Document:

EXHIBIT 10.4
 

    NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

    

    Original
Issue Date: July 2,
2009

    Original
Conversion Price (subject to adjustment herein): $0.06

    

    $_______________

    

    8%
SECURED CONVERTIBLE DEBENTURE

    DUE
OCTOBER 1, 2010

    

    THIS DEBENTURE is one of a series of
duly authorized and validly issued 8% Secured Convertible Debentures of
Ecotality, Inc., a Nevada corporation, (the “Company”), having its
principal place of business at 6821 East Thomas Road, Scottsdale, Arizona 85251,
designated as its 8% Secured Convertible Debenture due October 1, 2010 (this
debenture, the “Debenture” and,
collectively with the other debentures of such series, the “Debentures”).

    

    FOR VALUE
RECEIVED, the Company promises to pay to ________________________ or its
registered assigns (the “Holder”), or shall
have paid pursuant to the terms hereunder, the principal sum of $_______________
on October 1, 2010 (the “Maturity Date”) or
such earlier date as this Debenture is required or permitted to be repaid as
provided hereunder, and to pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Debenture in
accordance with the provisions hereof.  This Debenture is subject to
the following additional provisions:

    

    Section
1.     Definitions.  For
the purposes hereof, in addition to the terms defined elsewhere in this
Debenture, (a) capitalized terms not otherwise defined herein shall have the
meanings set forth in the Purchase Agreement and (b) the following terms shall
have the following meanings:

    
      
         

      

      
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    “Alternate
Consideration” shall have the meaning set forth in Section
5(e).

    

    “Bankruptcy Event”
means any of the following events: (a) the Company or any Significant Subsidiary
(as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a
case or other proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction relating to the Company or any Significant
Subsidiary thereof; (b) there is commenced against the Company or any
Significant Subsidiary thereof any such case or proceeding that is not dismissed
within 60 days after commencement; (c) the Company or any Significant Subsidiary
thereof is adjudicated insolvent or bankrupt or any order of relief or other
order approving any such case or proceeding is entered; (d) the Company or any
Significant Subsidiary thereof suffers any appointment of any custodian or the
like for it or any substantial part of its property that is not discharged or
stayed within 60 calendar days after such appointment; (e) the Company or any
Significant Subsidiary thereof makes a general assignment for the benefit of
creditors; (f) the Company or any Significant Subsidiary thereof calls a meeting
of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (g) the Company or any Significant Subsidiary
thereof, by any act or failure to act, expressly indicates its consent to,
approval of or acquiescence in any of the foregoing or takes any corporate or
other action for the purpose of effecting any of the foregoing.

    

    “Base Conversion
Price” shall have the meaning set forth in Section 5(b).

    

    “Business Day” means
any day except any Saturday, any Sunday, any day which shall be a federal legal
holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.

    

    “Buy-In” shall have
the meaning set forth in Section 4(d)(v).

    

    “Change of Control
Transaction” means the occurrence after the date hereof of any of (i) an
acquisition after the date hereof by an individual or legal entity or “group”
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company (other than by means of conversion or exercise
of the Debentures and the Securities issued together with the Debentures), or
(ii) the Company merges into or consolidates with any other Person, or any
Person merges into or consolidates with the Company and, after giving effect to
such transaction, the stockholders of the Company immediately prior to such
transaction own less than 66% of the aggregate voting power of the Company or
the successor entity of such transaction, or (iii) the Company sells or
transfers all or substantially all of its assets to another Person and the
stockholders of the Company immediately prior to such transaction own less than
66% of the aggregate voting power of the acquiring entity immediately after the
transaction, or (iv) a replacement at one time or within a three year period of
more than one-half of the members of the Company’s board of directors which is
not approved by a majority of those individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are
members on the date hereof), or (v) the execution by the Company of an agreement
to which the Company  is a party or by which it is bound, providing
for any of the events set forth in clauses (i) through (iv)
above.

    
      
         

      

      
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    “Conversion Date”
shall have the meaning set forth in Section 4(a).

    

    “Conversion Price”
shall have the meaning set forth in Section 4(b).

    

    “Conversion Shares”
means, collectively, the shares of Common Stock issuable upon conversion of this
Debenture in accordance with the terms hereof.

    

    “Debenture Register”
shall have the meaning set forth in Section 2(b).

    

    “Dilutive Issuance”
shall have the meaning set forth in Section 5(b).

