EXHIBIT
4.3


SECURITY
AGREEMENT


THIS SECURITY AGREEMENT
(the “Agreement”),  is
entered into and made effective as of March 29, 2006, by and between OPEN ENERGY CORPORATION, a Nevada corporation with its principal place
of business located at 514 Via de la Valle, Suite 200, Solana Beach, CA 92075 (the
“Parent”), and each subsidiary of the Parent listed on Schedule I
attached hereto (each a “Subsidiary,” and collectively and together with
the Parent, the “Company”), in favor of the BUYER(S) (the “Secured Party”) listed on Schedule I
attached to the Securities Purchase Agreement (the “Securities Purchase
Agreement”) dated the date hereof between the Company and the Secured
Party.


WHEREAS, The Parent
shall issue and sell to the Secured Party, as provided in the Securities
Purchase Agreement, and the Secured Party shall purchase, up to Three Million
Dollars ($3,000,000) of secured convertible debentures (the “March
Convertible Debentures”), which shall be convertible into shares of the
Parent’s common stock, par value $0.001, in the respective amounts set forth
opposite each Buyer(s) name on Schedule I attached to the Securities
Purchase Agreement;


WHEREAS, the Parent has issued and sold to the
Secured Party secured convertible debentures (including any debentures issued
in exchange, transfer or replacement thereof) issued pursuant to the securities
purchase agreement between the Parent and the Secured Party dated March 2006
(the “Prior Convertible Debentures,” and collectively along with the
March Convertible Debenture, the “Convertible Debentures”);


WHEREAS, to induce
the Secured Party to enter into the transaction contemplated by the Securities
Purchase Agreement, the March Convertible Debentures, the Investor Registration
Rights Agreement of even date herewith between the Parent and the Secured Party
(the “Investor Registration Rights Agreement”), and the Irrevocable
Transfer Agent Instructions among the Parent, the Secured Party, the Parent’s
transfer agent, and David Gonzalez, Esq. (the “Transfer Agent Instructions”)
(collectively referred to as the “Transaction Documents”), each Company
hereby grants to the Secured Party a security interest in and to the pledged
property of each Company identified on Exhibit A hereto (collectively
referred to as the “Pledged Property”) to secure all of the Obligations
(as defined below).


NOW, THEREFORE, in
consideration of the promises and the mutual covenants herein contained, and
for other good and valuable consideration, the adequacy and receipt of which
are hereby acknowledged, the parties hereto hereby agree as follows:


ARTICLE
1.


DEFINITIONS
AND INTERPRETATIONS


Section 1.1.            Recitals.


The above recitals are true and correct and are
incorporated herein, in their entirety, by this reference.



  
  
 








Section 1.2.            Interpretations.


Nothing herein expressed or implied is intended or
shall be construed to confer upon any person other than the Secured Party any
right, remedy or claim under or by reason hereof.


Section 1.3.            Obligations
Secured.


The security interest created hereby in the Pledged
Property constitutes continuing collateral security for all of the obligations
of the Parent now existing or hereinafter incurred to the Buyers, whether oral
or written and whether arising before, on or after the date hereof including,
without limitation following obligations (collectively, the “Obligations”):


(a)  for so long
as the Convertible Debentures are outstanding, the payment by the Parent, as
and when due and payable (by scheduled maturity, acceleration, demand or
otherwise), of all amounts from time to time owing by it in respect of the
Securities Purchase Agreement, the Convertible Debentures, the Transaction
Documents, and any other related documents in connection with the Convertible
Debentures; and


(b)  for so long
as the Convertible Debentures are outstanding, the due performance and
observance by the Parent of all of its other obligations from time to time
existing in respect of any of the Transaction Documents and any other related
documents in connection with the Convertible Debentures, including without
limitation, the Parent’s obligations with respect to any conversion or
redemption rights of the Secured Party under the Convertible Debentures.


ARTICLE
2.


PLEDGED
PROPERTY; EVENT OF DEFAULT


Section 2.1.            Pledged
Property.


(a)              As collateral security
for all of the Obligations, the Company hereby pledges to the Secured Party,
and creates in the Secured Party for its benefit, a continuing security
interest in and to all of the Pledged Property whether now owned or hereafter
acquired.


