lists all material
licenses in favor of any Debtor for the use of any patents, trademarks,
copyrights and domain names as of the date hereof. All material patents and
trademarks of the Debtors have

 

 

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been duly recorded at the United States Patent and Trademark Office and all
material copyrights of the Debtors have been duly recorded at the United States
Copyright Office.

(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 the Secured
Party’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 any Debtor is subject or to
which any Debtor is party.

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

(a)     The occurrence of an Event of Default under the Notes;

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

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

7.     Duty To Hold In Trust.

(a)     Upon the occurrence and during the continuance of any Event of Default
and at any time thereafter, each Debtor shall, upon receipt of any revenue,
income, dividend, interest or other sums subject to the Security Interests,
whether payable pursuant to the Notes 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 Party and shall forthwith
endorse and transfer any such sums or instruments, or both, to the Secured
Party.

(b)     If any 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

 

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dividend, or any distribution in connection with any recapitalization,
reclassification or increase or reduction of capital, or issued in connection
with any reorganization of such 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),
such Debtor agrees to (i) accept the same as the agent of the Secured Party;
(ii) hold the same in trust on behalf of and for the benefit of the Secured
Party; and (iii) deliver any and all certificates or instruments evidencing the
same to the Secured Party on or before the close of business on the fifth
business day following the receipt thereof by such Debtor, in the exact form
received together with the Necessary Endorsements, to be held by the Secured
Party 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 Party shall have the right to exercise all of the remedies conferred
hereunder and under the Notes, and the Secured Party shall have all the rights
and remedies of a secured party under the UCC. Without limitation, the Secured
Party shall have the following rights and powers:

(i)     The Secured Party shall have the right to take possession of the
Collateral and, for that purpose, enter by reasonable means, 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 each Debtor shall assemble
the Collateral and make it available to the Secured Party at places which the
Secured Party shall reasonably select, whether at such Debtor’s premises or
elsewhere, and make reasonably available to the Secured Party, without rent, all
of such Debtor’s respective premises and facilities for the purpose of the
Secured Party taking possession of, removing or putting the Collateral in
saleable or disposable form.

(ii)     Upon written notice to the Debtors by the Secured Party, all rights of
each Debtor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise and all rights of each Debtor to receive the
dividends and interest which it would otherwise be authorized to receive and
retain, shall cease. Upon such notice, the Secured Party shall have the right to
receive any interest, cash dividends or other payments on the Collateral and, at
the option of the Secured Party, to exercise in the Secured Party’s discretion
all voting rights pertaining thereto. Without limiting the generality of the
foregoing, the Secured Party shall have the right (but not the obligation) to
exercise all rights with respect to the Collateral as if 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

 

 

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concerning or involving the Collateral or any Debtor or any of its direct or
indirect subsidiaries.

(iii)   The Secured Party 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
commercially reasonable terms and conditions. Upon each such sale, lease,
assignment or other transfer of Collateral, the Secured party, 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 any Debtor, which are hereby waived and released.

(iv)    The Secured Party 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 Secured Party, and to enforce the Debtors’ rights
against such account debtors and obligors.

(v)     The Secured Party, 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 Secured Party, or its designee.

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

(b)     The Secured Party 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 Secured Party may sell the Collateral without giving any warranties and may
specifically disclaim such warranties. In addition, each Debtor waives any and
all rights that it may have to a judicial hearing in advance of the enforcement
of any of the Secured Party’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.

(c)     For the purpose of enabling the Secured Party to further exercise rights
and remedies under this Section 8 or elsewhere provided by agreement or
applicable law, each Debtor hereby grants to the Secured Party, an irrevocable,
nonexclusive license (exercisable without payment of royalty or other
compensation to such Debtor) to use, license or sublicense following an Event of
Default, any Intellectual Property now owned or hereafter acquired by such
Debtor, and wherever the same may be located, and including in such license
access to all media in which

 

 

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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 reasonable and actually incurred expenses of retaking, holding, storing,
processing and preparing for sale, selling, and the like (including, without
limitation, any taxes, fees and other costs reasonably incurred in connection
therewith) of the Collateral, to the reasonable attorneys’ fees and expenses
incurred by the Secured Party in enforcing the Secured Party’s rights hereunder
and in connection with collecting, storing and disposing of the Collateral, and
then to satisfaction of the Obligations, and to the payment of any other amounts
required by applicable law, after which the Secured Party shall pay to the
applicable 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 Party is legally entitled, the Debtors 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 Party to
collect such deficiency. To the extent permitted by applicable law, each Debtor
waives all claims, damages and demands against the Secured Party 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 Party as
determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction.

10.     Securities Law Provision. Each Debtor recognizes that the Secured Party
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. Each 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 the Secured Party 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. Each Debtor shall
cooperate with the Secured Party in its reasonable attempt to satisfy any
requirements under the Securities Laws (including, without limitation,
registration thereunder if reasonably requested by the Secured Party) applicable
to the sale of the Pledged Securities by the Secured Party.