    

    “Dilutive Issuance
Notice” shall have the meaning set forth in Section 5(b).

    

    “Effectiveness Period”
shall have the meaning set forth in the Registration Rights
Agreement.

    

    “Equity Conditions”
means, during the period in question, (i) the Company shall have duly honored
all conversions and redemptions scheduled to occur or occurring by virtue of one
or more Notices of Conversion of the Holder, if any, (ii) the Company shall have
paid all liquidated damages and other amounts owing to the Holder in respect of
this Debenture, (iii) there is an effective Registration Statement pursuant
to which the Holder is permitted to utilize the prospectus thereunder to resell
all of the shares issuable pursuant to the Transaction Documents (and the
Company believes, in good faith, that such effectiveness will continue
uninterrupted for the foreseeable future), (iv) the Common Stock is trading on a
Trading Market and all of the shares issuable pursuant to the Transaction
Documents are listed or quoted for trading on such Trading Market (and the
Company believes, in good faith, that trading of the Common Stock on a Trading
Market will continue uninterrupted for the foreseeable future), (v) there is a
sufficient number of authorized but unissued and otherwise unreserved shares of
Common Stock for the issuance of all of the shares issuable pursuant to the
Transaction Documents, (vi) there is no existing Event of Default or no existing
event which, with the passage of time or the giving of notice, would constitute
an Event of Default, (vii) the issuance of the shares in question (or, in the
case of an Optional or Monthly Redemption, the shares issuable upon conversion
in full of the Optional or Monthly Redemption Amount) to
the Holder would not violate the limitations set forth in Section 4(c) herein,
(viii) there has been no public announcement of a pending or proposed
Fundamental Transaction or Change of Control Transaction that has not been
consummated, (ix) the Holder is not in possession of any information provided by
the Company that constitutes, or may constitute, material non-public information
and (x) the average daily trading volume for a period of 20 consecutive Trading
Days prior to the applicable date in question on the principal Trading
Market exceeds 200,000 shares (subject to adjustment for forward and reverse
stock splits and the like) per Trading Day.

    
      
         

      

      
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    “Event of Default”
shall have the meaning set forth in Section 8.

    

    “Forced Conversion”
shall have the meaning set forth in Section 6(d).

    

    “Forced Conversion
Date” shall have the meaning set forth in Section 6(d).

    

    “Forced Conversion
Notice” shall have the meaning set forth in Section 6(d).

    

    “Forced Conversion Notice
Date” shall have the meaning set forth in Section 6(d).

    

    “Fundamental
Transaction” shall have the meaning set forth in Section
5(e).

    

    “Late Fees” shall have
the meaning set forth in Section 2(c).

    

    “Mandatory Default
Amount”  means the sum of (i) the greater of (A) 130% of the
outstanding principal amount of this Debenture, plus 100% of accrued and unpaid
interest hereon, or (B) the outstanding principal amount of this Debenture, plus
all accrued and unpaid interest hereon, divided by the Conversion Price on the
date the Mandatory Default Amount is either (a) demanded (if demand or notice is
required to create an Event of Default) or otherwise due or (b) paid in full,
whichever has a lower Conversion Price, multiplied by the VWAP on the date the
Mandatory Default Amount is either (x) demanded or otherwise due or (y) paid in
full, whichever has a higher VWAP, and (ii) all other amounts, costs, expenses
and liquidated damages due in respect of this Debenture.

    

    “Monthly Conversion
Period” shall have the meaning set forth in Section 6(b)
hereof.

    

    “Monthly Conversion
Price” shall have the meaning set forth in Section 6(b)
hereof.

    

    “Monthly Redemption”
means the redemption of this Debenture pursuant to Section 6(b)
hereof.

     

    “Monthly Redemption
Amount” means one tenth (1/10th) of the
outstanding principal amount of the Debenture outstanding as of January 1, 2010,
plus accrued but unpaid interest, liquidated damages and any other amounts then
owing to the Holder in respect of this Debenture.

    
      
         

      

      
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    “Monthly Redemption
Date” means January 1, 2010, and the first calendar day of each month
thereafter, and terminating upon the full redemption of this
Debenture.

    

    “Monthly Redemption
Notice” shall have the meaning set forth in Section 6(b)
hereof.

    

    “New York Courts”
shall have the meaning set forth in Section 9(d).

    

    “Notice of Conversion”
shall have the meaning set forth in Section 4(a).