(b)              Simultaneously
with the execution and delivery of this Agreement, the Company shall make,
execute, acknowledge, file, record and deliver to the Secured Party any
documents reasonably requested by the Secured Party to perfect its security
interest in the Pledged Property. 
Simultaneously with the execution and delivery of this Agreement, the
Company shall make, execute, acknowledge and deliver to the Secured Party such
documents and instruments, including, without limitation, financing statements,
certificates, affidavits and forms as may, in the Secured Party’s reasonable
judgment, be necessary to effectuate, complete or perfect, or to continue and
preserve, the security interest of the Secured Party in the Pledged Property,
and the Secured Party shall hold such documents and instruments as secured
party, subject to the terms and conditions contained herein.



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Section 2.2.            Event
of Default


An “Event of Default” shall be deemed to have occurred under
this Agreement upon an Event of Default under and as defined in the Convertible
Debentures.


ARTICLE
3.


ATTORNEY-IN-FACT;
PERFORMANCE


Section 3.1.            Secured
Party Appointed Attorney-In-Fact.


Upon the occurrence and during the continuance of an
Event of Default: (a) the Company hereby appoints the Secured Party as its
attorney-in-fact, with full authority in the place and stead of the Company and
in the name of the Company or otherwise, from time to time in the Secured Party’s
discretion to take any action and to execute any instrument which the Secured
Party may reasonably deem necessary to accomplish the purposes of this
Agreement, including, without limitation, to receive and collect all
instruments made payable to the Company representing any payments in respect of
the Pledged Property or any part thereof and to give full discharge for the
same; (b) the Secured Party may demand, collect, receipt for, settle,
compromise, adjust, sue for, foreclose, or realize on the Pledged Property as
and when the Secured Party may determine, and (c) to facilitate collection, the
Secured Party may notify account debtors and obligors on any Pledged Property
to make payments directly to the Secured Party.


Section 3.2.            Secured
Party May Perform.


If the Company fails to perform any agreement
contained herein, the Secured Party, at its option, may itself perform, or
cause performance of, such agreement, and the expenses of the Secured Party
incurred in connection therewith shall be included in the Obligations secured
hereby and payable by the Company under Section 8.3.


ARTICLE
4.


REPRESENTATIONS
AND WARRANTIES


Section 4.1.            Authorization;
Enforceability.


Each of the parties hereto represents and warrants
that it has taken all action necessary to authorize the execution, delivery and
performance of this Agreement and the transactions contemplated hereby; and
upon execution and delivery, this Agreement shall constitute a valid and
binding obligation of the respective party, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors’
rights or by the principles governing the availability of equitable remedies.


Section 4.2.            Ownership
of Pledged Property.


The Company represents and warrants that it is the
legal and beneficial owner of the Pledged Property free and clear of any lien,
security interest, option or other charge or encumbrance (each, a “Lien”)
except for the security interest created by this Agreement and



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other Permitted Liens. 
For purposes of this Agreement, “Permitted Liens” means: (1) the
security interest created by this Agreement, (2) existing Liens disclosed by
the Company to the Secured Party; (3) inchoate Liens for taxes, assessments or
governmental charges or levies not yet due, as to which the grace period, if
any, related thereto has not yet expired, or being contested in good faith and
by appropriate proceedings for which adequate reserves have been established in
accordance with GAAP; (4) Liens of carriers, materialmen, warehousemen,
mechanics and landlords and other similar Liens which secure amounts which are
not yet overdue by more than 60 days or which are being contested in good faith
by appropriate proceedings; (5) licenses, sublicenses, leases or subleases
granted to other Persons not materially interfering with the conduct of the
business of the Company; (6) Liens securing capitalized lease obligations and
purchase money indebtedness incurred solely for the purpose of financing an
acquisition or lease; (7) easements, rights-of-way, restrictions,
encroachments, municipal zoning ordinances and other similar charges or
encumbrances, and minor title deficiencies, in each case not securing debt and
not materially interfering with the conduct of the business of the Company and
not materially detracting from the value of the property subject thereto; (8)
Liens arising out of the existence of judgments or awards which judgments or
awards do not constitute an Event of Default; (9) Liens incurred in the
ordinary course of business in connection with workers compensation claims,
unemployment insurance, pension liabilities and social security benefits and
Liens securing the performance of bids, tenders, leases and contracts in the
ordinary course of business, statutory obligations, surety bonds, performance
bonds and other obligations of a like nature (other than appeal bonds) incurred
in the ordinary course of business (exclusive of obligations in respect of the
payment for borrowed money); (10) Liens in favor of a banking institution
arising by operation of law encumbering deposits (including the right of
set-off) and contractual set-off rights held by such banking institution and
which are within the general parameters customary in the banking industry and
only burdening deposit accounts or other funds maintained with a creditor
depository institution; (11) usual and customary set-off rights in leases and
other contracts; and (12) escrows in connection with acquisitions and
dispositions.


