Exhibit 10.2

                               SECURITY AGREEMENT

     SECURITY  AGREEMENT  (this "Agreement"), dated as of March 23, 2006, by and
among  Hybrid Fuel Systems, Inc., a George corporation ("Company"), and Dutchess
Private  Equities  Fund,  LP,  a  Delaware  Limited  partnership, as the secured
parties signatory hereto and their respective endorsees, transferees and assigns
(collectively,  the  "Secured Party") (sometimes hereinafter the Company and the
Secured  Party  are  collectively  referred  to  as  the  "parties").

                              W I T N E S S E T H:

     WHEREAS,  pursuant  to  Note  Agreement,  dated the date hereof between the
Company and the Secured Party (the "Note Agreement"), and the prior Note between
the  Company  and  the  Secured  Party  dated December 20, 2005, the Company has
agreed  to  issue  to  the  Secured  Party  and  the Secured Party has agreed to
purchase  from  Company certain of Company's 0% Secured Notes, due one year from
the  date  of  issue  (the  "Note")

     WHEREAS, pursuant to Subscription Agreement, dated November 4, 2005 between
Company and the Secured Party (the "Subscription Agreement"), Company has issued
to the Secured Party and the Secured Party has purchased from Company certain of
Company's  twelve  percent  (12%) Secured Convertible Debentures, due five years
from  the date of issue (the "Debentures"), which are convertible into shares of
Company's  Common  Stock,  par  value  $.001  per share (the "Common Stock"). In
connection  therewith,  Company  shall issue to the Secured Party certain Common
Stock  purchase  warrants  dated as of the date hereof to purchase the number of
shares  of  Common  Stock  (the  "Warrants");  and

     WHEREAS,  in  order  to  further induce the Secured Party's purchase of the
Note,  and  for  further  consideration  of  the Secured Party's purchase of the
Debenture,  the  Company  has agreed to execute and deliver to the Secured Party
this  Agreement  for the benefit of the Secured Party and to grant to it a first
priority  security  interest in certain property of Company to secure the prompt
payment, performance and discharge in full of all of Company's obligations under
the  Note, Debenture and exercise and discharge in full of Company's obligations
under  the  Warrants.

     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 (such as
     "general  intangibles"  and  "proceeds") 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,  whether  presently  owned  or existing or hereafter acquired or
     coming  into  existence,  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:

               (i)  All Goods of the Company, including, without limitation, 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  the  Company's  businesses  and  all  improvements  thereto
          (collectively,  the  "Equipment");  and

               (ii)  All  Inventory  of  the  Company;  and

               (iii)  All  of  the  Company's  contract  rights  and  general
          intangibles, including, without limitation, all partnership interests,
          stock  or  other  securities,  licenses,  distribution  and  other
          agreements,  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, deposit accounts, and income
          tax  refunds  (collectively,  the  "General  Intangibles");  and

               (iv)  All  Receivables  of  the  Company  including all insurance
          proceeds,  and  rights to refunds or indemnification whatsoever owing,
          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 Receivable,
          including  any  right  of  stoppage  in  transit;  and

               (v)  All  of  the  Company's  documents,  instruments and chattel
          paper,  files,  records,  books  of account, business papers, computer
          programs  and  the  products  and  proceeds  of  all  of the foregoing
          Collateral  set  forth  in  clauses  (i)-(iv)  above.

          (b)  "Company"  shall  mean,  collectively,  Company  and  all  of the
     subsidiaries  of  Company,  a  list  of  which  is contained in Schedule A,
     attached  hereto.

          (c)  "Obligations"  means  all of the Company's obligations under this
     Agreement  and  the Notes, 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
     decreased,  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.

          (d) "UCC" means the Uniform Commercial Code, as currently in effect in
     the  Commonwealth  of  Massachusetts.

2.   Grant of  Security  Interest.  As  an  inducement  for the Secured Party to
     purchase  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,  the Company hereby, unconditionally and irrevocably, pledges,
     grants  and  hypothecates  to  the  Secured  Party,  a  continuing security
     interest  in,  a  continuing  first  lien  upon,  an  unqualified  right to
     possession  and disposition of and a right of set-off against, in each case
     to  the  fullest extent permitted by law, all of the Company's right, title
     and  interest  of  whatsoever kind and nature in and to the Collateral (the
     "Security  Interest").

