exhibit_10-2.htm


    
      

    

    Exhibit
10.2

    
 

    SECURITY
AGREEMENT

    


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

    


    W
I T N E S S E T H

     

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

    


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

    


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

    


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

    


    1.           Certain Definitions. As used
in this Agreement, the following terms shall have the meanings set forth in this
Section 1.  Terms used but not otherwise defined in this Agreement
that are defined in Article 9 of the UCC (including the terms “account”,
“chattel paper”, “commercial tort claim”, “deposit account”, “document”,
“equipment”, “fixtures”, “general intangibles”, “goods”, “instruments”,
“inventory”, “investment property”, “letter-of-credit rights”, “proceeds”,
“securities” and “supporting obligations”) shall have the respective
meanings given such terms in Article 9 of the UCC.

    


    (a)                 “Collateral” means the
collateral in which the Secured Party is granted a security interest by
this Agreement and which shall include the following personal property of the
Debtors, whether presently owned or existing or hereafter acquired or coming
into existence, wherever situated, and all additions and accessions thereto and
all substitutions and replacements thereof, and all proceeds, products and
accounts thereof, including, without limitation, all proceeds from the sale or
transfer of the Collateral and of insurance covering the same and of any
tort claims in connection therewith, and all
dividends, interest, cash, notes, securities, equity interest or other property
at any time and from time to time acquired, receivable or otherwise distributed in respect of, or in exchange for, any or all of
the Pledged Securities (as defined below):

     


    
      
         


      

      
        1

        
          

        

      

      
         


      

    


     

    


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

    


    (ii)              All
contract rights and other general intangibles, including, without limitation,
all partnership interests, membership interests, stock or other securities,
rights under any of the Organizational Documents,
agreements related to the Pledged Securities, licenses, distribution and other
agreements, computer software (whether “off-the-shelf”, licensed from any third
party or developed by any Debtor), computer software development rights, leases,
franchises, customer lists, quality control procedures, grants and rights,
goodwill, trademarks, service marks, trade styles, trade names, patents, patent
applications, copyrights, and income tax refunds; 

    


    (iii)            All
accounts, together with all instruments, all documents of title representing any
of the foregoing, all rights in any merchandising, goods, equipment, motor
vehicles and trucks which any of the same may represent, and all right, title,
security and guaranties with respect to each account, including any right of
stoppage in transit; 

    


    
      	
            	
              (iv) 

            	
              All
      documents, letter-of-credit rights, instruments and chattel
      paper;

            


    

    


    
      	
            	
              (v) 

            	
              All
      commercial tort claims;

            


    

    


    
      	
            	
              (vi) 

            	
              All
      deposit accounts and all cash (whether or not deposited in such deposit
      accounts);

            


    

    


    
      	
            	
              (vii) 

            	
              All
      investment property;

            


    

    


    
      	
            	
              (viii) 

            	
              All
      supporting obligations;

            


    

    


    
      	
            	
              (ix) 

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

            


    

     


    
      
         


      

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

    


    Without limiting the generality of the foregoing, the
“Collateral” shall include all
investment property and general intangibles
respecting ownership and/or other equity interests in each Guarantor, including,
without limitation, the shares of capital stock and the other equity interests
listed on Schedule H hereto (as the same may be modified from time
to time pursuant to the terms hereof), and
any other shares of capital stock and/or other equity interests of any other
direct or indirect subsidiary of any Debtor obtained in the future, and, in each
case, all certificates representing such shares and/or equity interests
and, in each case, all rights, options, warrants, stock, other securities and/or
equity interests that may hereafter be received, receivable or distributed in
respect of, or exchanged for, any of the foregoing and all rights arising under
or in
connection with the Pledged Securities, including, but not limited to, all
dividends, interest and cash.

     

    Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an assignment of any
asset which, in the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise prohibited by applicable
law (in each case to the extent that such applicable law is not overridden by
Sections 9-406, 9-407 and/or 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 Secured Party may
reasonably request.

    


    (d)             
   “Obligations” means
all of the liabilities and obligations (primary, secondary, direct,
contingent, sole, joint or several) due or to become due, or that are now or may
be hereafter contracted or acquired, or owing, of any Debtor to the Secured
Party under this Agreement, the Notes, the Purchase Agreement, the Guaranty and
any other instruments, agreements or other documents executed and/or delivered
in connection herewith or therewith, in each case, whether now or hereafter
existing, voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others, and whether
or not from time to time decreased or extinguished and later increased, created
or incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from the Secured Party as a preference, fraudulent
transfer or otherwise as such obligations may be amended, supplemented,
converted, extended or modified from time to time.  Without limiting
the generality of the foregoing, the term “Obligations” shall include, without
limitation: (i) principal of, and interest on, the Notes and the loans extended
pursuant thereto; (ii) any and all other fees, indemnities, costs, obligations
and liabilities of the Debtors from time to time under or in connection with
this Agreement, the Notes, the Purchase Agreement, the Guaranty and any other
instruments, agreements or other documents executed and/or delivered in
connection herewith or therewith; and (iii) all amounts (including but not
limited to post-petition interest) in respect of the foregoing that would be
payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Debtor.

    


    (e)                  “Organizational
Documents” means, with respect to any Debtor, the documents by which such
Debtor was organized (such as a certificate of incorporation, certificate of
limited partnership or articles of organization, and including, without
limitation, any certificates of designation for preferred stock or other forms
of preferred equity) and which relate to the internal governance of such Debtor
(such as bylaws, a partnership agreement or an operating, limited liability or
members agreement).