ARTICLE
5.


DEFAULT;
REMEDIES; SUBSTITUTE COLLATERAL


Section 5.1             Method
of Realizing Upon the Pledged Property: Other Remedies.


If any Event of Default shall have occurred and be
continuing:


(a)           The
Secured Party may exercise in respect of the Pledged Property, in addition to
any other rights and remedies provided for herein or otherwise available to it,
all of the rights and remedies of a secured party upon default under the
Uniform Commercial Code (whether or not the Uniform Commercial Code applies to
the affected Pledged Property), and also may (i) take absolute control of the
Pledged Property, including, without limitation, transfer into the Secured
Party’s name or into the name of its nominee or nominees (to the extent the
Secured Party has not theretofore done so) and thereafter receive, for the
benefit of the Secured Party, all payments made thereon, give all consents,
waivers and ratifications in respect thereof and otherwise act with respect
thereto as though it were the outright owner thereof, (ii) require the
Company to assemble all or part of the Pledged Property as directed by the
Secured Party and make it available to the Secured Party at a place or places
to be designated by the Secured Party that is reasonably convenient to both
parties, and the Secured Party may enter into and occupy any



 4
 








premises owned or leased by the Company where the
Pledged Property or any part thereof is located or assembled for a reasonable
period in order to effectuate the Secured Party’s rights and remedies hereunder
or under law, without obligation to the Company in respect of such occupation,
and (iii) without notice except as specified below and without any
obligation to prepare or process the Pledged Property for sale, (A) sell
the Pledged Property or any part thereof in one or more parcels at public or
private sale, at any of the Secured Party’s offices or elsewhere, for cash, on
credit or for future delivery, and at such price or prices and upon such other
terms as the Secured Party may deem commercially reasonable and/or
(B) lease, license or dispose of the Pledged Property or any part thereof
upon such terms as the Secured Party may deem commercially reasonable.  The Company agrees that, to the extent notice
of sale or any other disposition of the Pledged Property shall be required by
law, at least ten (10) days’ notice to the Company of the time and place of any
public sale or the time after which any private sale or other disposition of
the Pledged Property is to be made shall constitute reasonable
notification.  The Secured Party shall
not be obligated to make any sale or other disposition of any Pledged Property
regardless of notice of sale having been given. 
The Secured Party may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.  The Company hereby waives any
claims against the Secured Party arising by reason of the fact that the price
at which the Pledged Property may have been sold at a private sale was less
than the price which might have been obtained at a public sale or was less than
the aggregate amount of the Obligations, even if the Secured Party accepts the
first offer received and does not offer such Pledged Property to more than one
offeree, and waives all rights that the Company may have to require that all or
any part of such Pledged Property be marshaled upon any sale (public or
private) thereof.  The Company hereby
acknowledges that (i) any such sale of the Pledged Property by the Secured
Party may be made without warranty, (ii) the Secured Party may
specifically disclaim any warranties of title, possession, quiet enjoyment or
the like, and (iii) such actions set forth in clauses (i) and (ii)
above shall not adversely affect the commercial reasonableness of any such sale
of Pledged Property.


(b)           Any
cash held by the Secured Party as Pledged Property and all cash proceeds
received by the Secured Party in respect of any sale of or collection from, or
other realization upon, all or any part of the Pledged Property shall be
applied (after payment of any amounts payable to the Secured Party pursuant to Section
8.3 hereof) by the Secured Party against, all or any part of the Obligations in
such order as the Secured Party shall elect, consistent with the provisions of
the Securities Purchase Agreement.  Any
surplus of such cash or cash proceeds held by the Secured Party and remaining
after the indefeasible payment in full in cash of all of the Obligations shall
be paid over to whomsoever shall be lawfully entitled to receive the same or as
a court of competent jurisdiction shall direct.


(c)           In
the event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Secured Party is legally entitled,
the Company shall be liable for the deficiency, together with interest thereon
at the rate specified in the Convertible Debentures for interest on overdue
principal thereof or such other rate as shall be fixed by applicable law,
together with the costs of collection and the reasonable fees, costs, expenses
and other client charges of any attorneys employed by the Secured Party to
collect such deficiency.



 5
 








(d)           The
Company hereby acknowledges that if the Secured Party complies with any
applicable state, provincial, or federal law requirements in connection with a
disposition of the Pledged Property, such compliance will not adversely affect
the commercial reasonableness of any sale or other disposition of the Pledged
Property.


