f8k0210ex10ix_envision.htm


    Exhibit
10.9

     

    SECURITY
AGREEMENT

    


                This
SECURITY AGREEMENT, dated as of November 12, 2008 (this “Agreement”), is among
ENVISION SOLAR INTERNATIONAL, INC., a California corporation (the “Company”), each of
the undersigned direct and indirect Subsidiaries of the Company and all other
direct and indirect Subsidiaries of the Company (the
“Guarantors”,
and together with the Company, the “Debtors”), and the
holder, signatory hereto, of the Company’s Secured Bridge Note issued or to be
issued in the original principal amount of $591,770.83 (the “Note”) pursuant to
the Purchase Agreement (as defined below) (“Secured Party”, and
together with its endorsees, transferees and assigns, the “Secured
Parties”).

    


    W
I T N E S S E T H:

    


                WHEREAS,
pursuant to that certain Securities Purchase Agreement dated on or about the
date hereof between the Company and the Secured Party (the “Purchase Agreement”),
the Secured Party has agreed to extend the loans to the Company evidenced by the
Note;

    


                WHEREAS,
pursuant to that certain Subsidiary Guarantee, dated as of the date hereof
(“Guarantee”),
the Guarantors
have jointly and severally agreed to guarantee and act as surety for payment of
the Note; and

    


                WHEREAS,
in order to induce the Secured Party to extend the loans evidenced by the Note,
each Debtor has agreed to execute and deliver to the Secured Party this
Agreement and to grant the Secured Party a security interest 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 Note and other Transaction
Documents and the Guarantors’ obligations under the Guarantee;

    


                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 “account”, “chattel paper”,
“commercial tort claim”, “deposit account”, “document”, “equipment”, “fixtures”,
“general intangibles”, “goods”, “instruments”, “inventory”, “investment
property”, “letter-of-credit rights”, “proceeds” 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 Parties 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 distributed in respect
of, or in exchange for, any or all of the Pledged Securities (as defined
below):

     

     

    
      
        
        

      

      
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    (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;

    


    (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,
including without limitation and all
files, records, books, ledger cards, correspondence, computer programs, tapes,
disks, digital storage  media and related data processing software
that at any time evidence or contain information relating to any of the
Collateral set forth in clauses (i)-(viii) above or are otherwise necessary or
helpful in the collection thereof or realization thereupon; and

    
 

    
      
        
        

      

      
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    (x) All the
products, profits and proceeds of all of the foregoing Collateral set forth in
clauses (i)-(ix) above, and all payments under insurance (whether or not the
Secured Party is the loss payee thereof) or under any indemnity, warranty or
guaranty, payable by reason or loss or damage to, or otherwise with respect to,
any 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 9-408 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 Agent (as that term is defined below)
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 to, of any Debtor to the Secured
Parties either (i) under this Agreement, the Note, the Guarantee, the other
Transaction Documents and any other instruments, agreements or other documents
executed and/or delivered in connection herewith or therewith, or (ii) related
to any other liabilities or obligations associated with any indebtedness for
borrowed money from any Secured Party to any Debtor, 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 any of the Secured Parties 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 Note 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 Note, the Guarantee, the
other Transaction Documents 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).

    


    


    
      
        
        

      

      
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    (g) “Transaction
Documents” shall have the meaning ascribed to such term in the Purchase
Agreement.

    


    (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 has 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
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 Secured Parties to extend the loans
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 of the
Obligations, each Debtor hereby unconditionally and irrevocably pledges, grants
and hypothecates to the Secured Parties a first priority security interest in
and to, a lien upon and a right of set-off against all of their respective
right, title and interest of whatsoever kind and nature in and to, the
Collateral (a “Security Interest”
and, collectively, the “Security
Interests”).

    


    3. Delivery of Certain
Collateral.  Contemporaneously or
prior to the execution of this Agreement, each Debtor shall deliver or cause to
be delivered to the Agent (a) any and all certificates and other instruments
representing or evidencing the Pledged Securities, together with all Necessary
Endorsements, 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 Agent, or have previously delivered to
the Agent, 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.

    


    (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 its
attorneys or accountants) or places where Collateral is stored or located,
except as set forth on Schedule A attached
hereto.  No Debtor owns any real property.  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 (as defined in the Note) and except as set forth on Schedule B attached
hereto, the Debtors are the sole owner 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 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 Parties pursuant to this
Agreement) covering or affecting any of the Collateral.  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 document or instrument (except to the extent filed or
recorded in favor of the Secured Parties pursuant to the terms of this
Agreement).

    


    (d) No
written claim has been received 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.

    
 

    
      
        
        

      

      
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    (e) Each
Debtor 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 Parties 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 Parties a valid, perfected
and continuing first priority lien in all the Collateral.