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

          (a)  The  Company  has  the requisite corporate power and authority to
     enter  into  this  Agreement  and  otherwise  to  carry out its obligations
     thereunder.  The execution, delivery and performance by the Company of this
     Agreement and the filings contemplated therein have been duly authorized by
     all  necessary  action  on the part of the Company and no further action is
     required  by  the  Company.  This  Agreement constitutes a legal, valid and
     binding obligation of the Company enforceable in accordance with its terms,
     except  as  enforceability  may  be  limited  by  bankruptcy,  insolvency,
     reorganization,  moratorium  or  similar  laws affecting the enforcement of
     creditor's  rights  generally.

          (b)  The  Company  represents  and  warrants  that  it has no place of
     business  or  offices where its respective books of account and records are
     kept  (other  than  temporarily  at  the  offices  of  its  attorneys  or
     accountants) or places where Collateral is stored or located, except as set
     forth  on  Schedule  A  attached  hereto;

          (c)  The  Company  is  the  sole  owner  of the Collateral (except for
     non-exclusive  licenses  granted  by  the Company in the ordinary course of
     business),  free  and clear of any liens, security interests, encumbrances,
     rights or claims, and is fully authorized to grant the Security Interest in
     and  to  pledge the Collateral. 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  have  been filed in favor of the
     Secured  Party pursuant to this Agreement) covering or affecting any of the
     Collateral. So long as this Agreement shall be in effect, the Company shall
     not execute and shall not knowingly permit to be on file in any such office
     or  agency  any  such  financing  statement or other 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  part  of  the  Collateral  has  been  judged  invalid  or
     unenforceable.  No  written  claim has been received that any Collateral or
     the Company's use of any Collateral violates the rights of any third party.
     There  has  been  no  adverse  decision to the Company's claim of ownership
     rights  in or exclusive rights to use the Collateral in any jurisdiction or
     to  the  Company'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 Company, threatened before any court, judicial
     body, administrative or regulatory agency, arbitrator or other governmental
     authority.

          (e)  The  Company shall at all times maintain its books of account and
     records  relating  to the Collateral at its principal place of business 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  and other necessary documents have been
     filed  and recorded and other steps have been taken to perfect the Security
     Interest  to  create  in  favor  of  the Secured Party valid, perfected and
     continuing  first  priority  liens  in  the  Collateral.

          (f)  This  Agreement  creates  in  favor  of the Secured Party a valid
     security interest in the Collateral securing the payment and performance of
     the  Obligations  and, upon making the filings described in the immediately
     following  sentence,  a  perfected first priority security interest in such
     Collateral.  Except  for the filing of financing statements on Form-1 under
     the UCC with the jurisdictions indicated on Schedule B, attached hereto, no
     authorization  or  approval of or filing with or notice to any governmental
     authority  or  regulatory  body is required either (i) for the grant by the
     Company  of,  or the effectiveness of, the Security Interest granted hereby
     or  for  the  execution,  delivery and performance of this Agreement by the
     Company  or  (ii) for the perfection of or exercise by the Secured Party of
     its  rights  and  remedies  hereunder.

          (g)  On  the  date  of  execution  of this Agreement, the Company will
     deliver  to the Secured Party one or more executed UCC financing statements
     on  Form-1  with  respect  to  the  Security  Interest  for filing with the
     jurisdictions  indicated  on  Schedule B, attached hereto and in such other
     jurisdictions  as  may  be  requested  by  the  Secured  Party.

          (h) The execution, delivery and performance of this Agreement does not
     conflict  with  or  cause  a  breach  or  default, or an event that with or
     without  the  passage  of  time  or  notice,  shall  constitute a breach or
     default,  under  any  agreement to which the Company is a party or by which
     the Company is bound. No consent (including, without limitation, from stock
     holders  or  creditors of the Company) is required for the Company to enter
     into  and  perform  its  obligations  hereunder.

          (i)  The  Company  shall  at all times maintain the liens and Security
     Interest 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 Interest hereunder shall terminate
     pursuant  to  Section  11.  The  Company  hereby  agrees to defend the same
     against  any  and  all persons. The Company shall safeguard and protect all
     Collateral  for  the  account  of  the Secured Party. At the request of the
     Secured  Party,  the  Company 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  (or any other applicable statute) in form reasonably satisfactory
     to the Secured Party and will pay the cost of filing the same in all public
     offices  wherever  filing  is,  or  is  deemed  by the Secured Party to be,
     necessary  or  desirable  to effect the rights and obligations provided for
     herein. Without limiting the generality of the foregoing, the Company shall
     pay  all fees, taxes and other amounts necessary to maintain the Collateral
     and  the  Security  Interest  hereunder,  and  the Company 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
     the  priority  of  the  Security  Interest  hereunder.

