Exhibit
      10.11

    


    SECURITY
      AGREEMENT

    


    SECURITY
      AGREEMENT (this “Agreement”),
      dated
      as of June 28, 2006, by and among Enigma Software Group, Inc., a Delaware
      corporation (“Company”),
      and
      Dutchess Private Equities Fund, LP & Dutchess Private Equities Fund, II, LP,
      both Delaware Limited partnerships, as the secured parties signatory hereto
      and
      their respective endorsees, transferees and assigns (collectively, the
“Secured
      Party”)
      (sometimes hereinafter the Company and the Secured Party are collectively
      referred to as the “parties”). 

    


    WITNESSETH:

    


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

    


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

    


    NOW,
      THEREFORE, in consideration of the agreements herein contained and for other
      good and valuable consideration, the receipt and sufficiency of which is hereby
      acknowledged, the parties hereto hereby agree as follows:

    


    1.    Certain
      Definitions.
      As used
      in this Agreement, the following terms shall have the meanings set forth in
      this
      Section 1. Terms used but not otherwise defined in this Agreement that are
      defined in Article 9 of the UCC (such as “general
      intangibles”
and
      “proceeds”)
      shall
      have the respective meanings given such terms in Article 9 of the
      UCC.

    


    
      	 	
              (a)

            	
              “Collateral”
                means
                the Company Collateral and Share Collateral as described
                herein.

            


    

     

    
      	 	
              (b)

            	
              "Company
                Collateral” means
                the collateral in which the Secured Party is granted a security interest
                by this Agreement and which shall include the following, whether
                presently
                owned or existing or hereafter acquired or coming into existence,
                and all
                additions and accessions thereto and all substitutions and replacements
                thereof, and all proceeds, products and accounts thereof, including,
                without limitation, all proceeds from the sale or transfer of the
                Company
                Collateral and of insurance covering the same and of any tort claims
                in
                connection therewith.

            


    

    
    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (i)

            	
              All
                Goods of the Company, including, without limitation, all machinery,
                inventory, equipment, computers, motor vehicles, trucks, tanks, boats,
                ships, appliances, furniture, special and general tools, fixtures,
                test
                and quality control devices and other equipment of every kind and
                nature
                and wherever situated, together with all documents of title and documents
                representing the same, all additions and accessions thereto, replacements
                therefor, all parts therefor, and all substitutes for any of the
                foregoing
                and all other items used and useful in connection with the Company’s
                businesses and all improvements thereto (collectively, the “Equipment”);
                and

            


    

    
      	 	
              (ii)

            	
              All
                of the Company’s contract rights and general intangibles, including,
                without limitation, all partnership interests, stock or other securities,
                licenses, distribution and other agreements, computer software development
                rights, leases, franchises, customer lists, quality control procedures,
                grants and rights, goodwill, trademarks, service marks, trade styles,
                trade names, patents, patent applications, copyrights, deposit accounts,
                and income tax refunds (collectively, the “General
                Intangibles”);
                and

            


    

    
      	 	
              (iii)

            	
              All
                Receivables of the Company including all insurance proceeds, and
                rights to
                refunds or indemnification whatsoever owing, together with all
                instruments, all documents of title representing any of the foregoing,
                all
                rights in any merchandising, goods, equipment, motor vehicles and
                trucks
                which any of the same may represent, and all right, title, security
                and
                guaranties with respect to each Receivable, including any right of
                stoppage in transit; and

            


    

    
      	 	
              (iv)

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

            


    

     

    
      	 	
              (c)

            	
              “Company”
                shall mean, collectively, Company and all of the subsidiaries of
                Company,
                a list of which is contained in Schedule
                A,
                attached hereto.

            


    

     

    
      	 	
              (d)

            	
              “Obligations”
                means all of the Company’s obligations under this Agreement and the
                Debentures, in each case, whether now or hereafter existing, voluntary
                or
                involuntary, direct or indirect, absolute or contingent, liquidated
                or
                unliquidated, whether or not jointly owed with others, and whether
                or not
                from time to time decreased or extinguished and later decreased,
                created
                or incurred, and all or any portion of such obligations or liabilities
                that are paid, to the extent all or any part of such payment is avoided
                or
                recovered directly or indirectly from the Secured Party as a preference,
                fraudulent transfer or otherwise as such obligations may be amended,
                supplemented, converted, extended or modified from time to
                time.