    


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

    


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

    


    (h)                 “UCC” means the
Uniform Commercial Code of the State of New York and/or any other applicable law
of any state or states which have jurisdiction with respect to all, or any
portion of, the Collateral or this Agreement, from time to time.  It
is the intent of the parties that defined terms in the UCC should be construed
in 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.

     


    
      
         


      

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

    


    3.           Delivery of Certain
Collateral.  Contemporaneously
with or prior to the execution of this Agreement, each Debtor
shall deliver or cause to be delivered to the Secured Party (a) any and all
certificates and other instruments representing or evidencing the Pledged
Securities, and (b) any and all certificates and other instruments or documents
representing any of the other Collateral, in each case, together with all
Necessary Endorsements.  The
Debtors are, contemporaneously with the execution hereof, delivering
to the Secured Party, or have previously delivered to the Secured Party,
a true and correct copy of each Organizational Document governing any of the
Pledged Securities. 

    


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

    


    (a)                  Each
Debtor has the requisite corporate, partnership, limited liability company or
other power and authority to enter into this Agreement and otherwise to carry
out its obligations hereunder. The execution, delivery and performance by each
Debtor of this Agreement and the filings contemplated therein have been duly
authorized by all necessary action on the part of such Debtor and no
further action is required by such Debtor.  This Agreement has been
duly executed by each Debtor.  This Agreement constitutes the legal,
valid and binding obligation of each Debtor, enforceable against each Debtor in
accordance with its terms except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization and similar laws of general
application relating to or affecting the rights and remedies of creditors and by
general principles of equity.

    


    (b)                 The
Debtors have no place of business or offices where their respective books of
account and records are kept (other than temporarily at the offices of their
attorneys or accountants) or places where Collateral is stored or located,
except as set forth on Schedule A attached
hereto.  The Debtors own of record, subject only to Permitted Liens
(as defined in the Notes), the real property where such Collateral is located,
as identified on Schedule
A.  Except as disclosed on Schedule A, none of
such Collateral is in the possession of any consignee, bailee, warehouseman,
agent or processor.

     


    
      
         


      

      
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    (c)                 Except
for Permitted Liens and except as set forth on Schedule B attached
hereto, the Debtors are the sole owners of the Collateral, free and clear of any
liens, security interests, encumbrances, rights or claims, and are fully
authorized to grant the Security Interests.  Except with respect to
Permitted Liens and except as set forth on Schedule B attached
hereto, there is not on file in any governmental or regulatory authority, agency
or recording office an effective financing statement, security agreement,
license or transfer or any notice of any of the foregoing (other than those that
will be filed in favor of the Secured Party pursuant to this Agreement) covering
or affecting any of the Collateral.  Except with respect to Permitted
Liens, except as set forth on Schedule B attached
hereto and except pursuant to this Agreement, as long as this Agreement shall be
in effect, the Debtors shall not execute and shall not knowingly permit to be on
file in any such office or agency any other financing statement or other similar
document or instrument (except to the extent filed or recorded in favor of the
Secured Party pursuant to the terms of this Agreement).

    


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

    


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

    


    (f)                 This
Agreement creates in favor of the Secured Party a valid, security interest in
the Collateral, subject only to Permitted Liens (as defined in the Notes),
securing the payment and performance of the Obligations.  Upon making
the filings described in the immediately following paragraph, all security
interests created hereunder in any Collateral which may be perfected by filing
UCC financing statements shall have been duly perfected.  Except for
the filing of the UCC financing statements referred to in the immediately
following paragraph, the recordation of the Intellectual Property Security
Agreement (as defined below) with respect to copyrights and copyright
applications in the United States Copyright Office referred to in paragraph (p),
and the delivery of the certificates and other
instruments provided in Section 3, no action is necessary to create,
perfect or protect the security interests created hereunder.  Without
limiting the generality of the foregoing, except for the filing of said
financing statements and the recordation of said Intellectual Property Security
Agreement, no consent of any third parties and no authorization, approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for (i) the execution, delivery and performance of
this Agreement, (ii) the creation or perfection of the Security Interests
created hereunder in the Collateral or (iii) the enforcement of the rights of
the Secured Party hereunder.

     

    
 

    
      
         


      

      
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    (g)                 Each
Debtor hereby authorizes the Secured Party to file one or more financing
statements under the UCC with respect to the Security Interests with the proper
filing and recording agencies in any jurisdiction deemed proper by it, which UCC
financing statement may describe the collateral as “All assets”.

    


    (h)                 The
execution, delivery and performance of this Agreement by the Debtors do not (i)
violate any of the provisions of any Organizational Documents of any Debtor or
any judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation applicable to any Debtor or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing any Debtor's debt or otherwise) or other understanding to
which any Debtor is a party or by which any property or asset of any Debtor is
bound or affected. If any, all required consents (including, without limitation,
from stockholders or creditors of any Debtor) necessary for any Debtor to enter
into and perform its obligations hereunder have been obtained.

    


    (i)                 
The capital stock and other equity interests
listed on Schedule H hereto (the
“Pledged
Securities”) represent all of
the capital stock and other equity interests in and to the
Guarantors and the other subsidiaries of
the Company, and represent all capital
stock and other equity interests owned, directly or indirectly, by the Company.  All of the Pledged
Securities are validly issued, fully paid and nonassessable, and the Company is
the legal and beneficial owner of the Pledged Securities, free and clear of any
lien, security interest or other encumbrance except for the
security interests created by this Agreement and other Permitted
Liens.  Each Debtor shall cause the pledge and
security interest of the Secured Party to be duly noted in its corporate books
and records. 