          (j)  The  Company  will  not  transfer, pledge, hypothecate, encumber,
     license  (except  for  non-exclusive licenses granted by the Company in the
     ordinary  course  of  business),  sell  or  otherwise dispose of any of the
     Collateral  without  the  prior  written  consent  of  the  Secured  Party.

          (k)  The  Company 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.

          (l)  The  Company  shall,  within ten (10) days of obtaining knowledge
     thereof,  advise  the  Secured Party promptly, in sufficient detail, of any
     substantial  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.

          (m)  The  Company  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 and may in its sole discretion deem necessary to perfect,
     protect  or  enforce  its  security  interest  in the Collateral including,
     without  limitation,  the  execution  and  delivery  of a separate security
     agreement  with  respect  to  the  Company's  intellectual  property
     ("Intellectual Property Security Agreement") in which the Secured Party has
     been  granted  a  security  interest  hereunder,  substantially  in  a form
     acceptable  to  the  Secured  Party,  which  Intellectual Property Security
     Agreement,  other  than  as  stated therein, shall be subject to all of the
     terms  and  conditions  hereof.

          (n) The Company shall permit the Secured Party and its representatives
     and  agents  to  inspect  the Collateral at any time, and to make copies of
     records  pertaining  to  the  Collateral as may be requested by the Secured
     Party  from  time  to  time.

          (o) The Company will 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.

          (p)  The Company 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 the Company that may materially affect the value of
     the  Collateral,  the  Security  Interest or the rights and remedies of the
     Secured  Party  hereunder.

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

          (r)  Schedule  A  attached  hereto  contains  a  list  of  all  of the
     subsidiaries  of  Company.

4.   Defaults.  The  following  events  shall  be  "Events  of  Default":

          (a)  The  occurrence  of  an  Event  of  Default  (as  defined  in the
     Transaction  Documents)  under  the Transaction Documents, or breach of the
     terms  of  the  Transaction  Documents.

          (b) Any representation or warranty of the Company in this Agreement or
     in  the  Intellectual  Property Security Agreement shall prove to have been
     incorrect  in  any  material  respect  when  made;

          (c)  The  failure  by  the  Company  to  observe or perform any of its
     obligations  hereunder  or  in the Intellectual Property Security Agreement
     for  ten  (10)  days after receipt by the Company of notice of such failure
     from  the  Secured  Party.

5.   Duty To  Hold  In Trust. Upon the occurrence of any Event of Default and at
     any  time thereafter, the Company shall, upon receipt by it of any revenue,
     income  or  other  sums  subject  to the Security Interest, 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  for  application  to  the  satisfaction  of  the  Obligations.

6.   Rights  and  Remedies Upon Default. Upon 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  and/or  any  other  applicable  law (including the Uniform
     Commercial  Code  of  any  jurisdiction  in  which  any  Collateral is then
     located).  Without  limitation,  the Secured Party shall have the following
     rights  and  powers:

          (a)  The  Secured Party shall have the right to take possession of the
     Collateral and, for that purpose, enter, 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  the  Company  shall  assemble the
     Collateral  and  make it available to the Secured Party at places which the
     Secured Party shall reasonably select, whether at the Company's premises or
     elsewhere,  and  make  available to the Secured Party, without rent, all of
     the  Company'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.

          (b)  The Secured Party shall have the right to operate the business of
     the  Company using the Collateral and 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 such terms and conditions as the Secured Party
     may  deem commercially reasonable, all without (except as shall be required
     by applicable statute and cannot be waived) advertisement or demand upon or
     notice  to  the  Company  or  right of redemption of the Company, which are
     hereby  expressly  waived.  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 the Company, which are hereby waived
     and  released.

7.   Applications  of  Proceeds.  The  proceeds of any such sale, lease or other
     disposition  of  the  Collateral  hereunder  shall be applied first, to the
     expenses  of retaking, holding, storing, processing and preparing for sale,
     selling,  and  the like (including, without limitation, any taxes, fees and
     other  costs  incurred  in  connection therewith) of the Collateral, to the
     reasonable  attorneys'  fees  and expenses incurred by the Secured Party in
     enforcing  its  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 Company 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 Company will be liable for
     the  deficiency,  together  with  interest  thereon, at the rate of 18% per
     annum  (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,  the Company waives all claims, damages and
     demands against the Secured Party arising out of the repossession, removal,
     retention  or sale of the Collateral, unless due to the gross negligence or
     willful  misconduct  of  the  Secured  Party.