            


    

     

    
      	 	
              (e)

            	
              "Share
                Collateral" means
                any Shares of the Company's Common Stock, options to purchase Shares
                of
                Common Stock and preferred shares currently owned or hereinafter
                acquired
                by the Company's management and directors, whether individually owned
                or
                through an affiliate of an insider, including but not limited to:
                trusts,
                corporations and LLC's.,

            


    

    


    
      
        
        

      

      
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              (f)

            	
              “UCC”
                means the Uniform Commercial Code, as currently in effect in the
                Commonwealth of Massachusetts.

            


    

     

    2.    Grant
      of Security Interest.
      As an
      inducement for the Secured Party to purchase the Debentures and to secure the
      complete and timely payment, performance and discharge in full, as the case
      may
      be, of all of the Obligations, the Company hereby, unconditionally and
      irrevocably, pledges, grants and hypothecates to the Secured Party, a continuing
      security interest in, a continuing first lien upon, an unqualified right to
      possession and disposition of and a right of set-off against, in each case
      to
      the fullest extent permitted by law, all of the Company’s right, title and
      interest of whatsoever kind and nature in and to the Collateral (the
“Security
      Interest”).

     

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

     

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

     

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

     

    (c)    The
      Company is the sole owner of the Collateral (except for non-exclusive licenses
      granted by the Company in the ordinary course of business), free and clear
      of
      any liens, security interests, encumbrances, rights or claims, and is fully
      authorized to grant the Security Interest in and to pledge the Collateral.
      There
      is not on file in any governmental or regulatory authority, agency or recording
      office an effective financing statement, security agreement, license or transfer
      or any notice of any of the foregoing (other than those that have been filed
      in
      favor of the Secured Party pursuant to this Agreement) covering or affecting
      any
      of the Collateral. So long as this Agreement shall be in effect, the Company
      shall not execute and shall not knowingly permit to be on file in any such
      office or agency any such financing statement or other document or instrument
      (except to the extent filed or recorded in favor of the Secured Party pursuant
      to the terms of this Agreement).

    


    
      
        
        

      

      
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    (d)    No
      part
      of the Collateral has been judged invalid or unenforceable. No written claim
      has
      been received that any Collateral or the Company’s use of any Collateral
      violates the rights of any third party. There has been no adverse decision
      to
      the Company’s claim of ownership rights in or exclusive rights to use the
      Collateral in any jurisdiction or to the Company’s right to keep and maintain
      such Collateral in full force and effect, and there is no proceeding involving
      said rights pending or, to the best knowledge of the Company, threatened before
      any court, judicial body, administrative or regulatory agency, arbitrator or
      other governmental authority. 

     

    (e)    The
      Company shall at all times maintain its books of account and records relating
      to
      the Collateral at its principal place of business and its Collateral at the
      locations set forth on Schedule
      A
      attached
      hereto and may not relocate such books of account and records or tangible
      Collateral unless it delivers to the Secured Party at least 30 days prior to
      such relocation (i) written notice of such relocation and the new location
      thereof (which must be within the United States) and (ii) evidence that
      appropriate financing statements and other necessary documents have been filed
      and recorded and other steps have been taken to perfect the Security Interest
      to
      create in favor of the Secured Party valid, perfected and continuing first
      priority liens in the Collateral. 