     

     


    
      
         


      

      
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    (j)                
The ownership and other equity interests
in partnerships and limited liability
companies (if any) included in the
Collateral (the “Pledged
Interests”) by their express terms do not provide that they are
securities governed by Article 8 of the UCC and are not held in a securities
account or by any financial
intermediary.

    


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

    


    (l)                   Except
for Permitted Liens (as defined in the Notes), no Debtor will transfer, pledge,
hypothecate, encumber, license, sell or otherwise dispose of any of the
Collateral (except for sub-licenses granted by a Debtor in its ordinary course
of business and sales of inventory by a Debtor in its ordinary course of
business) without the prior written consent of the Secured Party.

    


    (m)                 Each
Debtor shall keep and preserve its equipment, inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate
any such Collateral (or cause to be operated or located) in any area excluded
from insurance coverage.

     

     

     

    
 

    
      
        
        

      

      
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    (n)                 Except as provided in Schedule I, each Debtor shall maintain with financially sound and
reputable insurers, insurance with respect to the Collateral, including Collateral hereafter acquired, against loss or
damage of the kinds and in the amounts customarily insured against by entities
of established reputation having similar properties similarly situated and in
such amounts as are customarily carried under similar circumstances by other
such entities and otherwise as is prudent for entities engaged in
similar businesses but in any event sufficient to cover the full replacement
cost thereof.  Each Debtor shall cause each insurance policy issued in
connection herewith to provide, and the insurer issuing such policy
to certify to the Secured Party that (a) the
Secured Party will be named as lender loss payee and additional
insured under each such insurance policy; (b) if such insurance be
proposed to be cancelled or materially changed for any
reason whatsoever, such insurer will
promptly notify the Secured Party and such
cancellation or change shall not be effective as to the Secured
Party for at least thirty (30) days
after receipt by the Secured Party of such
notice, unless the effect of such change is
to extend or increase coverage under the policy; and (c) the Secured
Party will have the right (but no obligation) at
its election to remedy any default in the payment of premiums within
thirty (30) days of notice from the insurer of such
default.  If no Event of Default
(as defined in the Notes) exists and if
the proceeds arising out of any claim or series of related claims do
not exceed $100,000, loss
payments in each instance will be applied by the applicable Debtor to the repair
and/or replacement of property with respect
to which the loss was incurred to the extent reasonably feasible, and any loss
payments or the balance thereof remaining, to the extent not so applied, shall
be payable to the applicable Debtor, provided, however, that payments
received by any Debtor after an Event of Default occurs and
is continuing or in excess of $100,000 for any
occurrence or series of related occurrences shall be paid to the Secured
Party and, if received by such Debtor, shall be
held in trust for the Secured Party and
promptly paid over to the Secured Party unless otherwise directed in writing by the
Secured Party. Copies of such policies or the related certificates, in
each case, naming the Secured Party as lender
loss payee and additional insured shall be delivered to the Secured Party at least
annually and at the time any new policy of insurance is
issued.

    


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

    


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

    


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

     


    
      
         


      

      
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    (r)                  Each
Debtor shall take all steps reasonably necessary to diligently pursue and seek
to preserve, enforce and collect any rights, claims, causes of action and
accounts receivable in respect of the Collateral.

    


    (s)                 Each
Debtor shall promptly notify the Secured Party in sufficient detail upon
becoming aware of any attachment, garnishment, execution or other legal process
levied against any Collateral and of any other information received by such
Debtor that would have a material adverse effect on the value of the Collateral,
the Security Interest or the rights and remedies of the Secured Party
hereunder.

    


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

    


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

    


    (v)                 No
Debtor will change its name, type of organization, jurisdiction of organization,
organizational identification number (if it has one), legal or corporate
structure, or identity, or add any new fictitious name unless it provides at
least 30 days’ prior written notice to the Secured Party of such change and, at
the time of such written notification, such Debtor provides any financing
statements or fixture filings necessary to perfect and continue the perfection
of the Security Interests granted and evidenced by this Agreement.

    


    (w)                
Except in the ordinary course of business and except for Permitted Liens (as
defined in the Notes), no Debtor may consign any of its Inventory or sell any of
its Inventory on bill and hold, sale or return, sale on approval, or other
conditional terms of sale without the consent of the Secured Party, which
shall not be unreasonably withheld.

    


    (x)                  No
Debtor may relocate its chief executive office to a new location without
providing 30 days’ prior written notification thereof to the Secured Party and
so long as, at the time of such written notification, such Debtor provides any
financing statements or fixture filings necessary to perfect and continue the
perfection of the Security Interests granted and evidenced by this
Agreement.

    


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

    


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

     


    
      
         


      

      
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    (aa)                At
any time and from time to time that any Collateral consists of instruments,
certificated securities or other items that require or permit possession by the
secured party to perfect the security interest created hereby, the applicable
Debtor shall deliver such Collateral to the Secured Party.

    


    (bb)               Each Debtor, in its capacity as issuer, hereby agrees to
comply with any and all reasonable
orders and instructions of Secured
Party regarding the Pledged Interests consistent
with the terms of this Agreement without
the further consent of any Debtor as contemplated by Section 8-106 (or any
successor section) of the UCC.  Further, each Debtor agrees that it
shall not enter into a similar agreement (or one that would confer “control” within the
meaning of Article 8 of the UCC) with any other person or
entity.