8.   Costs and Expenses. The Company agrees to pay all out-of-pocket fees, costs
     and  expenses  incurred  in  connection with any filing required hereunder,
     including  without  limitation,  any  financing  statements,  continuation
     statements,  partial releases and/or termination statements related thereto
     or  any  expenses of any searches reasonably required by the Secured Party.
     The  Company  shall  also  pay  all  other  claims and charges which in the
     reasonable  opinion  of  the  Secured  Party  might  prejudice,  imperil or
     otherwise  affect  the  Collateral  or  the  Security Interest therein. The
     Company  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 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.
     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.

9.   Responsibility  for  Collateral.  The  Company  assumes all liabilities and
     responsibility  in  connection  with all Collateral, and the obligations of
     the Company hereunder or under the Transaction Documents 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.

10.  Security  Interest  Absolute.  All  rights  of  the  Secured  Party and all
     Obligations  of the Company hereunder, shall be absolute and unconditional,
     irrespective  of:  (a)  any  lack  of  validity  or  enforceability of this
     Agreement,  the  Notes,  the  Warrants  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, the Warrants 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  guaranty,  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 sole 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 Company, or a discharge of all or any part of the Security Interest
     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. The Company 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,  the  Company'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. The Company waives all right to require the
     Secured  Party  to  proceed  against  any  other  person  or  to  apply any
     Collateral  which  the  Secured  Party  may hold at any time, or to marshal
     assets,  or  to  pursue  any  other  remedy. The Company waives any defense
     arising  by  reason of the application of the statute of limitations to any
     obligation  secured  hereby.

11.  Term of Agreement. This Agreement and the Security Interest shall terminate
     on  the  date  on which all payments under the Notes have been made in full
     and all other Obligations of the Company have been paid or discharged. Upon
     such  termination,  the Secured Party, at the request and at the expense of
     the  Company, will join in executing any termination statement with respect
     to  any  financing statement executed and filed pursuant to this Agreement.

12.  Power of  Attorney;  Further  Assurances.

          (a)  The  Company  authorizes the Secured Party, and does hereby make,
     constitute  and appoint it, and its respective officers, agents, successors
     or  assigns  with  full  power  of  substitution, as the Company's true and
     lawful  attorney-in-fact, with power, in its own name or in the name of the
     Company, to, after the occurrence and during the continuance of an Event of
     Default  (i)  endorse  any  notes,  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 UCC financing
     statement  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; and (v) generally, to
     do,  at  the  option of the Secured Party, and at the Company's expense, at
     any time, or from time to time, all acts and things which the Secured Party
     deems  necessary  to  protect, preserve and realize upon the Collateral and
     the Security Interest granted therein in order to effect the intent of this
     Agreement,  the Notes and the Warrants, all as fully and effectually as the
     Company  might  or  could do; and the Company 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.

          (b)  On  a  continuing  basis,  the  Company  will  make,  execute,
     acknowledge,  deliver,  file  and record, as the case may be, in the proper
     filing  and  recording  places  in  any  jurisdiction,  including,  without
     limitation, the jurisdictions indicated on Schedule B, 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 Interest 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 security interest in all
     the  Collateral.

          (c)  The  Company hereby irrevocably appoints the Secured Party as the
     Company's  attorney-in-fact,  with full authority in the place and stead of
     the  Company  and  in  the  name  of  the Company, 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  the  Company  where  permitted  by  law.

13.  Notices.  All notices, requests, demands and other communications hereunder
     shall be in writing, with copies to all the other parties hereto, and shall
     be  deemed  to  have  been  duly  given when (i) if delivered by hand, upon
     receipt,  (ii)  if  sent  by  facsimile,  upon  receipt of proof of sending
     thereof,  (iii) if sent by nationally recognized overnight delivery service
     (receipt requested), the next business day or (iv) if mailed by first-class
     registered  or  certified  mail, return receipt requested, postage prepaid,
     four days after posting in the U.S. mails, in each case if delivered to the
     following  addresses:

If  the  to  the  Company:

  Mark  Clancy
  Hybrid  Fuel  Systems
  12409  Telecom  Drive
  Tampa,  FL  33637
  Telephone:  813-979-9222
  Facsimile:  813-979-9224

With  copy  to:

  Darrin  M.  Ocasio,  Esq.
  Sichenzia  Ross  Friedman  Ference  LLP
  1065  Avenue  of  the  Americas
  New  York,  New  York  10018
  Phone:  (212)  930-9700
  Fax:  (212)  930-9725

If  to  the  Holder:

  Dutchess  Capital  Management,  LLC
  Douglas  Leighton
  50  Commonwealth  Ave,  Suite  2
  Boston,  MA  02116
  Phone:  (617)  301-4700
  Facsimile:  (617)  249-0947

14.  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, firm, 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.