    


    (f) This
Agreement creates in favor of the Secured Parties a valid security interest in
the Collateral, subject only to Permitted Liens (as defined in the Note)
securing the payment and performance of the Obligations.  Upon making
the filings described in the immediately following paragraph, all security
interests created hereunder in any Collateral which may be perfected by filing
Uniform Commercial Code financing statements shall have been duly
perfected.  Except for the filing of the Uniform Commercial Code
financing statements referred to in the immediately following paragraph, the
recordation of the Intellectual Property Security Agreement(s) (as defined
below) with the United States Copyright Office or the United States Patent and
Trademark Office with respect to copyrights, patents and trademarks


     

     

    
      
        
        

      

      
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      (and
applications relating each of the foregoing) as described in paragraph 4(mm),
the execution and delivery of deposit account control agreements satisfying the
requirements of Section 9-104(a)(2) of the UCC with respect to each deposit
account of the Debtors, and the delivery of the
certificates and other instruments provided in Section 3, no further
action is necessary to create, perfect or protect the security interests created
hereunder.  Without limiting the generality of the foregoing, except
for the execution and delivery of this Agreement by the Secured Party, the
filing of said financing statements, the recordation of said Intellectual
Property Security Agreement(s), and the execution and delivery of said deposit
account control agreements, 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 Agent and the Secured Parties
hereunder.

    

    


    (g) Each
Debtor hereby authorizes the Agent 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.

    


    (h) The
execution, delivery and performance of this Agreement by the Debtors does 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.  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 of the Guarantors, and represent all capital
stock and other equity interests owned, directly or indirectly, by the Company
or any Guarantor.  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 (as defined in the Note).

    


    (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.

     

     

    
      
        
        

      

      
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    (k) Except
for Permitted Liens (as defined in the Note), until this Agreement and the
Security Interest hereunder shall be terminated pursuant to Section 14 hereof,
each Debtor shall at all times maintain in favor of the Secured Parties the
liens and Security Interests provided for hereunder as valid and perfected first
priority liens and security interests in all the Collateral.  Each
Debtor hereby agrees to defend the same against the claims of any and all
persons and entities.  Each Debtor shall safeguard and protect all
Collateral for the account of the Secured Parties.  At the request of
the Agent, each Debtor will sign and deliver to the Agent on behalf of the
Secured Parties at any time or from time to time one or more financing
statements pursuant to the UCC in form reasonably satisfactory to the Agent and
will pay the cost of filing the same in all public offices wherever filing is,
or is deemed by the Agent to be, necessary or desirable 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 Agent 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 Interests hereunder.

    


    (l) Except as
listed on Schedule
I, no Debtor will transfer, pledge, hypothecate, encumber, license, sell
or otherwise dispose of any of the Collateral (except for licenses granted by a
Debtor in its ordinary course of business and sales of inventory and other
unused or outdated assets by a Debtor in its ordinary course of business)
without the prior written consent of all the Secured Parties.

    


    (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) 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 Agent, that (a) the Agent will be named as
lender loss payee and additional insured under each such insurance policy; (b)
if such insurance be proposed to be cancelled or materially changed for any
reason whatsoever, such insurer will promptly notify the Agent and such
cancellation or change shall not be effective as to the Agent for at least
thirty (30) days after receipt by the Agent of such notice, unless the effect of
such change is to extend or increase coverage under the policy; and (c) the
Agent 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
Note) 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

     

     

    
      
        
        

      

      
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      the applicable Debtor; provided, however, that payments received by any Debtor after an Event of
Default occurs and is continuing or in excess of $100,000 for any occurrence or
series of related occurrences shall be paid to the Agent on behalf of the
Secured Parties and, if received by such Debtor, shall be held in trust for the
Secured Parties and immediately paid over to the Agent unless otherwise directed
in writing by the Agent.   Copies of such policies or the related
certificates, in each case, naming the Agent as lender loss payee and additional
insured shall be delivered to the Agent at least annually and at the time any
new policy of insurance is issued.

    

    


    (o) Each
Debtor shall promptly, but no later than ten (10) days after obtaining knowledge
thereof, advise the Secured Parties, through the Agent, in sufficient detail of
any materially 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 Parties’ security interest therein.

    


    (p) Each
Debtor shall promptly execute and deliver to the Agent such further deeds,
mortgages, assignments, security agreements, financing statements or other
instruments, documents, certificates and assurances and take such further action
as the Agent may from time to time request and may in its sole discretion deem
necessary to perfect, protect or enforce the Secured Parties’ security interest
in the Collateral including without limitation, if applicable, the execution and
delivery of a separate security agreement with respect to each Debtor’s
Intellectual Property (each an “Intellectual Property
Security Agreement”) in which the Secured Parties have been granted a
security interest hereunder, substantially in a form reasonably acceptable to
the Agent, which Intellectual Property Security Agreement(s), other than as
stated therein, shall be subject to all of the terms and conditions
hereof.

    


    (q) Each
Debtor shall permit the Agent and its representatives and agents to inspect the
Collateral during normal business hours and upon reasonable prior notice, and to
make copies of records pertaining to the Collateral as may be reasonably
requested by the Agent from time to time.

    


    (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 Parties 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 may materially affect the value of the Collateral, the Security
Interests or the rights and remedies of the Secured Parties
hereunder.

     

     

    
      
        
        

      

      
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    (t) All
information heretofore, herein or hereafter supplied to the Secured Parties by
or on behalf of any Debtor with respect to the Collateral is and will be
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 its business.

    


    (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 Parties 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, 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 Agent 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 Parties 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 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 Agent.

    


    (bb) Each Debtor, in its capacity as issuer, hereby agrees to
comply with any and all orders and instructions of the Agent 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.

     

     

    
      
        
        

      

      
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    (cc) Each
Debtor shall cause all tangible chattel paper constituting Collateral to be
delivered to the Agent, 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, promptly upon written request of the Agent following the
occurrence of an Event of Default, cause such an account control agreement, in
form and substance in each case satisfactory to the Agent, to be entered into
and delivered to the Agent for the benefit of the Secured Parties.