    


    (cc)                Each
Debtor shall cause all tangible chattel paper constituting Collateral to be
delivered to the Secured Party, or, if such delivery is not possible, then to
cause such tangible chattel paper to contain a legend noting that it is subject
to the security interest created by this Agreement.  To the extent
that any Collateral consists of electronic chattel paper, the applicable Debtor
shall cause the underlying chattel paper to be “marked” within the meaning of
Section 9-105 of the UCC (or successor section thereto).

    


    (dd)               If
there is any investment property or deposit account included as Collateral that
can be perfected by “control” through an account control agreement, the
applicable Debtor shall cause such an account control agreement, in form and
substance in each case reasonably satisfactory to the Secured Party, to be
entered into and delivered to the Secured Party.

    


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

    


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

    


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

     


    
      
         


      

      
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    (hh)               Each
Debtor shall promptly provide written notice to the Secured Party of any and all
accounts which arise out of contracts with any governmental authority and, to
the extent necessary to perfect or continue the perfected status of the Security
Interests in such accounts and proceeds thereof, shall execute and deliver to
the Secured Party an assignment of claims for such accounts and cooperate
with the Secured Party in taking any other steps required under the Federal
Assignment of Claims Act or any similar federal, state or local statute or rule
to perfect or continue the perfected status of the Security Interests in such
accounts and proceeds thereof.

    


    (ii)                 Each
Debtor shall cause each subsidiary of such
Debtor with operations or material operations (which, if in doubt, shall be
in the sole determination of the Secured Party) to immediately become a party
hereto (an “Additional
Debtor”), by executing and delivering an Additional Debtor Joinder in
substantially the form of Annex A attached
hereto and comply with the provisions hereof applicable to the
Debtors.  As of the date hereof, the each Debtor represents and
warrants that none of its subsidiaries have any operations or material assets
(other than the Guarantors).  Concurrent therewith, the Additional
Debtor shall deliver replacement schedules for, or supplements to all other
Schedules to (or referred to in) this Agreement, as applicable, which
replacement schedules shall supersede, or supplements shall modify, the
Schedules then in effect.  The Additional Debtor shall also deliver
such opinions of counsel, authorizing resolutions, good standing certificates,
incumbency certificates, organizational documents, financing statements and
other information and documentation as the Secured Party may reasonably
request.  Upon delivery of the foregoing to the Secured Party, the
Additional Debtor shall be and become a party to this Agreement with the same
rights and obligations as the Debtors, for all purposes hereof as fully and to
the same extent as if it were an original signatory hereto and shall be deemed
to have made the representations, warranties and covenants set forth herein as
of the date of execution and delivery of such Additional Debtor Joinder, and all
references herein to the “Debtors” shall be deemed to include each Additional
Debtor.

    


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

    


    (kk)               Each Debtor shall register the pledge of the
applicable Pledged Securities on the books
of such Debtor.  Each Debtor shall notify each issuer of Pledged
Securities to register the pledge of the applicable Pledged Securities in the
name of the Secured Party on the books of such issuer.  Further, except
with respect to certificated securities
delivered to the Secured
Party, the applicable Debtor shall
endeavor to deliver to the
Secured
Party an acknowledgement of pledge (which, where appropriate,
shall comply with the requirements of the relevant UCC with respect to perfection by registration) signed by the issuer
of the applicable Pledged Securities, which acknowledgement shall confirm that:
(a) it has registered the pledge on its books and records; and (b) at any time
directed by the Secured
Party during the continuation of an Event of Default, such issuer will
transfer the record ownership of such Pledged Securities into the name of any
designee of the Secured
Party, will take such steps as may be
necessary to effect the transfer, and will comply with all other reasonable
instructions of the Secured
Party regarding such Pledged Securities
without the further consent of the applicable Debtor.

     


    
      
         


      

      
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    (ll)                 In the event that, upon an occurrence of an Event of
Default, the Secured Party shall sell all or any of the Pledged Securities to another party or parties (herein called the
“Transferee”) or shall
purchase or retain all or any of the Pledged Securities, each Debtor shall, to
the extent applicable: (i) deliver to the
Secured Party or the Transferee, as the case may be, the articles of incorporation, bylaws, minute books, stock
certificate books, corporate seals, deeds, leases, indentures, agreements,
evidences of indebtedness, books of account, financial records and all other
Organizational Documents and records of such Debtor and its
direct and indirect subsidiaries; (ii) use
its best efforts to obtain resignations of the persons then serving as officers
and directors of such Debtor and its
direct and indirect subsidiaries, if so
requested; and (iii) use its best efforts to obtain any approvals that are required by any
governmental or regulatory body in order to permit the sale of the Pledged
Securities to the Transferee or the purchase or retention of the Pledged
Securities by the Secured Party and allow the
Transferee or Secured Party to continue
the business of such Debtor and its
direct and indirect
subsidiaries.

    


    (mm)             Without
limiting the generality of the other obligations of the Debtors hereunder, each
Debtor shall promptly (i) cause to be registered at the United States Copyright
Office all of its material copyrights, (ii) cause the security interest
contemplated hereby with respect to all Intellectual Property registered at the
United States Copyright Office or United States Patent and Trademark Office to
be duly recorded at the applicable office, and (iii) give the Secured
Party notice whenever it acquires (whether absolutely or by license) or
creates any additional material Intellectual Property.