     

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

     

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

     

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

     

    (i)    The
      Company shall at all times maintain the liens and Security Interest provided
      for
      hereunder as valid and perfected first priority liens and security interests
      in
      the Collateral in favor of the Secured Party until this Agreement and the
      Security Interest hereunder shall terminate pursuant to Section 11. The Company
      hereby agrees to defend the same against any and all persons. The Company shall
      safeguard and protect all Collateral for the account of the Secured Party.
      At
      the request of the Secured Party, the Company will sign and deliver to the
      Secured Party at any time or from time to time one or more financing statements
      pursuant to the UCC (or any other applicable statute) in form reasonably
      satisfactory to the Secured Party and will pay the cost of filing the same
      in
      all public offices wherever filing is, or is deemed by the Secured Party to
      be,
      necessary or desirable to effect the rights and obligations provided for herein.
      Without limiting the generality of the foregoing, the Company shall pay all
      fees, taxes and other amounts necessary to maintain the Collateral and the
      Security Interest hereunder, and the Company shall obtain and furnish to the
      Secured Party from time to time, upon demand, such releases and/or
      subordinations of claims and liens which may be required to maintain the
      priority of the Security Interest hereunder. 

    


    
      
        
        

      

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

     

    (k)    The
      Company shall keep and preserve its Equipment, Inventory and other tangible
      Collateral in good condition, repair and order and shall not operate or locate
      any such Collateral (or cause to be operated or located) in any area excluded
      from insurance coverage.

     

    (l)    The
      Company shall, within ten (10) days of obtaining knowledge thereof, advise
      the
      Secured Party promptly, in sufficient detail, of any substantial change in
      the
      Collateral, and of the occurrence of any event which would have a material
      adverse effect on the value of the Collateral or on the Secured Party’s security
      interest therein.

     

    (m)    The
      Company shall promptly execute and deliver to the Secured Party such further
      deeds, mortgages, assignments, security agreements, financing statements or
      other instruments, documents, certificates and assurances and take such further
      action as the Secured Party may from time to time request and may in its sole
      discretion deem necessary to perfect, protect or enforce its security interest
      in the Collateral 

     

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

     

    (o)    The
      Company will take all steps reasonably necessary to diligently pursue and seek
      to preserve, enforce and collect any rights, claims, causes of action and
      accounts receivable in respect of the Collateral.

     

    (p)    The
      Company shall promptly notify the Secured Party in sufficient detail upon
      becoming aware of any attachment, garnishment, execution or other legal process
      levied against any Collateral and of any other information received by the
      Company that may materially affect the value of the Collateral, the Security
      Interest or the rights and remedies of the Secured Party hereunder.

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

    (c)The
      failure by the Company to observe or perform any of its obligations hereunder
      for five (5) days after receipt by the Company of notice of such failure from
      the Secured Party.

     

    5.    Duty
      To Hold In Trust.
      Upon
      the occurrence of any Event of Default and at any time thereafter, the Company
      shall, upon receipt by it of any revenue, income or other sums subject to the
      Security Interest, whether payable pursuant to the Debentures or otherwise,
      or
      of any check, draft, note, trade acceptance or other instrument evidencing
      an
      obligation to pay any such sum, hold the same in trust for the Secured Party
      and
      shall forthwith endorse and transfer any such sums or instruments, or both,
      to
      the Secured Party for application to the satisfaction of the
      Obligations.

     

    6.    Rights
      and Remedies Upon Default.
      Upon
      occurrence of any Event of Default and at any time thereafter, the Secured
      Party
      shall have the right to exercise all of the remedies conferred hereunder and
      under the Debentures, and the Secured Party shall have all the rights and
      remedies of a secured party under the UCC and/or any other applicable law
      (including the Uniform Commercial Code of any jurisdiction in which any
      Collateral is then located). Without limitation, the Secured Party shall have
      the following rights and powers:

     

    (a)    The
      Secured Party shall have the right to take possession of the Collateral set
      forth in Section 1 (a), and, for that purpose, enter, with the aid and
      assistance of any person, any premises where the Collateral, or any part
      thereof, is or may be placed and remove the same, and the Company shall assemble
      the Collateral and make it available to the Secured Party at places which the
      Secured Party shall reasonably select, whether at the Company’s premises or
      elsewhere, and make available to the Secured Party, without rent, all of the
      Company’s respective premises and facilities for the purpose of the Secured
      Party taking possession of, removing or putting the Collateral in saleable
      or
      disposable form.

