SECURITY AGREEMENT

This SECURITY AGREEMENT, dated as of February 11, 2008 (this “Agreement”), is
among Solar Thin Films, Inc., a Delaware corporation, having its principal
offices located at 25 Highland Blvd., Dix Hills, New York 11746 (the
“Debtor”), and Solar Thin Power, Inc., a Nevada corporation, having its
principal offices located at 25 Highland Blvd., Dix Hills, New York 11746
(together with its successors and assigns, the “Secured Party”), which Secured
Party is the holder of the Debtor’s Secured Term Note, issued on February 11,
2008 in the aggregate original principal amount of $2,000,000 (the “Note”).

W I T N E S S E T H:

WHEREAS, pursuant to the Note, the Lender has agreed to extend the loan to the
Debtor evidenced by the Note, a copy of which is annexed hereto as Exhibit A;
 
WHEREAS, the Debtor intends to utilize the proceeds of the loan in order to fund
the acquisition of up to a 15% interest in the Weihai Blue Star Terra
Photovoltaic Co. Ltd. (the “Blue Star Joint Venture”).

WHEREAS, in order to induce the Secured Party to extend the loans evidenced by
the Note, the Debtor has agreed to execute and deliver to the Secured Party this
Agreement and to grant the Secured Party a security interest, in the proceeds of
the Debtor’s equity interest in the Blue Star Joint Venture to secure the prompt
payment, performance and discharge in full of all of the Debtor’s obligations
under the Note.

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.

(a) “Collateral” means the collateral in which the Secured Party is granted a
security interest by this Agreement and which shall include the proceeds of any
and all equity interests, whether now held or hereinafter acquired by the Debtor
in the Blue Star Joint Venture, up to a maximum interest of 15%.
 
2. Grant of Security Interest in Collateral. As an inducement for the Secured
Party to extend the loan as evidenced by the Note and to secure the complete and
timely payment, performance and discharge in full, as the case may be, of all
obligations under the Note, the 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”). To the extent there is at any time more than one Secured
Party hereunder, the Collateral will secure the obligations under the Note to
the Secured Party on a pari passu basis, based on the then outstanding amount of
such obligations under the Note.
 

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3. Representations, Warranties, Covenants and Agreements of the Debtor. The
Debtor represents and warrants to, and covenants and agrees with, the Secured
Party as follows:

(a) The 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 Debtor is the sole owner of the equity interest underlying the
Collateral, free and clear of any liens, security interests, encumbrances,
rights or claims, and is fully authorized to grant the Security Interest. 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 as pursuant to this Agreement, as long as this
Agreement shall be in effect, the Debtor 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).

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

(d) The Debtor shall at all times maintain its books of account and records
relating to the equity interest underlying the Collateral at its principal place
of business (except when temporarily kept at the offices of its attorneys or
accountants) and may not relocate such books of account unless it delivers to
the Secured Party at least 30 days prior to such relocation written notice of
such relocation and the new location thereof (which must be within the United
States).
 

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(e) This Agreement creates in favor of the Secured Party a valid, security
interest in the Collateral, securing the payment and performance of the
obligations under the Note. All security interests created hereunder in any
Collateral may be perfected by the shares underlying the Collateral being placed
in escrow with the escrow agent pursuant to the terms of the Escrow Agreement, a
copy of which is annexed hereto as Exhibit B. Except for the delivery of the
certificates and other instruments provided in Section 2, no action is necessary
to create, perfect or protect the security interests created hereunder. Without
limiting the generality of the foregoing, 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.
 
(f) The execution, delivery and performance of this Agreement by the Debtors do
not (i) violate any of the provisions of any Organizational Documents of the
Debtor or any judgment, decree, order or award of any court, governmental body
or arbitrator or any applicable law, rule or regulation applicable to the 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 the Debtor's debt or otherwise) or other understanding to
which the Debtor is a party or by which any property or asset of the Debtor is
bound or affected. If any, all required consents (including, without limitation,
from stockholders or creditors of the Debtor) necessary for the Debtor to enter
into and perform its obligations hereunder have been obtained.

(g) All of the shares underlying the Collateral are validly issued, fully paid
and nonassessable, and the Debtor is the legal and beneficial owner of the
shares underlying the Collateral, free and clear of any lien, security interest
or other encumbrance except for the security interests created by this
Agreement. The Debtor shall cause the security interest of the Secured Party to
be duly noted in its corporate books and records.
 
(h) The Debtor shall at all times maintain the 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 8 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.
 

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(i) The Debtor will not transfer, pledge, hypothecate, encumber, license, sell
or otherwise dispose of any of the Collateral without first providing written
notice to the escrow agent pursuant to Section 1.4 of the Escrow Agreement.

(j) The 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. 
 
(k) The 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.

(l) The 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.

(m) 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.

(n) 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
 
4. Defaults. The following events shall be “Events of Default”:
 
(a) The occurrence of an Event of Default under the Note; or

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

5. 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
under Section 3.2 of the Note.
 

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(b) The Debtor 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
Debtor shall sell the shares underlying the Collateral in accordance with
Section 1.4 of the Escrow Agreement.

6. Applications of Proceeds. The proceeds of any sale of shares underlying the
Collateral made in accordance with Section 1.4 of the Escrow Agreement, shall be
first applied to any obligations then outstanding under the Note. Including
accrued but unpaid interest. If, upon the sale of the Shares, the proceeds
thereof are insufficient to pay all amounts to which the Debtor is obligated
under the note, including accrued but unpaid interest, the Debtor will remain
liable for the deficiency pursuant to the terms of the Note. If the sale of the
Shares results in proceeds sufficient to satisfy the Debtor’s then outstanding
obligations under the Note, the Debtor shall be entitled to any excess proceeds.
 
7. 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 Note, the Security Agreement,
the Escrow Agreement 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 under the Note, or any other amendment or waiver of or any
consent to any departure from the Note 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 under the Note; (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 the Debtor, or a discharge of all or
any part of the Security Interests granted hereby.

8. Term of Agreement. This Agreement and the Security Interests shall terminate
on the date on which all payments under the Note have been indefeasibly paid or
otherwise satisfied in full.

9. 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.
 

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Secured Party:
Solar Thin Power, Inc.
 
25 Highland Blvd.
 
Dix Hills, NY 11746
   
Debtor:
Solar Thin Films, Inc.
 
25 Highland Blvd.
 
Dix Hills, NY 11746

10. Miscellaneous.

(a) No course of dealing between the Debtor 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 or 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 Note, the Security Agreement,
the Escrow Agreement 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 Note,
the Security Agreement, the Escrow Agreement 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 Debtor 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 Debtor may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Secured Party (other than by merger). 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 the Note, provided such transferee agrees in
writing to be bound, with respect to the transferred Note, 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. The Debtor agrees that all
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement, the Security Agreement, the Escrow
Agreement and the Note (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. The 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) The Debtor shall indemnify, reimburse and hold harmless the Secured Party,
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 Note, the Security Agreement, the Escrow
Agreement or any other agreement, instrument or other document executed or
delivered in connection herewith or therewith.

[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.

DEBTOR:

SOLAR THIN FILMS, INC.

By:
/s/ Peter Lewis
 
Name: Peter Lewis
 
Title: Chief Executive Officer
   
SECURED PARTY:
 
SOLAR THIN POWER, INC.
   
By:
/s/ Robert Rubin
 
Name:Robert Rubin
 
Title:Chief Financial Officer

 

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