    

    “Optional Redemption”
shall have the meaning set forth in Section 6(a).

    

    “Optional Redemption
Amount” means the sum of (i) 115% of the then outstanding principal
amount of the Debenture, (ii) accrued but unpaid interest and (iii) all
liquidated damages and other amounts due in respect of the
Debenture.

    

    “Optional Redemption
Date” shall have the meaning set forth in Section 6(a).

    

    “Optional Redemption
Notice” shall have the meaning set forth in Section 6(a).

    

    “Optional Redemption Notice
Date” shall have the meaning set forth in Section 6(a).

    

    “Original Issue Date”
means the date of the first issuance of the Debentures, regardless of any
transfers of any Debenture and regardless of the number of instruments which may
be issued to evidence such Debentures.

    

    “Permitted
Indebtedness” means (a) the indebtedness evidenced by the Debentures, (b)
up to $2,000,000, in the aggregate, of non-equity linked indebtedness under
accounts receivable or inventory lines of credit with a federal or state
regulated bank or nationally recognized commercial lending institution whose
primary business is not investing in securities, (c) indebtedness existing on
the Original Issue Date and set forth on Schedule 3.1(n) to
the Purchase Agreement and (d) indebtedness permitted under the Existing
Transaction Documents.

    

    “Permitted Lien” means
the individual and collective reference to the following: (a) Liens for taxes,
assessments and other governmental charges or levies not yet due or Liens for
taxes, assessments and other governmental charges or levies being contested in
good faith and by appropriate proceedings for which adequate reserves (in the
good faith judgment of the management of the Company) have been established in
accordance with GAAP; (b) Liens imposed by law which were incurred in the
ordinary course of the Company’s business, such as carriers’, warehousemen’s and
mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in
the ordinary course of the Company’s business, and which (x) do not individually
or in the aggregate materially detract from the value of such property or assets
or materially impair the use thereof in the operation of the business of the
Company and its consolidated Subsidiaries or (y) are being contested in good
faith by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the property or
asset subject to such Lien; (c) Liens incurred in connection with Permitted
Indebtedness under clauses (a), (c) and (d); and (d) Liens incurred in
connection with Permitted Indebtedness under clause (b) thereunder, provided
that such Liens are not secured by assets of the Company or its Subsidiaries
other than the accounts receivable and/or inventory subject to such lines of
credit.

    
      
         

      

      
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    “Purchase Agreement”
means the Securities Purchase Agreement, dated as of July 2, 2009 among the
Company and the original Holders, as amended, modified or supplemented from time
to time in accordance with its terms.

    

    “Registration Rights
Agreement” means the Registration Rights Agreement, dated as of the date
of the Purchase Agreement, among the Company and the original Holders, as
amended, modified or supplemented from time to time in accordance with its
terms.

    

    “Registration
Statement” means a registration statement that registers the resale of
all Conversion Shares and Interest Conversion Shares of the Holder, names the
Holder as a “selling stockholder” therein, and meets the requirements of the
Registration Rights Agreement.

    

    “Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

    

    “Share Delivery Date”
shall have the meaning set forth in Section 4(d).

    

    “Subsidiary” shall
have the meaning set forth in the Purchase Agreement.

    

    “Threshold Period”
shall have the meaning set forth in Section 6(d).

    

    “Trading Day” means a
day on which the New York Stock Exchange is open for business.

    

    “Trading Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the NYSE AMEX, the Nasdaq Capital Market,
the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock
Exchange or the OTC Bulletin Board.

    

    “Transaction
Documents” shall have the meaning set forth in the Purchase
Agreement.

    
      
         

      

      
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    “VWAP” means, for any
date, the price determined by the first of the following clauses that applies:
(a) if the Common Stock is then listed or quoted on a Trading Market, the daily
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day from
9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)); (b)  if
the OTC Bulletin Board is not a Trading Market, the volume weighted average
price of the Common Stock for such date (or the nearest preceding date) on the
OTC Bulletin Board; (c) if the Common Stock is not then quoted for trading on
the OTC Bulletin Board and if prices for the Common Stock are then reported in
the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported; or (d) in all other cases,
the fair market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Holder and reasonably acceptable to the
Company.

    

    Section
2.            
Interest.