     

    
      
        
        

      

      
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    (b)   The
      Secured Party shall have the right to operate the business of the Company using
      the Collateral and shall have the right to assign, sell, lease or otherwise
      dispose of and deliver all or any part of the Collateral, at public or private
      sale or otherwise, either with or without special conditions or stipulations,
      for cash or on credit or for future delivery, in such parcel or parcels and
      at
      such time or times and at such place or places, and upon such terms and
      conditions as the Secured Party may deem reasonable, all without (except as
      shall be required by applicable statute and cannot be waived) advertisement
      or
      demand upon or notice to the Company or right of redemption of the Company,
      which are hereby expressly waived. Upon each such sale, lease, assignment or
      other transfer of Collateral, the Secured Party may, unless prohibited by
      applicable law which cannot be waived, purchase all or any part of the
      Collateral being sold, free from and discharged of all trusts, claims, right
      of
      redemption and equities of the Company, which are hereby waived and
      released.

     

    7.    Applications
      of Proceeds.
      The
      proceeds of any such sale, lease or other disposition of the Collateral
      hereunder shall be applied first, to the expenses of retaking, holding, storing,
      processing and preparing for sale, selling, and the like (including, without
      limitation, any taxes, fees and other costs incurred in connection therewith)
      of
      the Collateral, to the reasonable attorneys’ fees and expenses incurred by the
      Secured Party in enforcing its rights hereunder and in connection with
      collecting, storing and disposing of the Collateral, and then to satisfaction
      of
      the Obligations, and to the payment of any other amounts required by applicable
      law, after which the Secured Party shall immediately pay to the Company any
      surplus proceeds. If, upon the sale, license or other disposition of the
      Collateral, the proceeds thereof are insufficient to pay all amounts to which
      the Secured Party is legally entitled, the Company will be liable for the
      deficiency, together with interest thereon, at the rate of 18% per annum (the
      “Default
      Rate”),
      and
      the reasonable fees of any attorneys employed by the Secured Party to collect
      such deficiency. To the extent permitted by applicable law, the Company waives
      all claims, damages and demands against the Secured Party arising out of the
      repossession, removal, retention or sale of the Collateral, unless due to the
      gross negligence or willful misconduct of the Secured Party.

     

    8.    Costs
      and Expenses. The
      Company agrees to pay all out-of-pocket fees, costs and expenses incurred in
      connection with any filing required hereunder, including without limitation,
      any
      financing statements, continuation statements, partial releases and/or
      termination statements related thereto or any expenses of any searches
      reasonably required by the Secured Party. The Company shall also pay all other
      claims and charges which in the reasonable opinion of the Secured Party might
      prejudice, imperil or otherwise affect the Collateral or the Security Interest
      therein. The Company will also, upon demand, pay to the Secured Party the amount
      of any and all reasonable expenses, including the reasonable fees and expenses
      of its counsel and of any experts and agents, which the Secured Party may incur
      in connection with (i) the enforcement of this Agreement, (ii) the custody
      or
      preservation of, or the sale of, collection from, or other realization upon,
      any
      of the Collateral, or (iii) the exercise or enforcement of any of the rights
      of
      the Secured Party under the Debentures. Until so paid, any fees payable
      hereunder shall be added to the principal amount of the Debentures and shall
      bear interest at the Default Rate.

     

    
      
        
        

      

      
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    9.    Responsibility
      for Collateral.
      The
      Company assumes all liabilities and responsibility in connection with all
      Collateral, and the obligations of the Company hereunder or under the
      Transaction Documents shall in no way be affected or diminished by reason of
      the
      loss, destruction, damage or theft of any of the Collateral or its
      unavailability for any reason. 