15.     Miscellaneous.

          (a)  No  course  of dealing between the Company 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 Notes or by any
     other  agreements,  instruments  or documents or by law shall be cumulative
     and  may  be  exercised  singly  or  concurrently.

          (c)  This  Agreement  constitutes  the entire agreement of the parties
     with  respect to the subject matter hereof and is intended to supersede all
     prior  negotiations,  understandings  and  agreements  with  respect to the
     subject  matter hereof. Except as specifically set forth in this Agreement,
     no  provision  of  this  Agreement  may  be modified or amended except by a
     written  agreement  specifically  referring to this Agreement and signed by
     the  parties  hereto.

          (d)  In  the  event that any provision of this Agreement is held to be
     invalid,  prohibited  or  unenforceable in any jurisdiction for any reason,
     unless  such provision is narrowed by judicial construction, this Agreement
     shall, as to such jurisdiction, be construed as if such invalid, prohibited
     or  unenforceable  provision  had  been more narrowly drawn so as not to be
     invalid,  prohibited  or  unenforceable. If, notwithstanding the foregoing,
     any  provision  of  this  Agreement  is  held  to be invalid, prohibited or
     unenforceable in any jurisdiction, such provision, as to such jurisdiction,
     shall  be  ineffective  to  the  extent  of such invalidity, prohibition or
     unenforceability  without  invalidating  the  remaining  portion  of  such
     provision  or  the other provisions of this Agreement and without affecting
     the validity or enforceability of such provision or the other provisions of
     this  Agreement  in  any  other  jurisdiction.

          (e)  No  waiver  of  any  breach  or  default  or any right under this
     Agreement  shall  be  considered  valid unless in writing and signed by the
     party  giving  such  waiver, and no such waiver shall be deemed a waiver of
     any  subsequent  breach or default or right, whether of the same or similar
     nature  or  otherwise.

          (f)  This  Agreement shall be binding upon and inure to the benefit of
     each  party  hereto  and  its  successors  and  assigns.

          (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) The validity, terms, performance and enforcement of this Agreement
     shall  be governed and construed by the provisions hereof and in accordance
     with the laws of the Commonwealth of Massachusetts applicable to agreements
     that  are  negotiated,  executed,  delivered  and  performed  solely in the
     Commonwealth  of  Massachusetts.

          (i) All disputes arising under this agreement shall be governed by and
     interpreted  in  accordance  with  the  laws  of  the  Commonwealth  of
     Massachusetts,  without  regard  to  principles  of  conflict  of laws. The
     parties  to  this  agreement  will  submit  all disputes arising under this
     agreement  to  arbitration  in  Boston,  Massachusetts  before  a  single
     arbitrator  of the American Arbitration Association ("AAA"). The arbitrator
     shall  be  selected  by  application  of the rules of the AAA, or by mutual
     agreement  of the parties, except that such arbitrator shall be an attorney
     admitted  to practice law in the Commonwealth of Massachusetts. No party to
     this  agreement  will  challenge  the  jurisdiction  or venue provisions as
     provided  in this section. Nothing in this section shall limit the Holder's
     right  to  obtain an injunction for a breach of this Agreement from a court
     of  law.

          (j) 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.

          (k)  This  Agreement  shall  supersede  the  prior  executed  Security
     Agreement dated November 4, 2005, and upon execution of this Agreement, the
     prior  Security  Agreement  shall  be  void.






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<PAGE>

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


                      HYBRID FUEL SYSTEMS, INC.


                      By:  /s/  Mark  Clancy
                           -----------------
                    Name:  Mark  Clancy
                   Title:  Chief  Executive  Officer


                      DUTCHESS PRIVATE EQUITIES FUND, L.P.
                      BY  ITS  GENERAL  PARTNER  DUTCHESS
                      CAPITAL  MANAGEMENT,  LLC


                      By:  /s/  Douglas  H.  Leighton
                           --------------------------
                    Name:  Douglas  H.  Leighton
                   Title:  A  Managing  Member