    

    a)           Payment of Interest in
Cash. The Company shall pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Debenture at the rate
of 8% per annum. On October 1, 2009, any
interest that has accrued on the Debenture up through September 30, 2009 and has
not been paid, shall be added to the then principal amount of the Debenture, and
thereafter interest shall be payable on the 1st of each
month, commencing immediately upon November 1, 2009, on each Monthly Redemption
Date (as to that principal amount then being redeemed), on each Conversion Date
(as to that principal amount then being converted), on each Optional Redemption
Date (as to that principal amount then being redeemed) and on the Maturity Date
(each such date, an “Interest Payment
Date”) (if any Interest Payment Date is not a Business Day, then the
applicable payment shall be due on the next succeeding Business Day), in
cash.

    

    b)           Interest
Calculations. Interest shall be calculated on the basis of a 360-day
year, consisting of twelve 30 calendar day periods, and shall accrue daily
commencing on the Original Issue Date until payment in full of the outstanding
principal, together with all accrued and unpaid interest, liquidated damages and
other amounts which may become due hereunder, has been made.  Interest
shall cease to accrue with respect to any principal amount converted, provided
that the Company actually delivers the Conversion Shares within the time period
required by Section 4(d)(ii) herein.  Interest hereunder will be paid
to the Person in whose name this Debenture is registered on the records of the
Company regarding registration and transfers of this Debenture (the “Debenture
Register”).

    

    c)           Late
Fee.  All overdue accrued and unpaid interest to be paid
hereunder shall entail a late fee at an interest rate equal to the lesser of 18%
per annum or the maximum rate permitted by applicable law (“Late Fees”) which
shall accrue daily from the date such interest is due hereunder through and
including the date of actual payment in full.

    

    d)           Prepayment.  Except
as otherwise set forth in this Debenture, the Company may not prepay any portion
of the principal amount of this Debenture without the prior written consent of
the Holder.

    
      
         

      

      
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    Section
3.             Registration of Transfers
and Exchanges.

    

    a)           Different
Denominations. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same.  No service charge will
be payable for such registration of exchange.

    

    b)           Investment
Representations. This Debenture has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance with the
Purchase Agreement and applicable federal and state securities laws and
regulations.

    

    c)           Reliance on Debenture
Register. Prior to due presentment for transfer to the Company of this
Debenture, the Company and any agent of the Company may treat the Person in
whose name this Debenture is duly registered on the Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this Debenture is overdue, and neither the
Company nor any such agent shall be affected by notice to the
contrary.

    

    Section
4.             Conversion.

    

    a)           Voluntary Conversion.
At any time after the Authorized Share Approval until this Debenture is no
longer outstanding, this Debenture shall be convertible, in whole or in part,
into shares of Common Stock at the option of the Holder, at any time and from
time to time (subject to the conversion limitations set forth in
Section 4(c) hereof).  The Holder shall effect conversions by
delivering to the Company a Notice of Conversion, the form of which is attached
hereto as Annex
A (a “Notice of
Conversion”), specifying therein the principal amount of this Debenture
to be converted and the date on which such conversion shall be effected (such
date, the “Conversion
Date”).  If no Conversion Date is specified in a Notice of
Conversion, the Conversion Date shall be the date that such Notice of Conversion
is deemed delivered hereunder.  To effect conversions hereunder, the
Holder shall not be required to physically surrender this Debenture to the
Company unless the entire principal amount of this Debenture, plus all accrued
and unpaid interest thereon, has been so converted. Conversions hereunder shall
have the effect of lowering the outstanding principal amount of this Debenture
in an amount equal to the applicable conversion.  The Holder and the
Company shall maintain records showing the principal amount(s) converted and the
date of such conversion(s).  The Company may deliver an objection to
any Notice of Conversion within 1 Business Day of delivery of such Notice of
Conversion.  In the event of any dispute or discrepancy, the records
of the Holder shall be controlling and determinative in the absence of manifest
error. The Holder, and any
assignee by acceptance of this Debenture, acknowledge and agree that, by reason
of the provisions of this paragraph, following conversion of a portion of this
Debenture, the unpaid and unconverted principal amount of this Debenture may be
less than the amount stated on the face hereof.

    
      
         

      

      
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    b)           Conversion
Price.  The conversion price in effect on any Conversion Date
shall be equal to $0.06,
subject to adjustment herein (the “Conversion
Price”).