    


    (ee) To the
extent that any Collateral consists of letter-of-credit rights, the applicable
Debtor shall, promptly upon written request of the Agent following the
occurrence of an Event of Default, cause the issuer of each underlying letter of
credit to consent to an assignment of the proceeds thereof to the Secured
Parties.

    


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

    


    (gg) If any
Debtor shall at any time hold or acquire a commercial tort claim, such Debtor
shall promptly notify the Secured Parties in a writing signed by such Debtor of
the particulars thereof and grant to the Secured Parties in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance reasonably
satisfactory to the Agent.

    


    (hh) Each
Debtor shall immediately provide written notice to the Secured Parties 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 Agent an assignment of claims for such accounts and cooperate
with the Agent in taking any other steps required, in its judgment, 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 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.  Concurrent therewith, the 

     

     

    
      
        
        

      

      
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      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 Agent may reasonably
request.  Upon delivery of the foregoing to the Agent, 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
Note.

    


    (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 Parties on the books of
such issuer.  Further, except with respect to certificated securities
delivered to the Agent, the applicable Debtor shall deliver to the Agent 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, which acknowledgement
shall confirm that: (a) it has registered the pledge on its books and records;
and (b) at any time directed by the Agent 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 Agent, will take such steps as
may be necessary to effect the transfer, and will comply with all other
instructions of the Agent 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 Agent 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
Agent 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 the Debtors and
their direct and indirect subsidiaries; (ii) use its best efforts to obtain
resignations of the persons then serving as officers and directors of the
Debtors and their 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 Agent and allow the Transferee or the Agent to continue the
business of the Debtors and their direct and indirect
subsidiaries.

     

     

    
      
        
        

      

      
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    (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 Agent 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 Agent
may reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Secured Parties to
exercise and enforce their 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 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 Agent’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 (as defined in the Note) under the
Note;

    


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

     

     

    
      
        
        

      

      
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    (c) The
failure by any Debtor to observe or perform any of its obligations hereunder for
five (5) business days after delivery to such Debtor of notice of such failure
by or on behalf of a 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; or

    


    (d) If any
material provision of this Agreement shall at any time for any reason be
declared to be null and void, or the validity or enforceability thereof shall be
contested by any Debtor, or a proceeding shall be commenced by any Debtor, or by
any governmental authority having jurisdiction over any Debtor, seeking to
establish the invalidity or unenforceability thereof, or any Debtor shall deny
that any Debtor has any material liability or obligation purported to be created
under this Agreement.

    


    7. Duty to Hold in
Trust.

    


    (a) Upon the
occurrence 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 Note 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 Parties and shall forthwith endorse
and transfer any such sums or instruments, or both, to the Secured Parties,
pro-rata in proportion to their respective then-currently outstanding principal
amount of the Note for application to the satisfaction of the
Obligations.

    


    (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 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 Parties; (ii) hold the same in trust on behalf of and for the benefit of
the Secured Parties; and (iii) deliver any and all certificates or instruments
evidencing the same to the Agent 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 Agent
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
Parties, acting through the Agent, shall have the right to exercise all of the
remedies conferred hereunder and under the Note and other Transaction Documents,
and the Secured Parties, acting through the Agent, shall have all the rights and
remedies of a secured party under the UCC.  Without limitation, the
Agent, for the benefit of the Secured Parties, shall have the following rights
and powers:

    
 

    
      
        
        

      

      
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    (i) The Agent
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
each Debtor shall assemble the Collateral and make it available to the Agent at
places which the Agent shall reasonably select, whether at such Debtor's
premises or elsewhere, and make available to the Agent, without rent, all of
such Debtor’s respective premises and facilities for the purpose of the Agent
taking possession of, removing or putting the Collateral in saleable or
disposable form.

    


    (ii) Upon notice to the Debtors by the Agent, 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 Agent shall have the right
to receive, for the benefit of the Secured Parties, any interest, cash dividends
or other payments on the Collateral and, at the option of the Agent, to exercise
in such Agent’s discretion all voting rights pertaining
thereto.  Without limiting the generality of the foregoing, the Agent
shall have the right (but not the obligation) to exercise all rights with
respect to the Collateral as 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 concerning or involving
the Collateral or any Debtor or any of its direct or indirect
subsidiaries.

    


    (iii) The Agent
shall have the right to operate the business of each Debtor 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
Agent 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 any Debtor or right of redemption of a Debtor, which are hereby
expressly waived.  Upon each such sale, lease, assignment or other
transfer of Collateral, the Agent, for the benefit of the Secured Parties, 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 Agent
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
Agent, on behalf of the Secured Parties, and to enforce the Debtors’ rights
against such account debtors and obligors.

     

     

    
      
        
        

      

      
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    (v) The
Agent, for the benefit of the Secured Parties, 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 Agent, on behalf of the Secured
Parties, or its designee.

    


    (vi) The Agent
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 Parties or any
designee or any purchaser of any Collateral.