11.     Costs and Expenses. Each 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 Secured Party. The Debtors shall also pay all other
claims and charges which would be reasonably likely to prejudice, imperil or
otherwise affect the Collateral or the Security Interests therein. The Debtors
will also, upon demand, pay to the Secured Party 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 Secured Party, may incur in connection
with (i) the

 

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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 Party under the
Notes and the other Transaction Documents. Until so paid, any fees payable
hereunder shall be added to the principal amount of the Notes and shall bear
interest at the Default Rate.

12.     Responsibility for Collateral. The Debtors assume 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) in no event shall the Secured
Party (i) have 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) have any obligation to clean-up or otherwise prepare the
Collateral for sale, and (b) each Debtor shall remain obligated and liable under
each contract or agreement included in the Collateral to be observed or
performed by such Debtor thereunder. The Secured party shall not 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 Secured Party of any payment
relating to any of the Collateral, nor shall the Secured Party be obligated in
any manner to perform any of the obligations of any 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 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 Secured Party or to which the Secured Party may be entitled at
any time or times.

13.     Security Interests Absolute. All rights and all obligations of the
parties hereunder, shall be absolute and unconditional, irrespective of: (a) any
lack of validity or enforceability of this Agreement, the Notes 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 Notes 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
Party to obtain, adjust, settle and cancel in its reasonable 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 Party shall continue even
if the Obligations are barred for any reason, including, without limitation, the
running of the statute of limitations or bankruptcy. Each 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 Party 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 Party, then, in any such event and to the

 

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extent thereof, each 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. Each Debtor waives all right to require the Secured Party to proceed
against any other person or entity or to apply any Collateral which the Secured
Party may hold at any time, or to marshal assets, or to pursue any other remedy.

14.     Term of Agreement. This Agreement and the Security Interests shall
terminate on the date on which all payments under the Notes have been
indefeasibly paid or otherwise satisfied in full (including by way of conversion
of the Notes) and all other Obligations have been paid or discharged (other than
contingent indemnification obligations).

15.     Obligations of Vertigro Algae Technologies LLC. Notwithstanding any
other provision of this Agreement or the Loan Documents with respect to Vertigro
Algae Technologies LLC (“Vertigro”) the Security Interest created by this
Agreement only applies to Vertigro to the extent the Guaranty is effective with
respect to Vertigro pursuant to Section 4 thereof.

16.     Power of Attorney; Further Assurances.

(a)     Each Debtor authorizes the Secured Party, and does hereby make,
constitute and appoint the Secured Party and its officers, agents, successors or
assigns with full power of substitution, as such Debtor’s true and lawful
attorney-in-fact, with power, in the name of the Secured Party or such 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 Secured Party;
(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
Secured Party, and at the expense of the Debtors, 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 Secured Party 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 Notes all as fully and
effectually as the Debtors might or could do; and each 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 any Debtor is subject or to which any
Debtor is a party. Without limiting

 

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the generality of the foregoing, after the occurrence and during the continuance
of an Event of Default, the 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.

(b)     On a continuing basis, each 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 Secured Party, 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 Secured Party the grant or
perfection of a perfected security interest in all the Collateral under the UCC.

(c)     Each Debtor hereby irrevocably appoints the Secured Party as such
Debtor’s attorney-in-fact, with full authority in the place and instead of such
Debtor and in the name of such Debtor, from time to time in the Secured Party’s
discretion, to take any action and to execute any instrument which the Secured
Party 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 such 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 Secured Party. 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.

17.     Notices. Any demand upon or notice to the Debtors hereunder shall be
effective when delivered by hand or when properly deposited in the mails postage
prepaid, or sent by telex, answerback received, or electronic facsimile
transmission, receipt acknowledged, or delivered to a telegraph company or
overnight courier, in each case addressed to the Debtor at the address shown
below or such other address as the Debtors may advise the Secured Party in
writing. Any notice by the Debtors to the Secured Party shall be given as
aforesaid, addressed to the Secured Party at the address shown below or such
other address as the Secured Party may advise the Debtors in writing.

Secured Party:  Platinum Long Term Growth VI, LLC    152 West 57th Street, 54th
Floor    New York, NY 10019    Debtors:  c/o Valcent Products Inc.    789 West
Pender Street, Suite 1010    Vancouver, BC V6C 1H2 

 

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With a copy to:  Burns Figa & Will P.C.    6400 S. Fiddlers Green Circle   
Suite 1000    Greenwood Village, CO 80111    Attn: Theresa M. Mehringer    Tel:
(303) 796-2626    Fax: (303) 796-2777 

18.     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, finn, corporation or other entity, then the
Secured Party 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 Party’s rights and
remedies hereunder.