(e)           The
Secured Party shall not be required to marshal any present or future collateral
security (including, but not limited to, this Agreement and the Pledged
Property) for, or other assurances of payment of, the Obligations or any of
them or to resort to such collateral security or other assurances of payment in
any particular order, and all of the Secured Party’s rights hereunder and in
respect of such collateral security and other assurances of payment shall be
cumulative and in addition to all other rights, however existing or
arising.  To the extent that the Company
lawfully may, the Company hereby agrees that it will not invoke any law relating
to the marshaling of collateral which might cause delay in or impede the
enforcement of the Secured Party’s rights under this Agreement or under any
other instrument creating or evidencing any of the Obligations or under which
any of the Obligations is outstanding or by which any of the Obligations is
secured or payment thereof is otherwise assured, and, to the extent that it
lawfully may, the Company hereby irrevocably waives the benefits of all such
laws.


Section 5.2             Duties
Regarding Pledged Property.


The Secured Party shall have no duty as to the
collection or protection of the Pledged Property or any income thereon or as to
the preservation of any rights pertaining thereto, beyond the safe custody and
reasonable care of any of the Pledged Property actually in the Secured Party’s
possession.


ARTICLE
6.


AFFIRMATIVE
COVENANTS


The Company covenants and agrees that, from the date
hereof and until the Obligations have been fully paid and satisfied or the
Convertible Debentures have been fully converted, unless the Secured Party
shall consent otherwise in writing (as provided in Section 8.4 hereof):


Section 6.1.            Existence,
Properties, Etc.


(a)               The Company
shall do, or cause to be done, all things, or proceed with due diligence with
any actions or courses of action, that may be reasonably necessary (i) to
maintain Company’s due organization, valid existence and good standing under
the laws of its state of incorporation, and (ii) to preserve and keep in
full force and effect all qualifications, licenses and registrations in those
jurisdictions in which the failure to do so could have a Material Adverse
Effect (as defined below); and (b) the Company shall not do, or cause to
be done, any act impairing the Company’s corporate power or authority
(i) to carry on the Company’s business as now conducted, and (ii) to
execute or deliver this Agreement or any other document delivered in connection
herewith, including, without limitation, any UCC-1 Financing Statements
required by the Secured Party (which other loan instruments collectively
shall be referred to as the “Loan Instruments”) to which it is or
will be a party, or perform any of its obligations hereunder or
thereunder.  For purpose of this
Agreement, the term “Material Adverse Effect” shall mean any material
and adverse affect as determined by Secured Party in its reasonable discretion,
whether



 6
 








individually
or in the aggregate, upon (a) the Company’s assets, business, operations,
properties or condition, financial or otherwise; (b) the Company’s ability
to make payment as and when due of all or any part of the Obligations; or
(c) the Pledged Property.


Section 6.2.            Financial
Statements and Reports.


The Company shall furnish to the Secured Party within
a reasonable time such financial data as the Secured Party may reasonably
request.


Section 6.3.            Accounts
and Reports.


The Company shall maintain a standard system of
accounting in accordance with generally accepted accounting principles
consistently applied (“GAAP”) and provide, at its sole expense, to the Secured
Party the following:


(a)              as soon as
available, a copy of any notice or other communication alleging any nonpayment
or other material breach or default, or any foreclosure or other action
respecting any material portion of its assets and properties, received respecting
any of the indebtedness of the Company in excess of $500,000 (other than the
Obligations), or any demand or other request for payment under any guaranty,
assumption, purchase agreement or similar agreement or arrangement respecting
the indebtedness or obligations of others in excess of $500,000; and


(b)              within fifteen
(15) days after the making of each submission or filing, a copy of any
report, financial statement, notice or other document, whether periodic or
otherwise, submitted to the shareholders of the Company, or submitted to or
filed by the Company with any governmental authority involving or affecting (i)
the Company that could reasonably be expected to have a Material Adverse
Effect; (ii) the Obligations; (iii) any part of the Pledged Property;
or (iv) any of the transactions contemplated in this Agreement or the Loan
Instruments (except, in each case, to the extent any such submission, filing,
report, financial statement, notice or other document is posted on EDGAR
Online).


Section 6.4.            Maintenance
of Books and Records; Inspection.