    


    (b) The Agent 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 Agent may sell the Collateral without giving any
warranties and may specifically disclaim such warranties.  If the
Agent sells any of the Collateral on credit, the Debtors will only be credited
with payments actually made by the purchaser.  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 Agent’s rights and remedies hereunder,
including without limitation the Agent’s 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 Agent to further
exercise rights and remedies under this Section 8 or elsewhere provided by
agreement or applicable law, each Debtor hereby grants to the Agent, for the
benefit of the Agent and the Secured Parties, 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 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. Inter
Secured Party Rights; Transaction/Applications of Proceeds.

    


    (a) If an
Event of Default occurs and any party hereto collects proceeds pursuant to its
rights under any Obligations, the Agent shall be immediately notified and such
payment shall be shared with all of the other Secured Parties as set forth
above. Notwithstanding anything to the contrary contained in the Purchase
Agreement or any document executed in connection with the Obligations and
irrespective of: (i) the time, order or method of attachment or perfection of
the security interests created in favor of Secured Parties; (ii) the time or
order of filing or recording of financing statements or other documents filed or
recorded to perfect security interests in any Collateral; (iii) anything
contained in any filing or agreement to which any Secured Party now or hereafter
may be a party; and (iv) the rules for determining perfection or priority under
the UCC or any other law governing the relative priorities of secured creditors,
each of the Secured Parties acknowledges that (x) all other Secured Parties have
a valid security interest in the Collateral and (y) the security interests of
the Secured Parties in any Collateral pursuant to any outstanding Obligations
shall be pari
passu with each
other and enforced pursuant to the terms of this Agreement through the
Agent.  Each Secured Party, severally and not jointly with the other
Secured Parties, shall indemnify, defend, and hold harmless the other Secured
Parties against and in respect of any and all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries, and deficiencies,
including interest, penalties, and reasonable professional and attorneys’ fees,
including those arising from settlement negotiations, that the other Secured
Parties shall incur or suffer, which arise, result from, or relate to a breach
of, or failure by such Secured Party to perform under this
Agreement.

    
 

    
      
        
        

      

      
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    (b) 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 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, then to the reasonable attorneys’ fees
and expenses incurred by the Agent in enforcing the Secured Parties’ rights
hereunder and in connection with collecting, storing and disposing of the
Collateral, then to satisfaction of the Obligations, pro rata among the Secured
Parties (based on then-outstanding principal amounts of Note at the time of any
such determination), and then to the payment of any other amounts required by
applicable law, after which the Secured Parties 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 Parties are legally entitled, the Debtors will be
liable for the deficiency, together with interest thereon, at the rate of 20%
per annum or the lesser amount permitted by applicable law (the “Default Rate”), and
the reasonable fees of any attorneys employed by the Secured Parties to collect
such deficiency.  To the extent permitted by applicable law, each
Debtor waives all claims, damages and demands against the Secured Parties
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
Parties 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 Agent 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 Agent 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 Agent in its
attempt to satisfy any requirements under the Securities Laws applicable to the
sale of the Pledged Securities by the Agent.

     

    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 Agent.  The
Debtors shall also pay all other claims and charges which in the reasonable


     

     

    
      
        
        

      

      
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      opinion
of the Agent are reasonably likely to prejudice, imperil or otherwise affect the
Collateral or the Security Interests therein.  The Debtors will also,
upon demand, pay to the Agent 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 Agent, for the benefit of the Secured Parties, 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 Parties under the Note.  Until so paid, any fees payable
hereunder shall be added to the principal amount of the Note 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) neither the Agent nor any Secured Party (i) has 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) has 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.  Neither the Agent nor any Secured Party shall 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 Agent or any Secured Party
of any payment relating to any of the Collateral, nor shall the Agent or any
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 Agent or any
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 Agent or to which the
Agent or any Secured Party may be entitled at any time or times.

    


    13. Security Interests Absolute.
All rights of the Secured Parties and all obligations of the Debtors hereunder,
shall be absolute and unconditional, irrespective of: (a) any lack of validity
or enforceability of this Agreement, the Note, any other Transaction Documents
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 Note, any
other Transaction Documents 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 Parties 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 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 Parties 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,

     

     

    
      
        
        

      

      
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      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 Parties 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 Parties, then, in any such event, 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 Parties to proceed against any other
person or entity or to apply any Collateral
which the Secured Parties may hold at any time, or to marshal assets, or to
pursue any other remedy.  Each Debtor waives any defense arising by
reason of the application of the statute of limitations to any obligation
secured hereby.

    

    


    14. Term of Agreement. This
Agreement and the Security Interests shall terminate, automatically and without any action on the part of
the Agent or Secured Parties, on the date on which all payments under the
Note have been indefeasibly paid in full (or exchanged in full for securities
issued in connection with a Reverse Merger Financing (as defined in the Purchase
Agreement) pursuant to Section 4.7 of the Purchase Agreement) and all other
Obligations have been paid or discharged; provided, however, that all
indemnities of the parties hereto contained in this Agreement (including without
limitation Annex
B hereto) shall survive and remain operative and in full force and effect
regardless of the termination of this Agreement.  The Agent and Secured Parties shall, at the
Debtors’ request and expense, take any and all action required to discharge any
and all security interests and release to the Debtors any and all Collateral in
the Agent’s or Secured Parties’ possession or control.  The Secured
Parties hereby agree that the Debtors shall have the right to take all necessary
action to cause the termination and release of all security interests granted
hereunder upon termination of this Agreement.