    


    (nn)               Each
Debtor will from time to time, at the joint and several expense of the Debtors,
promptly execute and deliver all such further instruments and documents, and
take all such further action as may be necessary or desirable, or as the Secured
Party may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Secured
Party to exercise and enforce its rights and remedies hereunder and with respect
to any Collateral or to otherwise carry out the purposes of this
Agreement.

    


    (oo)             
Schedule F
attached hereto lists all of the patents, patent applications, trademarks,
trademark applications, registered copyrights, and domain names owned by any of
the Debtors as of the date hereof.  Schedule F lists all
material licenses in favor of any Debtor for the use of any patents, trademarks,
copyrights and domain names as of the date hereof.  All material
patents and trademarks of the Debtors have 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.

     


    
      
         


      

      
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    (pp)               Except
as set forth on Schedule G attached
hereto, none of the account debtors or other persons or entities obligated on
any of the Collateral is a governmental authority covered by the Federal
Assignment of Claims Act or any similar federal, state or local statute or rule
in respect of such Collateral.

    


    5.           Effect of Pledge on Certain
Rights. If any of the Collateral subject to this Agreement
consists of nonvoting equity or ownership interests (regardless of
class, designation, preference or rights)
that may be converted into voting equity or ownership interests upon the
occurrence of certain events (including, without limitation, upon the transfer
of all or any of the other stock or assets of the issuer), it is agreed that the
pledge of such equity or ownership interests pursuant to this Agreement or the
enforcement of any of the Secured
Party’s
rights hereunder shall not be deemed to be the type of event which would trigger
such conversion rights notwithstanding any
provisions in the Organizational Documents or agreements to which any Debtor is
subject or to which any Debtor is party.

    


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

    


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

    


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

    


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

    


    7.           Duty To Hold In
Trust.

    


    (a)             
   Upon the occurrence and during the continuance of any Event of
Default and at any time thereafter, each Debtor shall, upon receipt of any
revenue, income, dividend, interest or
other sums subject to the Security Interests, whether payable pursuant to the
Notes or otherwise, or of any check, draft, note, trade acceptance or other
instrument evidencing an obligation to pay any such sum, hold the same in trust
for the Secured Party and shall forthwith endorse and transfer any such sums or
instruments, or both, to the Secured Party.  

    


    (b)            
   If any Debtor shall become
entitled to receive or shall receive any securities or other property
(including, without limitation, shares of Pledged Securities or instruments
representing Pledged Securities acquired after the date hereof, or any
options, warrants, rights or other similar
property or certificates representing a dividend, or any distribution in
connection with any recapitalization, reclassification or increase or reduction
of capital, or issued in connection with any reorganization of such Debtor or any of its direct or indirect
subsidiaries) in respect of the Pledged Securities (whether as an addition to,
in substitution of, or in exchange for, such Pledged Securities or otherwise),
such Debtor agrees to (i) accept the same as the agent of the
Secured Party; (ii) hold the same in trust on behalf of and for the
benefit of the Secured Party; and (iii) deliver any and all certificates or
instruments evidencing the same to the
Secured Party on or before the close of business on the fifth
business day following the receipt thereof
by such Debtor, in the exact form received together with the Necessary
Endorsements, to be held by the
Secured Party subject to the terms of this Agreement as
Collateral.

     


    
      
         


      

      
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      8.      
    Rights and Remedies Upon
Default.

    

    


    (a)                 Upon
the occurrence of any Event of Default and at any time thereafter, the Secured
Party shall have the right to exercise all of the remedies conferred
hereunder and under the Notes, and the Secured Party shall have all the rights
and remedies of a secured party under the UCC.  Without
limitation, the Secured Party shall have the following rights and
powers:

    


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

    


    (ii)         Upon written
notice to the Debtors by the Secured Party,
all rights of each Debtor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise and all rights of each
Debtor to receive the dividends and
interest which it would otherwise be authorized to receive and retain, shall
cease.  Upon such notice, the
Secured Party shall have the right to receive any interest, cash
dividends or other payments on the Collateral and, at the option of the
Secured Party, to exercise in the Secured Party’s discretion all
voting rights pertaining thereto.  Without limiting the generality of
the foregoing, the Secured
Party shall have the right (but not the obligation) to
exercise all rights with respect to the
Collateral as if it were the sole
and absolute owner thereof, including,
without limitation, to vote and/or to exchange, at its sole discretion, any or
all of the Collateral in connection with a merger, reorganization,
consolidation, recapitalization or other
readjustment concerning or involving the Collateral or any Debtor or any of its
direct or indirect subsidiaries.

     

     

     

     

     


    
      
         


      

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

    


    (iv)         The
Secured Party shall have the right (but not the obligation) to notify any
account debtors and any obligors under instruments or accounts to make payments
directly to the Secured Party, and to enforce the Debtors’ rights against such
account debtors and obligors.

    


    (v)         The Secured
Party, may (but is not obligated to) direct any financial intermediary or any
other person or entity holding any investment property to transfer the same to
the Secured Party, or its designee.

    


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

    


    (b)                 The Secured
Party shall comply with any applicable law in connection with a
disposition of Collateral and such compliance will not be considered adversely to affect the commercial
reasonableness of any sale of the Collateral.  The Secured Party may
sell the Collateral without giving any warranties and may specifically disclaim
such warranties.  In addition, each Debtor waives any and all rights that it may have to a judicial hearing in
advance of the enforcement of any of the Secured Party’s rights and
remedies hereunder, including, without limitation, its right following an Event
of Default to take immediate possession of the Collateral and to exercise its rights and remedies with respect
thereto.