     

    10.   Security
      Interest Absolute.
      All
      rights of the Secured Party and all Obligations of the Company hereunder, shall
      be absolute and unconditional, irrespective of: (a) any lack of validity or
      enforceability of this Agreement, the Debentures, the Warrants or any agreement
      entered into in connection with the foregoing, or any portion hereof or thereof;
      (b) any change in the time, manner or place of payment or performance of, or
      in
      any other term of, all or any of the Obligations, or any other amendment or
      waiver of or any consent to any departure from the Debentures, the Warrants
      or
      any other agreement entered into in connection with the foregoing; (c) any
      exchange, release or nonperfection of any of the Collateral, or any release
      or
      amendment or waiver of or consent to departure from any other collateral for,
      or
      any guaranty, or any other security, for all or any of the Obligations; (d)
      any
      action by the Secured Party to obtain, adjust, settle and cancel in its sole
      discretion any insurance claims or matters made or arising in connection with
      the Collateral; or (e) any other circumstance which might otherwise constitute
      any legal or equitable defense available to the Company, or a discharge of
      all
      or any part of the Security Interest granted hereby. Until the Obligations
      shall
      have been paid and performed in full, the rights of the Secured Party shall
      continue even if the Obligations are barred for any reason, including, without
      limitation, the running of the statute of limitations or bankruptcy. The Company
      expressly waives presentment, protest, notice of protest, demand, notice of
      nonpayment and demand for performance. In the event that at any time any
      transfer of any Collateral or any payment received by the Secured Party
      hereunder shall be deemed by final order of a court of competent jurisdiction
      to
      have been a voidable preference or fraudulent conveyance under the bankruptcy
      or
      insolvency laws of the United States, or shall be deemed to be otherwise due
      to
      any party other than the Secured Party, then, in any such event, the Company’s
      obligations hereunder shall survive cancellation of this Agreement, and shall
      not be discharged or satisfied by any prior payment thereof and/or cancellation
      of this Agreement, but shall remain a valid and binding obligation enforceable
      in accordance with the terms and provisions hereof. The Company waives all
      right
      to require the Secured Party to proceed against any other person or to apply
      any
      Collateral which the Secured Party may hold at any time, or to marshal assets,
      or to pursue any other remedy. The Company waives any defense arising by reason
      of the application of the statute of limitations to any obligation secured
      hereby.

     

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

     

    
      
        
        

      

      
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    12.   Power
      of Attorney; Further Assurances.

     

    (a)    The
      Company authorizes the Secured Party, and does hereby make, constitute and
      appoint it, and its respective officers, agents, successors or assigns with
      full
      power of substitution, as the Company’s true and lawful attorney-in-fact, with
      power, in its own name or in the name of the Company, to, after the occurrence
      and during the continuance of an Event of Default (i) endorse any notes, checks,
      drafts, money orders, or other instruments of payment (including payments
      payable under or in respect of any policy of insurance) in respect of the
      Collateral that may come into possession of the Secured Party; (ii) to sign
      and
      endorse any UCC financing statement or any invoice, freight or express bill,
      bill of lading, storage or warehouse receipts, drafts against debtors,
      assignments, verifications and notices in connection with accounts, and other
      documents relating to the Collateral; (iii) to pay or discharge taxes, liens,
      security interests or other encumbrances at any time levied or placed on or
      threatened against the Collateral; (iv) to demand, collect, receipt for,
      compromise, settle and sue for monies due in respect of the Collateral; and
      (v)
      generally, to do, at the option of the Secured Party, and at the Company’s
      expense, at any time, or from time to time, all acts and things which the
      Secured Party deems necessary to reasonably protect, preserve and realize upon
      the Collateral and the Security Interest granted therein in order to effect
      the
      intent of this Agreement, the Debentures and the Warrants, all as fully and
      effectually as the Company might or could do; and the Company hereby ratifies
      all that said attorney shall lawfully do or cause to be done by virtue hereof.
      This power of attorney is coupled with an interest and shall be irrevocable
      for
      the term of this Agreement and thereafter as long as any of the Obligations
      shall be outstanding.

     

    (b)    On
      a
      continuing basis, the Company will make, execute, acknowledge, deliver, file
      and
      record, as the case may be, in the proper filing and recording places in any
      jurisdiction, including, without limitation, the jurisdictions indicated on
      Schedule
      B,
      attached hereto, all such instruments, and take all such action as may
      reasonably be deemed necessary or advisable, or as reasonably requested by
      the
      Secured Party, to perfect the Security Interest granted hereunder and otherwise
      to carry out the intent and purposes of this Agreement, or for assuring and
      confirming to the Secured Party the grant or perfection of a security interest
      in all the Collateral.