    


    15. Power of Attorney; Further
Assurances.

    


    (a) Each
Debtor authorizes the Agent, and does hereby make, constitute and appoint the
Agent 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 Agent 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 Agent; (ii) 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) pay or discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on or threatened
against the Collateral; (iv) demand, collect, receive, compromise, settle and
sue for monies due in respect of the Collateral; (v) transfer any Intellectual
Property or provide licenses respecting any Intellectual Property; and (vi)
generally, at the option of the Agent, and at the expense of the Debtors, at any
time, or from time to time, execute and deliver any and all documents and
instruments and do all acts and things which the Agent deems necessary to
protect, preserve and realize

     

     

    
      
        
        

      

      
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      upon the
Collateral and the Security Interests granted therein in order to effect the
intent of this Agreement, the Note and other Transaction Documents 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 the generality of the
foregoing, after the occurrence and during the continuance of an Event of
Default, each 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 Agent, 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
Agent the grant or perfection of a perfected security interest in all the
Collateral under the UCC.

    


    (c) Each
Debtor hereby irrevocably appoints the Agent 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 Agent’s discretion, to take any action and
to execute any instrument which the Agent 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 Agent.  This power
of attorney is coupled with an interest and shall be irrevocable for the term of
this Agreement.

    


    16. Notices. All notices,
requests, demands and other communications hereunder shall be subject to the
notice provision of the Purchase Agreement.

    


    17. 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 Agent 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 Parties’ rights and remedies hereunder.

    


    18. Appointment of
Agent.  The Secured Parties hereby appoint Gemini Strategies,
LLC or its appointed agent to act as their agent (“Gemini” or “Agent”) for purposes
of exercising any and all rights and remedies of the Secured Parties hereunder.
Such appointment shall continue until revoked in writing by the Secured
Parties, at
which time the Secured Parties shall appoint a new Agent.  The
Agent shall have the rights, responsibilities and immunities set forth in Annex B
hereto.

     

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    
 

    19. Miscellaneous.

    


    (a) No course
of dealing between the Debtors and the Secured Parties, nor any failure to
exercise, nor any delay in exercising, on the part of the Secured Parties, any
right, power or privilege hereunder or under the Note 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 Parties with respect to the Collateral,
whether established hereby or by the Note 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, 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
Parties 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.

    


    (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.

    
 

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

       

       

    

    (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 each Secured Party (other than by
merger).  Any Secured Party may assign any or all of its rights under
this Agreement to any Person to whom such 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 Parties.”

    


    (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 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. 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
costs and expenses incurred with the investigation, preparation and prosecution
of such proceeding.

    


    (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 or e-mail
transmission, such signature shall create a valid binding obligation of the
party executing the same (or on whose behalf such signature is executed) with
the same force and effect as if such facsimile signature were the original
thereof.

    
 

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

       

       

    

    (j) All
Debtors (including without limitation any Additional Debtor joined hereto) shall
be jointly and severally be liable for the obligations of each Debtor to the
Secured Parties hereunder.

    


    (k) Each
Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured
Parties and 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 any violation of the terms or provisions of this Agreement or the
agreements underlying the Obligations or the negligence or willful misconduct of
the Indemnitee.  This indemnification provision is in addition to, and
not in limitation of, any other indemnification provision in the Note, the
Purchase Agreement 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 Agent or any Secured Party to liability as a partner or member in or of any
Debtor or any of its direct or indirect subsidiaries, nor shall the Agent or any
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 any such 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.

    


    [SIGNATURE
PAGES FOLLOW]

    
 

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    
 

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

    


    


    ENVISION SOLAR INTERNATIONAL,
INC., a California corporation

    


    


    By:/s/ Robert
Noble______________________________________

    Name:  Robert
Noble

    Title:    CEO

    


    ENVISION SOLAR CONSTRUCTION,
INC., a California corporation

    


    


    By:/s/ Robert
Noble______________________________________

    Name:  Robert
Noble

    Title:    CEO

    


    ENVISION SOLAR RESIDENTIAL,
INC., a California corporation

    


    


    By: /s/ Robert
Noble______________________________________

    Name:  Robert
Noble

    Title:    CEO

    


    ENVISION AFRICA, LLC, a
Delaware limited liability company

    


    


    By:/s/ Robert
Noble______________________________________

    Name:  Robert
Noble

    Title:    CEO

    


    


    


    [SIGNATURE
PAGE OF SECURED PARTY FOLLOWS]

     

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

     

    [SIGNATURE
PAGE OF SECURED PARTY TO ESII SECURITY AGREEMENT]

    


    


    


    
      	
               
      

            	
              GEMINI
      MASTER FUND, LTD.

            


    

    
      	
               
      

            	
              By:
      GEMINI STRATEGIES, LLC, as investment
manager

            


    

    


    


    By: /s/ Steven
Winters

    Name:  Steven
Winters

    Title:  Managing
Member

     

    
      	
               
      

            	
              GEMINI STRATEGIES, LLC,
      as Agent

            


    

    


    


    By: /s/ Steven
Winters

    Name:  Steven
Winters

    Title:  Managing
Member

     

    


    


    


    
      
         

      

      
        25

        
          

        

      

      
         

      

    

     
 

    ANNEX
A

    to

    SECURITY
AGREEMENT

    


    
      FORM
OF ADDITIONAL DEBTOR JOINDER

    

    


    Security
Agreement dated as of November ___, 2008 made by

    ENVISION
SOLAR INTERNATIONAL, INC.

    and its
subsidiaries party thereto from time to time, as Debtors

    to and in
favor of

    the
Secured Parties 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 Parties referred to above (or the Agent on their behalf), 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 PARTIES A SECURITY INTEREST IN
THE COLLATERAL OWNED BY IT 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 Parties (or the Agent on their behalf), and the Secured Parties 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 Parties.