The Company shall maintain its books, accounts and
records in accordance with GAAP, and permit the Secured Party, its officers and
employees and any professionals designated by the Secured Party in writing, at
any time during normal business hours and upon reasonable notice to visit and
inspect any of its properties (including but not limited to the collateral
security described in the Transaction Documents and/or the Loan Instruments),
corporate books and financial records, and to discuss its accounts, affairs and
finances with any employee, officer or director thereof (it being agreed that,
unless an Event of Default shall have occurred and be continuing, there shall
be no more than two (2) such visits and inspections in any Fiscal Year).


Section 6.5.            Maintenance
and Insurance.


(a)              The Company shall
maintain or cause to be maintained, at its own expense, all of its material
assets and properties in good working order and condition, ordinary wear and
tear excepted, making all necessary repairs thereto and renewals and
replacements thereof.



 7
 








(b)              The Company shall
maintain or cause to be maintained, at its own expense, insurance in form,
substance and amounts (including deductibles), which the Company deems
reasonably necessary to the Company’s business, (i) adequate to insure all
assets and properties of the Company of a character usually insured by persons
engaged in the same or similar business against loss or damage resulting from
fire or other risks included in an extended coverage policy; (ii) against
public liability and other tort claims that may be incurred by the Company;
(iii) as may be required by the Transaction Documents and/or applicable
law and (iv) as may be reasonably requested by Secured Party, all with financially
sound and reputable insurers.


Section 6.6.            Contracts
and Other Collateral.


The Company shall perform all of its obligations under
or with respect to each instrument, receivable, contract and other intangible
included in the Pledged Property to which the Company is now or hereafter will
be party on a timely basis and in the manner therein required, including,
without limitation, this Agreement, except to the extent the failure to so
perform such obligations would not reasonably be expected to have a Material
Adverse Effect.


Section 6.7.            Defense
of Collateral, Etc.


The Company shall defend and enforce its right, title
and interest in and to any part of: 
(a) the Pledged Property; and (b) if not included within the
Pledged Property, those assets and properties whose loss would reasonably be
expected to have a Material Adverse Effect, each against all manner of claims
and demands on a timely basis to the full extent permitted by applicable law
(other than any such claims and demands by holders of Permitted Liens).


Section 6.8.            Taxes
and Assessments.


The Company shall (a) file all material tax
returns and appropriate schedules thereto that are required to be filed under
applicable law, prior to the date of delinquency (taking into account any
extensions of the original due date), (b) pay and discharge all material
taxes, assessments and governmental charges or levies imposed upon the Company,
upon its income and profits or upon any properties belonging to it, prior to
the date on which penalties attach thereto, and (c) pay all material
taxes, assessments and governmental charges or levies that, if unpaid, might
become a lien or charge upon any of its properties; provided, however, that the Company in good faith may
contest any such tax, assessment, governmental charge or levy described in the
foregoing clauses (b) and (c) so long as appropriate reserves are maintained
with respect thereto if and to the extent required by GAAP.


Section 6.9.            Compliance
with Law and Other Agreements.


The Company shall maintain its business operations and
property owned or used in connection therewith in compliance with (a) all
applicable federal, state and local laws, regulations and ordinances governing
such business operations and the use and ownership of such property, and (b) all
agreements, licenses, franchises, indentures and mortgages to which the Company
is a party or by which the Company or any of its properties is bound, except
where the failure to so comply would not reasonably be expected to have a
Material Adverse Effect.



 8
 








Section 6.10.          Notice
of Default.


The Company shall give written notice to the Secured
Party of the occurrence of any Event of Default.


Section 6.11.          Notice
of Litigation.


The Company shall give notice, in writing, to the
Secured Party of (a) any actions, suits or proceedings wherein the amount
at issue is in excess of $250,000, instituted by any persons against the
Company, or affecting any of the assets of the Company, and (b) any
dispute, not resolved within fifteen (15) days of the commencement thereof,
between the Company on the one hand and any governmental or regulatory body on
the other hand, which might reasonably be expected to have a Material Adverse
Effect on the business operations or financial condition of the Company.


Section 6.13.          Future
Subsidiaries.


If the Company shall hereafter create or acquire any
subsidiary, simultaneously with the creation or acquisition of such subsidiary,
the Company shall cause such subsidiary to grant to the Secured Party a
security interest of the same tenor as created under this Agreement.


ARTICLE
7.


NEGATIVE
COVENANTS


The Company covenants and agrees that, from the date hereof until the
Obligations have been fully paid and satisfied, the Company shall not, unless
the Secured Party shall consent otherwise in writing:


Section 7.1.            Liens
and Encumbrances.