    

    c)           Conversion
Limitations.  The Company shall not effect any conversion of
this Debenture, and a Holder shall not have the right to convert any portion of
this Debenture, to the extent that after giving effect to the conversion set
forth on the applicable Notice of Conversion, the Holder (together with the
Holder’s Affiliates, and any other person or entity acting as a group together
with the Holder or any of the Holder’s Affiliates) would beneficially own in
excess of the Beneficial Ownership Limitation (as defined below).  For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates shall include the number of
shares of Common Stock issuable upon conversion of this Debenture with respect
to which such determination is being made, but shall exclude the number of
shares of Common Stock which are issuable upon (A) conversion of the remaining,
unconverted principal amount of this Debenture beneficially owned by the Holder
or any of its Affiliates and (B) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company  subject to
a limitation on conversion or exercise analogous to the limitation contained
herein (including, without limitation, any other Debentures or the Warrants)
beneficially owned by the Holder or any of its Affiliates.  Except as set
forth in the preceding sentence, for purposes of this Section 4(c), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder.  To the
extent that the limitation contained in this Section 4(c) applies, the
determination of whether this Debenture is convertible (in relation to other
securities owned by the Holder together with any Affiliates) and of which
principal amount of this Debenture is convertible shall be in the sole
discretion of the Holder, and the submission of a Notice of Conversion shall be
deemed to be the Holder’s determination of whether this Debenture may be
converted (in relation to other securities owned by the Holder together with any
Affiliates) and which principal amount of this Debenture is convertible, in each
case subject to the Beneficial Ownership Limitation. To ensure compliance with
this restriction, the Holder will be deemed to represent to the Company each
time it delivers a Notice of Conversion that such Notice of Conversion has not
violated the restrictions set forth in this paragraph and the Company shall have
no obligation to verify or confirm the accuracy of such
determination.  In addition, a determination as to any group status as
contemplated above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated
thereunder.   For purposes of this Section 4(c), in determining
the number of outstanding shares of Common Stock, the Holder may rely on the
number of outstanding shares of Common Stock as stated in the most recent of the
following: (A) the Company’s most recent Form 10-Q (or 10-QSB) or Form 10-K (or
10-KSB), as the case may be; (B) a more recent public announcement by the
Company; or (C) a more recent notice by the Company or the Company’s transfer
agent setting forth the number of shares of Common Stock outstanding.  Upon
the written or oral request of a Holder, the Company shall within two Trading
Days confirm orally and in writing to the Holder the number of shares of Common
Stock then outstanding.  In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including this Debenture, by the Holder
or its Affiliates since the date as of which such number of outstanding shares
of Common Stock was reported. The “Beneficial Ownership
Limitation” shall be 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of this Debenture held by the
Holder.  The provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with the terms of
this Section 4(c) to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership Limitation
herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this
Debenture.

    
      
         

      

      
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      d)         
 Mechanics of
Conversion.

    

    

    i.           Conversion Shares Issuable
Upon Conversion of Principal Amount.  The number of Conversion
Shares issuable upon a conversion hereunder shall be determined by the quotient
obtained by dividing (x) the outstanding principal amount of this Debenture to
be converted by (y) the Conversion Price.

    

    ii.           Delivery of Certificate Upon
Conversion. Not later than three Trading Days after each Conversion Date
(the “Share Delivery
Date”), the Company shall deliver, or cause to be delivered, to the
Holder (A) a certificate or certificates representing the Conversion Shares
which, on or after the earlier of (x) the Effective Date or (y) the 6-month
anniversary of the Closing Date, shall be free of restrictive legends and
trading restrictions (other than those which may then be required by the
Purchase Agreement) representing the number of Conversion Shares being acquired
upon the conversion of this Debenture and (B) a bank check in the amount of
accrued and unpaid interest. On or after the earlier of (x) the Effective Date
or (y) the six month anniversary of the Closing Date, the Company shall use its
best efforts to deliver any certificate or certificates required to be delivered
by the Company under this Section 4 electronically through the Depository Trust
Company or another established clearing corporation performing similar
functions.

    

    iii.           Failure to Deliver
Certificates.  If in the case of any Notice of Conversion such
certificate or certificates are not delivered to or as directed by the
applicable Holder by the third Trading Day after the Conversion Date, the Holder
shall be entitled to elect by written notice to the Company at any time on or
before its receipt of such certificate or certificates, to rescind such
Conversion, in which event the Company shall promptly return to the Holder any
original Debenture delivered to the Company and the Holder shall promptly return
to the Company the Common Stock certificates representing the principal amount
of this Debenture unsuccessfully tendered for conversion to the
Company.