     

    (c)    The
      Company hereby irrevocably appoints the Secured Party as the Company’s
      attorney-in-fact, with full authority in the place and stead of the Company
      and
      in the name of the Company, from time to time in the Secured Party’s discretion,
      to take any action and to execute any instrument which the Secured Party may
      deem necessary or advisable to accomplish the purposes of this Agreement,
      including the filing, in its sole discretion, of one or more financing or
      continuation statements and amendments thereto, relative to any of the
      Collateral without the signature of the Company where permitted by
      law.

     

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

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      	If to the Company:	Colorado Stark
              Enigma
                Software Group, Inc.

              2
                Stamford Landing, Suite 100

              Stamford,
                CT 06902 

              Telephone:
                (888) 360-0646 

              Facsimile:
                (203) 621-3334 

            
	 	 
	If to the Secured
              Party: 	
              Dutchess
                Capital Management, LLC 

              Douglas
                Leighton

              50
                Commonwealth Ave, Suite 2

              Boston,
                MA 02116

              (617)
                301-4700

              (617)
                249-0947

            


    

     

    14.   Other
      Security.
      To the
      extent that the Obligations are now or hereafter secured by property other
      than
      the Collateral or by the guarantee, endorsement or property of any other person,
      firm, corporation or other entity, then the Secured Party shall have the right,
      in its sole discretion, to pursue, relinquish, subordinate, modify or take
      any
      other action with respect thereto, without in any way modifying or affecting
      any
      of the Secured Party’s rights and remedies hereunder.

     

    15.    Miscellaneous.

     

    (a)    No
      course
      of dealing between the Company and the Secured Party, nor any failure to
      exercise, nor any delay in exercising, on the part of the Secured Party, any
      right, power or privilege hereunder or under the Debentures shall operate as
      a
      waiver thereof; nor shall any single or partial exercise of any right, power
      or
      privilege hereunder or thereunder preclude any other or further exercise thereof
      or the exercise of any other right, power or privilege.

     

    (b)    All
      of
      the rights and remedies of the Secured Party with respect to the Collateral,
      whether established hereby or by the Debentures or by any other agreements,
      instruments or documents or by law shall be cumulative and may be exercised
      singly or concurrently.

     

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

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    (g)    Each
      party shall take such further action and execute and deliver such further
      documents as may be necessary or appropriate in order to carry out the
      provisions and purposes of this Agreement.

     

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

     

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

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (j)    This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed shall be deemed to be an original and, all of which taken together
      shall constitute one and the same Agreement. In the event that any signature
      is
      delivered by facsimile transmission, such signature shall create a valid binding
      obligation of the party executing (or on whose behalf such signature is
      executed) the same with the same force and effect as if such facsimile signature
      were the original thereof.

    


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        12

        
          

        

      

      
        
        

      

    

    


    


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

     

    
      	 	
               

              ENIGMA
                SOFTWARE GROUP, INC. 

              


              By:
                /s/
                Colorado Stark     

              Name: Colorado
                Stark

              Title:
                 Executive
                Chairman

              


              By:
                /s/
                Alvin Estevez    

              Name:
                Alvin Estevez 

              Title:
                President and Chief Executive Officer 

              


              By:
                /s/
                Richard M. Scarlata    

              Name:
                Richard M. Scarlata

              Title:
                 Chief
                Financial Officer

              


              DUTCHESS
                PRIVATE EQUITIES FUND, L.P.

              DUTCHESS
                PRIVATE EQUITIES FUND, II, L.P.

              BY
                ITS GENERAL PARTNER DUTCHESS

              CAPITAL
                MANAGEMENT, LLC 

               

              By:
                : /s/
                Douglas H. Leighton

              Name:
                Douglas H. Leighton

              Title:
                A Managing Member 

            


    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      A

    Principal
      Place of Business of the Company:

    


     

    Locations
      Where Collateral is Located or Stored:

     

    


    List
      of Subsidiaries of the Company including EIN:

    


     

    SCHEDULE
      B

    


    


    Jurisdictions:

     

    
      
        
        

      

      
        14