Directly or indirectly make, create, incur, assume or
permit to exist any Lien in, to or against any part of the Pledged Property
other than Permitted Liens.


Section 7.2.            Restriction
on Redemption and Cash Dividends


Directly or indirectly, redeem, repurchase or declare
or pay any cash dividend or distribution on its capital stock without the prior
express written consent of the Secured Party.


Section 7.3.            Incurrence
of Indebtedness.


Directly or
indirectly, incur or guarantee, assume or suffer to exist any indebtedness,
other than the indebtedness evidenced by the Convertible Debentures and other
Permitted Indebtedness.  “Permitted
Indebtedness” means: (i) indebtedness evidenced by Convertible Debentures;
(ii) indebtedness described on the Disclosure Schedule to the Securities
Purchase Agreement; (iii) indebtedness incurred solely for the purpose of
financing the acquisition or lease of any equipment by the Company, including
capital lease obligations with no recourse other than to such equipment; (iv)
indebtedness (A) the repayment of which has been subordinated to the payment of
the Convertible Debentures on terms and conditions acceptable to the Secured



 9
 








Party, including with regard to interest payments and
repayment of principal, (B) which does not mature or otherwise require or
permit redemption or repayment prior to or on the 91st day after the maturity date of any Convertible
Debentures then outstanding; and (C) which is not secured by any assets of the
Company; (v) indebtedness solely between the Company and/or one of its domestic
subsidiaries, on the one hand, and the Company and/or one of its domestic
subsidiaries, on the other which indebtedness is not secured by any assets of
the Company or any of its subsidiaries, provided that (x) in each case a
majority of the equity of any such domestic subsidiary is directly or
indirectly owned by the Company, such domestic subsidiary is controlled by the
Company and such domestic subsidiary has executed a security agreement in the
form of this Agreement and (y) any such
loan shall be evidenced by an intercompany note that is pledged by the Company
or its subsidiary, as applicable, as collateral pursuant to this Agreement;
(vi) reimbursement obligations in respect of letters of credit issued for the
account of the Company or any of its subsidiaries for the purpose of securing
performance obligations of the Company or its subsidiaries incurred in the
ordinary course of business so long as the aggregate face amount of all such
letters of credit does not exceed $500,000 at any one time; and (vii) renewals,
extensions and refinancing of any indebtedness described in clauses (i) or
(iii) of this subsection.


Section 7.4.            Places
of Business.


Change the location of its chief place of business,
chief executive office or any place of business disclosed to the Secured Party,
unless such change in location is to a different location within the United
States and the Company provides notice to the Secured Party of new location
within 10 days’ of such change in location.


ARTICLE
8.


MISCELLANEOUS


Section 8.1.            Notices.


All notices or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be considered as duly given on: 
(a) the date of delivery, if delivered in person or by nationally
recognized overnight delivery service or (b) five (5) days after
mailing if mailed from within the continental United States by certified mail,
return receipt requested to the party entitled to receive the same:


	
  If to the Secured Party:

  	
  Cornell Capital Partners, LP

  
	
   

  	
  101 Hudson Street-Suite 3700

  
	
   

  	
  Jersey City, New Jersey 07302

  
	
   

  	
  Attention:

  	
  Mark Angelo

  
	
   

  	
   

  	
  Portfolio Manager

  
	
   

  	
  Telephone:

  	
  (201) 986-8300

  
	
   

  	
  Facsimile:

  	
  (201) 985-8266

  



 



 10
 








 


	
  With a copy to:

  	
  David Gonzalez, Esq.

  
	
   

  	
  101 Hudson Street, Suite 3700

  
	
   

  	
  Jersey City, NJ 07302

  
	
   

  	
  Telephone:

  	
  (201) 985-8300

  
	
   

  	
  Facsimile:

  	
  (201) 985-8266

  
	
   

  	
   

  
	
  And if to the
  Company:

  	
  Open Energy Corporation

  
	
   

  	
  514 Via de la Valle, Suite 200

  
	
   

  	
  Solana Beach, CA 92075

  
	
   

  	
  Attention:

  	
  David Saltman, Chief Executive Officer

  
	
   

  	
  Telephone:

  	
  858-794-8800

  
	
   

  	
  Facsimile:

  	
  858-794-8811

  
	
   

  	
   

  
	
  With a copy to:

  	
  Pillsbury Winthrop Shaw Pittman LLP

  
	
   

  	
  12255 El Camino Real, Suite 300

  
	
   

  	
  San Diego, CA 92130

  
	
   

  	
  Attention: Sue J. Hodges, Partner

  
	
   

  	
  Telephone:

  	
  858-509-4003

  
	
   

  	
  Facsimile:

  	
  858-509-4010

  
				



 


Any party may change its address by giving notice to
the other party stating its new address. 
Commencing on the tenth (10th) day after the giving of such
notice, such newly designated address shall be such party’s address for the
purpose of all notices or other communications required or permitted to be
given pursuant to this Agreement.