    


               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:

     

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    ANNEX
B

    to

    SECURITY
AGREEMENT

    


    THE
AGENT

    


                          1.  Appointment. The Secured Parties
(all capitalized terms used herein and not otherwise defined shall have the
respective meanings provided in the Security Agreement to which this Annex B is
attached (the "Agreement")), by
their acceptance of the benefits of the Agreement, hereby designate Gemini
Strategies, LLC (“Gemini” or “Agent”) as the Agent
to act as specified herein and in the Agreement.  Each Secured Party
shall be deemed irrevocably to authorize the Agent to take such action on its
behalf under the provisions of the Agreement and any other Transaction Document
(as such term is defined in the Note) and to exercise such powers and to perform
such duties hereunder and thereunder as are specifically delegated to or
required of the Agent by the terms hereof and thereof and such other powers as
are reasonably incidental thereto.  The Agent may perform any of its
duties hereunder by or through its agents or employees.

    


                          2.
Nature of Duties.  The Agent shall
have no duties or responsibilities except those expressly set forth in the
Agreement.  Neither the Agent nor any of its partners, members,
shareholders, officers, directors, employees or agents shall be liable for any
action taken or omitted by it as such under the Agreement or hereunder or in
connection herewith or therewith, be responsible for the consequence of any
oversight or error of judgment or answerable for any loss, unless caused solely
by its or their gross negligence or willful misconduct as determined by a final
judgment (not subject to further appeal) of a court of competent
jurisdiction.  The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of the Agreement or
any other Transaction Document a fiduciary relationship in respect of any Debtor
or any Secured Party; and nothing in the Agreement or any other Transaction
Document, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of the Agreement or any other
Transaction Document except as expressly set forth herein and
therein.

    


                          3.
Lack of Reliance on the
Agent.  Independently and without reliance upon the Agent, each
Secured Party, to the extent it deems appropriate, has made and shall continue
to make (i) its own independent investigation of the financial condition and
affairs of the Company and its subsidiaries in connection with such Secured
Party’s investment in the Debtors, the creation and continuance of the
Obligations, the transactions contemplated by the Transaction Documents, and the
taking or not taking of any action in connection therewith, and (ii) its own
appraisal of the creditworthiness of the Company and its subsidiaries, and of
the value of the Collateral from time to time, and the Agent shall have no duty
or responsibility, either initially or on a continuing basis, to provide any
Secured Party with any credit, market or other information with respect thereto,
whether coming into its possession before any Obligations are incurred or at any
time or times thereafter.  The Agent shall not be responsible to the
Debtors or any Secured Party for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith, or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectability, priority or
sufficiency of the Agreement or any other Transaction Document, or for the
financial condition of the Debtors or the value of any of the Collateral, or be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of the Agreement or any other
Transaction Document, or the financial condition of the Debtors, or the value of
any of the Collateral, or the existence or possible existence of any default or
Event of Default under the Agreement, the Note or any of the other Transaction
Documents.

     

     

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

    
 

                          4.
Certain Rights of the
Agent.  The Agent shall have the right to take any action with
respect to the Collateral, on behalf of all of the Secured
Parties.  To the extent practical, the Agent shall request
instructions from the Secured Parties with respect to any material act or action
(including failure to act) in connection with the Agreement or any other
Transaction Document, and shall be entitled to act or refrain from acting in
accordance with the instructions of Secured Parties; if such instructions are
not provided despite the Agent’s request therefor, the Agent shall be entitled
to refrain from such act or taking such action, and if such action is taken,
shall be entitled to appropriate indemnification from the Secured Parties in
respect of actions to be taken by the Agent; and the Agent shall not incur
liability to any person or entity by reason of so refraining.  Without
limiting the foregoing, (a) no Secured Party shall have any right of action
whatsoever against the Agent as a result of the Agent acting or refraining from
acting hereunder in accordance with the terms of the Agreement or any other
Transaction Document, and the Debtors shall have no right to question or
challenge the authority of, or the instructions given to, the Agent pursuant to
the foregoing, and (b) the Agent shall not be required to take any action which
the Agent believes (i) could reasonably be expected to expose it to personal
liability or (ii) is contrary to this Agreement, the Transaction Documents or
applicable law.

    


                          5.  Reliance.  The Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, statement, certificate, telex, teletype or
telecopier message, cablegram, radiogram, order or other document or telephone
message signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to the Agreement and the other Transaction
Documents and its duties thereunder, upon advice of counsel selected by it, and
upon all other matters pertaining to this Agreement and the other Transaction
Documents and its duties thereunder, upon advice of other experts selected by
it.  Anything to the contrary notwithstanding, the Agent shall have no
obligation whatsoever to any Secured Party to assure that the Collateral exists
or is owned by the Debtors or is cared for, protected or insured or that the
liens granted pursuant to the Agreement have been properly or sufficiently or
lawfully created, perfected, or enforced or are entitled to any particular
priority.