    
      
         

      

      
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    iv.           Obligation Absolute; Partial
Liquidated Damages.  The Company’s obligations to issue and
deliver the Conversion Shares upon conversion of this Debenture in accordance
with the terms hereof are absolute and unconditional, irrespective of any action
or inaction by the Holder to enforce the same, any waiver or consent with
respect to any provision hereof, the recovery of any judgment against any Person
or any action to enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder or any
other Person of any obligation to the Company or any violation or alleged
violation of law by the Holder or any other Person, and irrespective of any
other circumstance which might otherwise limit such obligation of the Company to
the Holder in connection with the issuance of such Conversion Shares; provided, however, that such
delivery shall not operate as a waiver by the Company of any such action the
Company may have against the Holder.  In the event the Holder of this
Debenture shall elect to convert any or all of the outstanding principal amount
hereof, the Company may not refuse conversion based on any claim that the Holder
or anyone associated or affiliated with the Holder has been engaged in any
violation of law, agreement or for any other reason, unless an injunction from a
court, on notice to Holder, restraining and or enjoining conversion of all or
part of this Debenture shall have been sought and obtained, and the Company
posts a surety bond for the benefit of the Holder in the amount of 150% of the
outstanding principal amount of this Debenture, which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds of which shall
be payable to the Holder to the extent it obtains judgment.  In the
absence of such injunction, the Company shall issue Conversion Shares or, if
applicable, cash, upon a properly noticed conversion.  If the Company
fails for any reason to deliver to the Holder such certificate or certificates
pursuant to Section 4(d)(ii) by the third Trading Day after the Conversion Date,
the Company shall pay to the Holder, in cash, as liquidated damages and not as a
penalty, for each $1000 of principal amount being converted, $10 per Trading Day
(increasing to $20 per Trading Day on the fifth Trading Day after such
liquidated damages begin to accrue) for each Trading Day after such third
Trading Day until such certificates are
delivered.    Nothing herein shall limit a Holder’s right to
pursue actual damages or declare an Event of Default pursuant to Section 8
hereof for the Company’s failure to deliver Conversion Shares within the period
specified herein and the Holder shall have the right to pursue all remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.  The exercise
of any such rights shall not prohibit the Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable
law.

    
      
         

      

      
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    v.           Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Conversion. In addition to
any other rights available to the Holder, if the Company fails for any reason to
deliver to the Holder such certificate or certificates by the Share Delivery
Date pursuant to Section 4(d)(ii), and if after such Share Delivery Date the
Holder is required by its brokerage firm to purchase (in an open market
transaction or otherwise), or the Holder’s brokerage firm otherwise purchases,
shares of Common Stock to deliver in satisfaction of a sale by the Holder of the
Conversion Shares which the Holder was entitled to receive upon the conversion
relating to such Share Delivery Date (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder (in addition to any other remedies
available to or elected by the Holder) the amount by which (x) the Holder’s
total purchase price (including any brokerage commissions) for the Common Stock
so purchased exceeds (y) the product of (1) the aggregate number of shares of
Common Stock that the Holder was entitled to receive from the conversion at
issue multiplied by (2) the actual sale price at which the sell order giving
rise to such purchase obligation was executed (including any brokerage
commissions) and (B) at the option of the Holder, either reissue (if
surrendered) this Debenture in a principal amount equal to the principal amount
of the attempted conversion or deliver to the Holder the number of shares of
Common Stock that would have been issued if the Company had timely complied with
its delivery requirements under Section 4(d)(ii).  For example, if the
Holder purchases Common Stock having a total purchase price of $11,000 to cover
a Buy-In with respect to an attempted conversion of this Debenture with respect
to which the actual sale price of the Conversion Shares (including any brokerage
commissions) giving rise to such purchase obligation was a total of $10,000
under clause (A) of the immediately preceding sentence, the Company shall be
required to pay the Holder $1,000.  The Holder shall provide the
Company written notice indicating the amounts payable to the Holder in respect
of the Buy-In and, upon request of the Company, evidence of the amount of such
loss.  Nothing herein shall limit a Holder’s right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver certificates representing
shares of Common Stock upon conversion of this Debenture as required pursuant to
the terms hereof.