Section 8.2.            Severability.


If any provision of this Agreement shall be held
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render invalid or
unenforceable any other severable provision of this Agreement, and this
Agreement shall be carried out as if any such invalid or unenforceable
provision were not contained herein.


Section 8.3.            Expenses.


In the event of an Event of Default, the Company will
pay to the Secured Party the amount of any and all reasonable out-of-pocket
expenses, including the reasonable fees and expenses of its counsel, which the
Secured Party may incur in connection with: 
(i) the custody or preservation of, or the sale, collection from,
or other realization upon, any of the Pledged Property; (ii) the exercise
or enforcement of any of the rights of the Secured Party hereunder or
(iii) the failure by the Company to perform or observe any of the
provisions hereof.


Section 8.4.            Waivers,
Amendments, Etc.


The Secured Party’s delay or failure at any time or
times hereafter to require strict performance by Company of any undertakings,
agreements or covenants shall not waive, affect, or diminish any right of the
Secured Party under this Agreement to demand strict compliance and



 11
 








performance herewith. 
Any waiver by the Secured Party of any Event of Default shall not waive
or affect any other Event of Default, whether such Event of Default is prior or
subsequent thereto and whether of the same or a different type.  None of the undertakings, agreements and
covenants of the Company contained in this Agreement, and no Event of Default,
shall be deemed to have been waived by the Secured Party, nor may this
Agreement be amended, changed or modified, unless such waiver, amendment,
change or modification is evidenced by an instrument in writing specifying such
waiver, amendment, change or modification and signed by the Secured Party in
the case of any such waiver, and signed by the Secured Party and the Company in
the case of any such amendment, change or modification.


Section 8.5.            Continuing
Security Interest; Partial Release.


(a)  This
Agreement shall create a continuing security interest in the Pledged Property
and shall: (i) remain in full force and effect until payment or conversion
in full of the Convertible Debentures; (ii) be binding upon the Company
and its successors and assigns; and (iii) inure to the benefit of the
Secured Party and its successors and assigns. 
Upon the payment or satisfaction in full or conversion in full of the
Convertible Debentures, this Agreement and the security interest created hereby
shall terminate, and, in connection therewith, the Company shall be entitled to
the return, at its expense, of such of the Pledged Property as shall not have
been sold in accordance with Section 5.2 hereof or otherwise applied
pursuant to the terms hereof and the Secured Party shall deliver to the Company
such documents as the Company shall reasonably request to evidence such
termination.


(b)           Effective
upon the closing of a disposition of any Pledged Property, provided the Secured
Party consents in writing prior to such disposition or such disposition is made
in the ordinary course of business, the security interest granted hereunder in
the Pledged Property so disposed of shall terminate and the Secured Party shall
deliver such documents as the Company shall reasonably request to evidence such
termination; provided, however, the security interest granted hereunder in all
remaining Pledged Property shall remain in full force and effect.


Section 8.6.            Independent
Representation.


Each party hereto acknowledges and agrees that it has
received or has had the opportunity to receive independent legal counsel of its
own choice and that it has been sufficiently apprised of its rights and
responsibilities with regard to the substance of this Agreement.


Section 8.7.            Applicable
Law:  Jurisdiction.


This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New Jersey without regard to the
principles of conflict of laws.  The
parties further agree that any action between them shall be heard in Hudson
County, New Jersey, and expressly consent to the jurisdiction and venue of the
Superior Court of New Jersey, sitting in Hudson County and the United States
District Court for the District of New Jersey sitting in Newark, New Jersey for
the adjudication of any civil action asserted pursuant to this Paragraph.



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Section 8.8.            Waiver
of Jury Trial.


AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER
INTO THIS AGREEMENT AND TO MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY,
THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED
TO THIS TRANSACTION.


Section 8.9.            Entire
Agreement.


This Agreement constitutes the entire agreement among
the parties and supersedes any prior agreement or understanding among them with
respect to the subject matter hereof.


[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]



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IN WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.