     

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

     


    
      
         


      

      
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    9.           Applications of Proceeds. The
proceeds of any such sale, lease or other disposition of the Collateral
hereunder or from payments made on account of any insurance policy insuring any
portion of the Collateral shall be applied first, to the reasonable and actually
incurred expenses of retaking, holding, storing, processing and preparing for
sale, selling, and the like (including, without limitation, any taxes, fees and
other costs reasonably incurred in connection therewith) of the Collateral, to
the reasonable attorneys’ fees and expenses incurred by the Secured Party in
enforcing the Secured Party’s rights hereunder and in connection with
collecting, storing and disposing of the Collateral, and then to satisfaction of
the Obligations, and to the payment of any other amounts required by applicable
law, after which the Secured Party shall pay to the applicable Debtor any
surplus proceeds. If, upon the sale, license or other disposition of the
Collateral, the proceeds thereof are insufficient to pay all amounts to which
the Secured Party is legally entitled, the Debtors will be liable for the
deficiency, together with interest thereon, at the rate of 18% per annum or the
lesser amount permitted by applicable law (the “Default Rate”), and
the reasonable fees of any attorneys employed by the Secured Party to collect
such deficiency.  To the extent permitted by applicable law, each
Debtor waives all claims, damages and demands against the Secured Party arising
out of the repossession, removal, retention or sale of the Collateral, unless
due solely to the gross negligence or willful misconduct of the Secured Party as
determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction.

    


    10.           Securities Law Provision.  Each Debtor recognizes that the Secured Party may
be limited in its ability to effect a sale to the public of all or part of the
Pledged Securities by reason of certain prohibitions in the Securities Act of
1933, as amended, or other federal or state securities laws (collectively,
the “Securities Laws”), and may be
compelled to resort to one or more sales to a restricted group of purchasers who
may be required to agree to acquire the Pledged Securities for their own
account, for investment and not with a view to the distribution or
resale thereof.  Each Debtor
agrees that sales so made may be at prices and on terms less favorable than if
the Pledged Securities were sold to the public, and that the Secured
Party has no obligation to delay the sale
of any Pledged Securities for the period of
time necessary to register the Pledged Securities for sale to the public under
the Securities Laws.  Each Debtor shall cooperate with the Secured
Party in its reasonable attempt
to satisfy any requirements under the Securities Laws (including, without
limitation, registration thereunder if
reasonably requested by the
Secured Party) applicable to the sale of the Pledged Securities by
the Secured Party.

    


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

     


    
      
         


      

      
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    12.           Responsibility for Collateral.
The Debtors assume all liabilities and responsibility in connection with all
Collateral, and the Obligations shall in no way be affected or diminished by
reason of the loss, destruction, damage or theft of any of the Collateral or its
unavailability for any reason.  Without limiting the generality of the
foregoing, (a) in no event shall the Secured Party (i) have any duty (either
before or after an Event of Default) to collect any amounts in respect of the
Collateral or to preserve any rights relating to the Collateral, or (ii) have
any obligation to clean-up or otherwise prepare the Collateral for sale, and (b)
each Debtor shall remain obligated and liable under each contract or agreement
included in the Collateral to be observed or performed by such Debtor
thereunder.  The Secured Party shall not have any obligation or
liability under any such contract or agreement by reason of or arising out of
this Agreement or the receipt by the Secured Party of any payment relating to
any of the Collateral, nor shall the Secured Party be obligated in any manner to
perform any of the obligations of any Debtor under or pursuant to any such
contract or agreement, to make inquiry as to the nature or sufficiency of any
payment received by the Secured Party in respect of the Collateral or as to the
sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Secured Party or to which the Secured Party may be entitled at
any time or times.

    


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

     


    
      
         


      

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

    


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

    


    16.         Power of Attorney; Further
Assurances.

    


    (a)                 Each
Debtor authorizes the Secured Party, and does hereby make, constitute and
appoint the Secured Party and its officers, agents, successors or assigns
with full power of substitution, as such Debtor’s true and lawful
attorney-in-fact, with power, in the name of the Secured Party or such Debtor,
to, after the occurrence and during the continuance of an Event of Default, (i)
endorse any note, checks, drafts, money orders or other instruments of payment
(including payments payable under or in respect of any policy of insurance) in
respect of the Collateral that may come into possession of the Secured Party;
(ii) to sign and endorse any financing statement pursuant to the UCC or any
invoice, freight or express bill, bill of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications and notices in connection
with accounts, and other documents relating to the Collateral; (iii) to pay or
discharge taxes, liens, security interests or other encumbrances at any time
levied or placed on or threatened against the Collateral; (iv) to demand,
collect, receipt for, compromise, settle and sue for monies due in respect of
the Collateral; (v) to transfer any Intellectual Property or provide licenses
respecting any Intellectual Property; and (vi) generally, at the option of the
Secured Party, and at the expense of the Debtors, at any time, or from time to
time, to execute and deliver any and all documents and instruments and to do all
acts and things which the Secured Party deems necessary to protect, preserve and
realize upon the Collateral and the Security Interests granted therein in order
to effect the intent of this Agreement and the Notes all as fully and
effectually as the Debtors might or could do; and each Debtor hereby ratifies
all that said attorney shall lawfully do or cause to be done by virtue
hereof.  This power of attorney is coupled with an interest and shall
be irrevocable for the term of this Agreement and thereafter as long as any of
the Obligations shall be outstanding.  The designation set forth herein shall be deemed to amend and supersede any
inconsistent provision in the Organizational Documents or other documents or
agreements to which any Debtor is subject or to which any Debtor is a
party.  Without limiting the generality of the foregoing, after
the occurrence and during the continuance of an Event of Default, the Secured
Party is specifically authorized to execute and file any applications for or
instruments of transfer and assignment of any patents, trademarks, copyrights or
other Intellectual Property with the United States Patent and Trademark Office
and the United States Copyright Office.