    


                          6.  Indemnification.  To the extent
that the Agent is not reimbursed and indemnified by the Debtors, the Secured
Parties will jointly and severally reimburse and indemnify the Agent from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against the
Agent in performing its duties hereunder or under the Agreement or any other
Transaction Document, or in any way relating to or arising out of the Agreement
or any other Transaction Document except for those determined by a final
judgment (not subject to further appeal) of a court of competent jurisdiction to
have resulted solely from the Agent's own gross negligence or willful
misconduct.  Prior to taking any action hereunder as Agent, the Agent
may require each Secured Party to deposit with it sufficient sums as it
determines in good faith is necessary to protect the Agent for costs and
expenses associated with taking such action.

     

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    
 

                          7.  Resignation by the Agent.

    


    (a)           The
Agent may resign from the performance of all its functions and duties under the
Agreement and the other Transaction Documents at any time by giving 30 days'
prior written notice (as provided in the Agreement) to the Debtors and the
Secured Parties.  Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c)
below.

    


    (b)           Upon
any such notice of resignation, the Secured Parties shall appoint a successor
Agent hereunder.

    


    (c)           If
a successor Agent shall not have been so appointed within said 30-day period,
the Agent shall then appoint a successor Agent who shall serve as Agent until
such time, if any, as the Secured Parties appoint a successor Agent as provided
above.  If a successor Agent has not been appointed within such 30-day
period, the Agent may petition any court of competent jurisdiction or may
interplead the Debtors and the Secured Parties in a proceeding for the
appointment of a successor Agent, and all fees, including, but not limited to,
extraordinary fees associated with the filing of interpleader and expenses
associated therewith, shall be payable by the Debtors on demand.

    


    (d)           Upon
the acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent and the retiring
Agent shall be discharged from its duties and obligations under the
Agreement.  After any retiring Agent’s resignation or removal hereunder as
Agent, the provisions of the Agreement including this Annex B shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Agent.

    


                          8.  Rights with respect to
Collateral.  Each Secured
Party agrees with all other Secured Parties and the Agent (i) that it shall not,
and shall not attempt to, exercise any rights with respect to its security
interest in the Collateral, whether pursuant to any other agreement or otherwise
(other than pursuant to this Agreement), or take or institute any action against
the Agent or any of the other Secured Parties in respect of the Collateral or
its rights hereunder (other than any such action arising from the breach of this
Agreement) and (ii) that such Secured Party has no other rights with respect to
the Collateral other than as set forth in this Agreement and the other
Transaction Documents.

    


    
      
         

      

      
        29

        
          

        

      

      
         

      

    

     
 

    DISCLOSURE
SCHEDULES

    


    


    Schedule
A

    


    Principal Place of Business
and Location of Collateral

    


    


    4225
Executive Square, Suite 1000, San Diego, California 92037.

    


    


    Schedule
B

    


    Exceptions

    


    None

    


    


    Schedule
C and D

    


    Legal Names; Organizational
and Filing Jurisdictions and Identification Numbers

    


    
      	
              Name

            	
              Entity
      Type

            	
              Jurisdiction

            	
              Jurisdiction
      ID Number (NOT EIN)

            	
              Address

            
	
              Envision
      Solar International, Inc.

            	
              Corporation

            	
              California

            	
               

               

            	
              4225
      Executive Square

              Suite
      1000

              San
      Diego, CA 92037

            
	
              Envision
      Solar Construction, Inc.

            	
              Corporation

            	
              California

            	
               

               

            	
              4225
      Executive Square

              Suite
      1000

              San
      Diego, CA 92037

            
	
              Envision
      Solar Residential, Inc.

            	
              Corporation

            	
              California

            	
               

               

            	
              4225
      Executive Square

              Suite
      1000

              San
      Diego, CA 92037

            
	
              Envision
      Africa, LLC

            	
              Limited
      Liability Company

            	
              Delaware

            	
               

               

            	
              4225
      Executive Square

              Suite
      1000

              San
      Diego, CA 92037

            


    

     

    [Note:
Company to provide ID #s or state that they don’t exist.]

    


    


    Schedule
E

    


    Other Names; Mergers and
Acquisitions

    


    None

    


    


    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    Schedule
F

    


    Intellectual
Property

    


    [Note:
Does the company have any domain names, such as
“envisionsolar.com”?]

    


    Patent
Applications

    


    
      	
              Owner

            	
              Short
      Title

            	
              Country

            	
              Status

            	
              Application
      Number

            	
              Filing
      Date

            	
              Inventors

            
	
              Envision
      Solar International, Inc.

            	
              Solar
      Module Racking and Electrical Connection System

            	
              USA

            	
              Pending

            	
              61/035,573

            	
              3/11/2008

            	
              R.
      Noble, W. Adelson, M. Colby

            
	
              Envision
      Solar International, Inc.

            	
              Photovoltaic
      System and Method

            	
              USA

            	
              Pending

            	
              12/046,113

            	
              3/11/2008

            	
              R.
      Noble, N. Zeller, W. Adelson, M. Colby, J. Labrum

            
	
              Envision
      Solar International, Inc.

            	
              Support
      System for a Photovoltaic System

            	
              USA

            	
              Pending

            	
              11/842,484

            	
              8/21/2007

            	
              R.
      Noble, N. Zeller, W. Adelson

            
	
              Envision
      Solar International, Inc.