 


	
  

  	
  COMPANY:

  
	
   

  	
  OPEN ENERGY CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Saltman

  
	
   

  	
  Name: David Saltman

  
	
   

  	
  Title:  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  



 



 14
 









IN WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.


 


	
  

  	
  COMPANY:

  
	
   

  	
  Connect Renewable Energy, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Saltman

  
	
   

  	
  Name: David Saltman

  
	
   

  	
  Title:  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  



 



 15
 









IN WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.


 


	
  

  	
  COMPANY:

  
	
   

  	
  Solar Roofing Systems, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Saltman

  
	
   

  	
  Name: David Saltman

  
	
   

  	
  Title:   Chief Executive Officer

  
	
   

  	
   

  	
   

  



 



 16
 









IN WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.


 


	
  

  	
  COMPANY:

  
	
   

  	
  WaterEye Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Saltman

  
	
   

  	
  Name: David Saltman

  
	
   

  	
  Title:   Chief Executive Officer

  
	
   

  	
   

  	
   

  



 



 17
 









IN WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.


 


	
  

  	
  SECURED PARTY:

  
	
   

  	
  CORNELL CAPITAL PARTNERS, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Yorkville Advisors, LLC

  
	
   

  	
  Its:

  	
  Investment Manager

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Gerald Eicke

  	
   

  
	
   

  	
  Name:

  	
  Gerald Eicke

  
	
   

  	
  Its: Managing Partner

  
	
   

  	
   

  	
   

  
				



 



 18
 









SCHEDULE I


LEGAL NAMES;
ORGANIZATIONAL IDENTIFICATION NUMBERS; STATES OF

ORGANIZATION


 


	
  Company’s
  Name

  	
   

  	
  State of

  Organization

  	
   

  	
  Employer

  ID

  	
   

  	
  Organizational

  ID

  
	
  Connect Renewable Energy, Inc.

  	
   

  	
  Nevada



  	
   

  	
   

  	
   

  	
   

  
	
  Solar Roofing Systems, Inc.

  	
   

  	
  Ontario,

  Canada

  	
   

  	
   

  	
   

  	
   

  
	
  WaterEye Corporation

  	
   

  	
  Nevada



  	
   

  	
   

  	
   

  	
   

  



 



 19
 









EXHIBIT A

DEFINITION OF PLEDGED
PROPERTY


For the purpose of
securing prompt and complete payment and performance by the Company of all of
the Obligations, the Company unconditionally and irrevocably hereby grants to
the Secured Party a continuing security interest in and to, and lien upon, the
following Pledged Property of the Company:


(a)           all goods of the Company,
including, without limitation, machinery, equipment, furniture, furnishings,
fixtures, signs, lights, tools, parts, supplies and motor vehicles of every
kind and description, now or hereafter owned by the Company or in which the
Company may have or may hereafter acquire any interest, and all replacements,
additions, accessions, substitutions and proceeds thereof, arising from the
sale or disposition thereof, and where applicable, the proceeds of insurance
and of any tort claims involving any of the foregoing;


(b)           all inventory of the
Company, including, but not limited to, all goods, wares, merchandise, parts,
supplies, finished products, other tangible personal property, including such
inventory as is temporarily out of Company’s custody or possession and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing;


(c)           all contract rights
and general intangibles of the Company, including, without limitation, goodwill,
trademarks, trade styles, trade names, leasehold interests, partnership or
joint venture interests, patents and patent applications, copyrights, deposit
accounts whether now owned or hereafter created;


(d)           all documents,
warehouse receipts, instruments and chattel paper of the Company whether now
owned or hereafter created;


(e)           all accounts and
other receivables, instruments or other forms of obligations and rights to
payment of the Company (herein collectively referred to as “Accounts”),
together with the proceeds thereof, all goods represented by such Accounts and
all such goods that may be returned by the Company’s customers, and all
proceeds of any insurance thereon, and all guarantees, securities and liens
which the Company may hold for the payment of any such Accounts including,
without limitation, all rights of stoppage in transit, replevin and reclamation
and as an unpaid vendor and/or lienor;


(f)            to the extent
assignable, all of the Company’s rights under all present and future
authorizations, permits, licenses and franchises issued or granted in
connection with the operations of any of its facilities;


(g)           all equity
interests, securities or other instruments in other companies, including,
without limitation, any subsidiaries, investments or other entities (whether or
not controlled); and


(h)           all products and
proceeds (including, without limitation, insurance proceeds) from the
above-described Pledged Property.



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