     


    
      
         


      

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

    


    (c)                 Each
Debtor hereby irrevocably appoints the Secured Party as such Debtor’s
attorney-in-fact, with full authority in the place and instead of such Debtor
and in the name of such Debtor, from time to time in the Secured Party’s
discretion, to take any action and to execute any instrument which the Secured
Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including the filing, in its sole discretion, of one or more
financing or continuation statements and amendments thereto, relative to any of
the Collateral without the signature of such Debtor where permitted by law,
which financing statements may (but need not) describe the Collateral as “all
assets” or “all personal property” or words of like import, and ratifies all
such actions taken by the Secured Party.  This power of attorney is
coupled with an interest and shall be irrevocable for the term of this Agreement
and thereafter as long as any of the Obligations shall be
outstanding.

    


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

    


    
      	
              Secured
      Party: 

            	
              Platinum
      Long Term Growth VI, LLC

              152 West 57th Street, 54th Floor

              New York, NY
10019

            


    

                                                                                                                           


    
      	
              Debtors: 

            	
              c/o
      Valcent Products Inc.

              789 West Pender Street, Suite 1010

              Vancouver, BC V6C
1H2

            


    

     

    
      	
              With
      a copy to:

            	
              Burns
      Figa & Will P.C.

               

              6400 S. Fiddlers Green Circle

              Suite 1000

              Greenwood Village, CO 80111

              Attn: Theresa M. Mehringer

              Tel: (303) 796-2626

              Fax: (303)
796-2777

            


    

     

     

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    


     

    18.        
Other Security. To the
extent that the Obligations are now or hereafter secured by property other than
the Collateral or by the guarantee, endorsement or property of any other person,
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.

    


    19.         Miscellaneous.

    


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

    


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

    


    (c)                 This
Agreement, together with the exhibits and schedules hereto, the Notes and the
related agreements contemplated hereby and thereby contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into this
Agreement and the exhibits and schedules hereto. No provision of this
Agreement may be waived, modified, supplemented or amended except in a written
instrument signed, in the case of an amendment, by the Debtors and the Secured
Party or, in the case of a waiver, by the party against whom enforcement of any
such waived provision is sought.  

    


    (d)                 If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

     

     


    
      
         


      

      
        21

        
          

        

      

      
         


      

    


    


    (e)                 No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such
right.

    


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

    


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

    


    (h)                 All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof.  Each Debtor agrees that all
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement, the Transaction Documents and the
Notes (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, partners, members, employees or agents) shall
be commenced exclusively in the state and federal courts sitting in the City of
New York, Borough of Manhattan. Each Debtor hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of
New York, Borough of Manhattan for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court or that such proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law.  Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out of
or relating to this Agreement or the transactions contemplated hereby. If any
party shall commence a proceeding to enforce any provisions of this Agreement,
then the prevailing party in such proceeding shall be reimbursed by the other
party for its reasonable attorney’s fees and other reasonable costs and expenses
incurred with the investigation, preparation and prosecution of such
proceeding.

     


    
      
         


      

      
        22

        
          

        

      

      
         


      

    

     

     

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

    


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

    


    (k)                 Each
Debtor shall indemnify, reimburse and hold harmless the Secured Party and each
Lender, and each of their respective partners, members, shareholders, officers,
directors, employees and agents (and any other persons with other titles that
have similar functions) (collectively, “Indemnitees”) from and against any and
all losses, claims, liabilities, damages, penalties, suits, costs and expenses,
of any kind or nature, (including fees relating to the cost of investigating and
defending any of the foregoing) imposed on, incurred by or asserted against such
Indemnitee in any way related to or arising from or alleged to arise from this
Agreement or the Collateral, except any such losses, claims, liabilities,
damages, penalties, suits, costs and expenses which result from the gross
negligence or willful misconduct of the Indemnitee as determined by a final,
nonappealable decision of a court of competent jurisdiction.  This
indemnification provision is in addition to, and not in limitation of, any other
indemnification provision in the Notes, the Transaction Documents or any other
agreement, instrument or other document executed or delivered in connection
herewith or therewith.

    


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

    


    (m)                 To the extent that the grant of the security interest in
the Collateral and the enforcement of the terms hereof require the consent,
approval or action of any partner or member, as applicable, of any Debtor or any
direct or indirect subsidiary of any Debtor
or compliance with any provisions of any of the Organizational Documents, the
Debtors hereby grant such consent and approval and waive any such noncompliance
with the terms of said documents.