            	
              Sun
      Tracking Solar Panels

            	
              USA

            	
              Pending

            	
              12/025,192

            	
              2/4/2008

            	
              R.
      Noble, W. Adelson,

            


    

    


    


    Trademarks
and Trademark Applications

    


    
      	
              Owner

            	
              Trademark

            	
              Country

            	
              Status

            	
              Application/
      Serial Number

            	
              Filing
      Date

            	
              Issuance
      Date

            	
              Registration  Number

            
	
              Envision
      Solar International, Inc.

            	
              LifePort

            	
              USA

            	
              Registered.

            	
              77115387

            	
              2/24/2007

            	
              4/1/2008

            	
              3,406,252

            
	
              Envision
      Solar International, Inc.

            	
              LifeShade

            	
              USA

            	
              Request
      for first extension of time to file statement of use has been
      granted.

            	
              77126066

            	
              3/8/2008

            	 
      	 
      


       

       

      
        
           

        

        
          31

          
            

          

        

        
           

        

      

       

       

      
        
          	Owner	Trademark	Country	Status	Application/
      Serial Number	Filing
      Date	Issuance
      Date	Registration  Number
	
                  Envision
      Solar International, Inc.

                	
                  LifeCanopy

                	
                  USA

                	
                  Request
      for first extension of time to file statement of use has been
      granted.

                	
                  77126053

                	
                  3/8/2007

                	 
      	 
      
	
                  Envision
      Solar International, Inc.

                	
                  LifeCharge

                	
                  USA

                	
                  Request
      for first extension of time to file statement of use has been
      granted.

                	
                  77126081

                	
                  3/8/2007

                	 
      	 
      
	
                  Envision
      Solar International, Inc.

                	
                  Solar
      Row

                	
                  USA

                	
                  Abandoned.
      Failure to respond or late response.

                	
                  77126003

                	
                  3/8/2007

                	 
      	 
      
	
                  Envision
      Solar International, Inc.

                	
                  Solar
      Canopy

                	
                  USA

                	
                  Abandoned.
      Failure to respond or late response.

                	
                  77126025

                	
                  3/8/2007

                	 
      	 
      
	
                  Envision
      Solar International, Inc.

                	
                  SolarOrchard

                	
                  USA

                	
                  Abandoned.
      Failure to respond or late response.

                	
                  77126175

                	
                  3/8/2007

                	 
      	 
      
	
                  Envision
      Solar International, Inc.

                	
                  Plant
      a Solar Tree

                	
                  USA

                	
                  Abandoned.
      Failure to respond or late response.

                	
                  77172347

                	
                  5/3/2007

                	 
      	 
      
	
                  Envision
      Solar International, Inc.

                	
                  Green
      Shade

                	
                  USA

                	
                  Abandoned.
      Failure to respond or late response.

                	
                  77126161

                	
                  3/8/2007

                	 
      	 
      
	
                  Envision
      Solar International, Inc.

                	
                  Solar
      Tree

                	
                  USA

                	
                  Request
      for fourth extension of time to file statement of use
    granted.

                	
                  78624896

                	
                  5/6/2005

                	 
      	 
      


        

         

         

        
          
             

          

          
            32

            
              

            

          

          
             

          

        

         

         

        
          	Owner	Trademark	Country	Status	Application/
      Serial Number	Filing
      Date	Issuance
      Date	Registration  Number
	
                  Envision
      Solar International, Inc.

                	
                  Beyond
      Parking

                	
                  USA

                	
                  Abandoned.
      No statement of use filed after notice of allowance was
      issued.

                	
                  77181581

                	
                  5/15/2007

                	 
      	 
      
	
                  Envision
      Solar International, Inc.

                	
                  Be
      Cool Park Solar

                	
                  USA

                	
                  Abandoned.
      No statement of use filed after notice of allowance was
      issued.

                	
                  77192558

                	
                  5/29/2007

                	 
      	 
      


        

      

    

    


    


    Material
Licenses

    


    Agreement
by and between Envision Solar, LLC (a predecessor of the Company) and Kyocera
Solar, Inc., dated December 19, 2006 for use of the trademarks “Solar Grove” and
“Solar Tree.”

    


    
      	
              Owner

            	
              Trademark

            	
              Country

            	
              Status

            	
              Application/
      Serial Number

            	
              Filing
      Date

            	
              Issuance
      Date

            	
              Registration  Number

            
	
              Kyocera
      Solar, Inc.

            	
              SOLAR
      GROVE

            	
              USA

            	
              Request
      for fourth extension of time to file statement of use
    granted.

            	
              78564619

            	
              2/10/2005

            	 
      	 
      
	
              Kyocera
      Solar, Inc.

            	
              SOLAR  TREE

            	
              USA

            	
              Request
      for fourth extension of time to file statement of use
    granted.

            	
              78624896

            	
              5/6/2005

            	 
      	 
      


    

    


    


    Schedule
G

    


    Government Account
Debtors

    


    None

    


    
      
         

      

      
        33

        
          

        

      

      
         

      

    

    


    Schedule
H

    


    Pledged
Securities

    


    All
equity interests and debt securities in the entities listed in Schedule C
above.

    


    


    Schedule
I

    


    Permitted Licenses and
Dispositions

    


    None

    
 

     

     

     

     34