19.     Miscellaneous.

(a)     No course of dealing between the Debtors and the Secured Party, nor any
failure to exercise, nor any delay in exercising, on the part of the Secured
Party, any right, power or privilege hereunder or under the Notes shall operate
as a waiver thereof; nor shall any single Qr 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 Party with respect to the
Collateral, whether established hereby or by the Notes, the Transaction
Documents 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, the
Notes and the related agreements contemplated hereby and thereby 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, in the case of an amendment, by the Debtors and the Secured
Party or, in the case of a waiver, by the party against whom enforcement of any
such waived provision is sought.

(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 Company and the
Guarantors may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Secured Party (other than by merger).
Upon the receipt of the Company’s prior written consent which shall not be
unreasonably withheld, the Secured Party may assign any or all of its rights
under this Agreement to any Person to whom the Secured Party assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions of this
Agreement that apply to the “Secured Party.”

(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. Each Debtor agrees that all
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement, the Transaction Documents and the
Notes (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. Each 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 or 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. If any party shall
commence a proceeding to enforce any provisions of this Agreement, then the
prevailing party in such proceeding shall be reimbursed by the other party for
its reasonable attorney’s fees and other reasonable costs and expenses incurred
with the investigation, preparation and prosecution of such proceeding.

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(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)     Except as provided in Paragraph 15, all Debtors shall jointly and
severally be liable for the obligations of each Debtor to the Secured Party
hereunder.

(k)     Each Debtor shall indemnify, reimburse and hold harmless the Secured
Party and each Lender, and each of 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 Notes, the Transaction
Documents or any other agreement, instrument or other document executed or
delivered in connection herewith or therewith.

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

(m)   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 any Debtor or any direct or indirect
subsidiary of any Debtor or compliance with any provisions of any of the
Organizational Documents, the Debtors hereby grant such consent and approval and
waive any such noncompliance with the terms of said documents.

(n)   The Lenders have, pursuant to the Purchase Agreement appointed the Agent,
as their agent for purposes of exercising any and all rights and remedies of the
secured parties hereunder. Such appointment shall continue until revoked in
writing (with a copy delivered to the Debtors) in accordance with the Purchase
Agreement.

[SIGNATURE PAGES FOLLOW]

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

VALCENT PRODUCTS INC

By: F. GEORGE ORR
       Name: F. George Orr
       Title:

VALCENT USA INC.

By: PERRY A. MARTIN
       Name: Perry A. Martin
       Title: President

VALCENT MANUFACTURING, INC.

By: PERRY A. MARTIN
       Name: Perry A. Martin
       Title: President

VALCENT MANAGEMENT LLC

By: PERRY A. MARTIN
       Name: Perry A. Martin
       Title: President

VERTIGRO ALGAE TECHNOLOGIES, LLC

By: M. ELDEN SCHORN
       Name: M. ELDEN SCHORN
       Title: Director

VALCENT PRODUCTS EU LIMITED

By: M. GLEN KERTZ
       Name: M. Glen Kertz
       Title: Director

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PURCHASERS:

PLATINUM LONG TERM GROWTH VI, LLC

By: MARK NORDLICHT
       Name: Mark Nordlicht
       Title: Managing Member

ALPHA CAPITAL AG

By: KONRAD ACKERMAN 
       Name: Konrad Ackerman
       Title: Director

OSHER CAPITAL PARTNERS LLC

By:  ILLEGIBLE
        Name:
        Title:

GEORGE ORR

By: F. GEORGE ORR
       Name: F. George Orr
       

 

 

 

 

 

 

 

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SCHEDULE A

Principal Place ofBusiness ofDebtors:

828 Harbourside Drive, Suite 208
North Vancouver, BC V7P 3R9

Rented Locations Where Collateral is Located or Stored:

828 Harbourside Drive, Suite 208
North Vancouver, BC V7P 3R9

Locations Owned:

 

 

 

 

 

 

 

 

 

 

 

 

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SCHEDULE B
Other Owners or Collateral or Lienholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SCHEDULE C

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SCHEDULE D
Legal Names and Organizational Identification Numbers

  NAME  STATE OF  ID#          ORGANIZATION                                    
         

 

 

 

 

 

 

 

 

 

 

 

 

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SCHEDULE E
Names; Mergers and Acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SCHEDULE F
Intellectual Property

See Collateral Assignment of Patents and Trademarks delivered by the Debtors on
the date
hereof to the Agent.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SCHEDULE G
Account Debtors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SCHEDULE H
Pledged Securities

Name of Issuer/Guarantor  Type of Securities  No. of shares  Percentage  Stock 
    owned  of Issuer  Certificate           owned  No.                         
               

 

 

 

 

 

 

 

 

 

 

 

 

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ANNEX A
to
SECURITY
AGREEMENT

FORM OF ADDITIONAL DEBTOR JOINDER

     Security Agreement dated as of July 16, 2008 made by Valcent Products,
Inc., and its subsidiaries party thereto from time to time, as Debtors to and in
favor of the Secured Party 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 Party referred to above, the undersigned shall (a) be an
Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors 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 PARTY 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 Party,
and the Secured Party 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 Party.

 

 

 

 

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     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:

 

 

 

 

 

 

 

 

 

 

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