    


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

     


    
      
         


      

      
        23

        
          

        

      

      
         


      

    

     

    


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

    


    
      
        	VALCENT PRODUCTS INC 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	
                /s/

              	 	 	
                 

              	 
	 	
                Name

              	 	 	
                 

              	 
	 	
                Title 

              	 	 	
                 

              	 


      

    

     

    
      	VALCENT USA INC. 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	
              /s/

            	 	 	
               

            	 
	 	
              Name

            	 	 	
               

            	 
	 	
              Title 

            	 	 	
               

            	 


    

     

    
      	VALCENT MANUFACTURING,
    LTD. 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	
              /s/

            	 	 	
               

            	 
	 	
              Name

            	 	 	
               

            	 
	 	
              Title 

            	 	 	
               

            	 


    

     

    
      	VALCENT MANAGEMENT LLC 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	
              /s/

            	 	 	
               

            	 
	 	
              Name

            	 	 	
               

            	 
	 	
              Title 

            	 	 	
               

            	 


    

     

    
      	VERTIGRO ALGAE
      TECHNOLOGIES, LLC 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	
              /s/

            	 	 	
               

            	 
	 	
              Name

            	 	 	
               

            	 
	 	
              Title 

            	 	 	
               

            	 



      	VALCENT PRODUCTS EU
    LIMITED 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	
              /s/

            	 	 	
               

            	 
	 	
              Name

            	 	 	
               

            	 
	 	
              Title 

            	 	 	
               

            	 


    

     

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    
      	PURCHASER:	 	 	 	 
	 	 	 	 	 	 
	PLATINUM LONG TERM GROWTH VI,
      LLC 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	
              /s/

            	 	 	
               

            	 
	 	
              Name

            	 	 	
               

            	 
	 	
              Title 

            	 	 	
               

            	 


    

     

    
      	ALPHA CAPITAL AG 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	
              /s/

            	 	 	
               

            	 
	 	
              Name

            	 	 	
               

            	 
	 	
              Title 

            	 	 	
               

            	 


    

     

    
      	OSHER CAPITAL PARTNERS
LLC 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	
              /s/

            	 	 	
               

            	 
	 	
              Name

            	 	 	
               

            	 
	 	
              Title 

            	 	 	
               

            	
               

            


    

     

    
      	GEORGE ORR 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	
              /s/

            	 	 	
               

            	 
	 	
              Name

            	 	 	
               

            	 
	 	
              Title 

            	 	 	
               

            	 


    

     

     

     

     

    
      
         


      

      
        25

        
          

        

      

      
         


      

    


    


    SCHEDULE
A

    


    


    Principal
Place of Business of Debtors:

    


    828
Harbourside Drive, Suite 208

    North Vancouver, BC V7P
3R9

    


    Rented
Locations Where Collateral is Located or Stored:

    


    828
Harbourside Drive, Suite 208

    North
Vancouver, BC V7P 3R9

     

    


    


    Locations
Owned:

     

     

     

     

    
 


    
      
         


      

      
        A-1

        
          

        

      

      
         


      

    


    


    SCHEDULE
B

    Other
Owners or Collateral or Lienholders

     

     

     

     

     

     

     

     

     

     

    
 

    



    
      
         


      

      
        B-1

        
          

        

      

      
         


      

    


    


    SCHEDULE
C

     

     

     

     

     

     

     

     

     

     

     

    



    
      
         


      

      
        C-1

        
          

        

      

      
         


      

    


    SCHEDULE
D

    Legal
Names and Organizational Identification Numbers

    


    
      	
              NAME

            	
              STATE
      OF ORGANIZATION

            	
              ID
      #

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      


    

    


     

     

     

     

     

    
 


    
      
         


      

      
        D-1

        
          

        

      

      
         


      

    


    SCHEDULE
E

    Names;
Mergers and Acquisitions

     

     

     

     

     

     

     

     

     

    
 


    
      
         


      

      
        E-1

        
          

        

      

      
         


      

    


    SCHEDULE
F

    Intellectual
Property

    


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

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        F-1

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
G

    Account
Debtors

    


    


     

     

     

     

     

     

    
 

    
      
         


      

      
        G-1

        
          

        

      

      
         


      

    


    SCHEDULE
H

    Pledged
Securities

    


    


    
      	
              Name
      Of Issuer/Guarantor

            	
              Type
      of Securities

            	
              No.
      of shares

              owned

            	
              Percentage
      of Issuer owned

            	
              Stock
      Certificate

              No.

            
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      


    

    


    


    


     

    
 

    



    
      
         


      

      
        H-1

        
          

        

      

      
         


      

    


    ANNEX
A

    to

    SECURITY

    AGREEMENT

    


    
      FORM
OF ADDITIONAL DEBTOR JOINDER

    

    


               Security
Agreement dated as of July 16, 2008 made by Valcent Products,
Inc., and its subsidiaries party thereto from time to time, as
Debtors to and in favor of the Secured Party identified therein (the
“Security
Agreement”)

    


               Reference
is made to the Security Agreement as defined above; capitalized terms used
herein and not otherwise defined herein shall have the meanings given to such
terms in, or by reference in, the Security Agreement.

    


               The
undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
to the Secured Party referred to above, the undersigned shall (a) be an
Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the same
extent as if the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth therein as of the date
of execution and delivery of this Additional Debtor Joinder.  WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO
THE SECURED PARTY A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH
IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY
TRIAL PROVISIONS SET FORTH THEREIN.

    


               Attached
hereto are supplemental and/or replacement Schedules to the Security Agreement,
as applicable.

    


               An
executed copy of this Joinder shall be delivered to the Secured Party, and the
Secured Party may rely on the matters set forth herein on or after the date
hereof.  This Joinder shall not be modified, amended or terminated
without the prior written consent of the Secured Party.

     

     

     

    
      
         


      

      
        AA-1

        
          

        

      

      
         


      

    


               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:

    

    
 

     

     

     

     

    AA-2