    

    vi.           Reservation of Shares
Issuable Upon Conversion. At all times from and after the Authorized
Share Approval, the Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock for the sole
purpose of issuance upon conversion of this Debenture and payment of interest on
this Debenture, each as herein provided, free from preemptive rights or any
other actual contingent purchase rights of Persons other than the Holder (and
the other holders of the Debentures), not less than such aggregate number of
shares of the Common Stock as shall (subject to the terms and conditions set
forth in the Purchase Agreement) be issuable (taking into account the
adjustments of Section 5) upon the conversion of the outstanding principal
amount of this Debenture and payment of interest hereunder.  The
Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly authorized, validly issued, fully paid and
nonassessable and, if the Registration Statement is then effective under the
Securities Act, shall be registered for public sale in accordance with such
Registration Statement.

    
      
         

      

      
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    vii.           Fractional Shares. No
fractional shares or scrip representing fractional shares shall be issued upon
the conversion of this Debenture.  As to any fraction of a share which
Holder would otherwise be entitled to purchase upon such conversion, the Company
shall at its election, either pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the Conversion Price
or round up to the next whole share.

    

    viii.           Transfer
Taxes.  The issuance of certificates for shares of the Common
Stock on conversion of this Debenture shall be made without charge to the Holder
hereof for any documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such certificates, provided that the Company shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in
a name other than that of the Holder of this Debenture and the Company shall not
be required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.

    

    Section
5.             Certain
Adjustments.

    

    a)           Stock Dividends and Stock
Splits.  If the Company, at any time while this Debenture is
outstanding: (A) pays a stock dividend or otherwise makes a distribution or
distributions payable in shares of Common Stock on shares of Common Stock or any
Common Stock Equivalents (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company upon conversion of, or payment of
interest on, the Debentures); (B) subdivides outstanding shares of Common Stock
into a larger number of shares; (C) combines (including by way of a reverse
stock split) outstanding shares of Common Stock into a smaller number of shares;
or (D) issues, in the event of a reclassification of shares of the Common Stock,
any shares of capital stock of the Company, then the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding any treasury shares of the Company) outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such
event.  Any adjustment made pursuant to this Section shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.

    
      
         

      

      
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    b)           Subsequent Equity
Sales.  If, at any time while this Debenture is
outstanding,  the Company or any Subsidiary, as applicable, sells or
grants any option to purchase or sells or grants any right to reprice, or
otherwise disposes of or issues (or announces any sale, grant or any option to
purchase or other disposition), any Common Stock or Common Stock Equivalents
entitling any Person to acquire shares of Common Stock at an effective price per
share that is lower than the then Conversion Price (such lower price, the “Base Conversion
Price” and such issuances, collectively, a “Dilutive Issuance”)
(if the holder of the Common Stock or Common Stock Equivalents so issued shall
at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights per share which are issued in connection with
such issuance, be entitled to receive shares of Common Stock at an effective
price per share that is lower than the Conversion Price, such issuance shall be
deemed to have occurred for less than the Conversion Price on such date of the
Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base
Conversion Price.  Such adjustment shall be made whenever such Common
Stock or Common Stock Equivalents are issued.  Notwithstanding the
foregoing, no adjustment will be made under this Section 5(b) in respect of an
Exempt Issuance.  If the Company enters into a Variable Rate
Transaction, despite the prohibition set forth in the Purchase Agreement, the
Company shall be deemed to have issued Common Stock or Common Stock Equivalents
at the lowest possible conversion price at which such securities may be
converted or exercised. The Company shall notify the Holder in writing, no later
than 1 Business Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this Section 5(b), indicating therein the applicable
issuance price, or applicable reset price, exchange price, conversion price and
other pricing terms (such notice, the “Dilutive Issuance
Notice”).  For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon
the occurrence of any Dilutive Issuance, the Holder is entitled to receive a
number of Conversion Shares based upon the Base Conversion Price on or after the
date of such Dilutive Issuance, regardless of whether the Holder accurately
refers to the Base Conversion Price in the Notice of Conversion.

     

    c)           Subsequent Rights
Offerings.  If the Company, at any time while the Debenture is
outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of
Common Stock at a price per share that is lower than the VWAP on the record date
referenced below, then the Conversion Price shall be multiplied by a fraction of
which the denominator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of Common Stock offered for subscription or purchase, and
of which the numerator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so
offered (assuming delivery to the Company in full of all consideration payable
upon exercise of such rights, options or warrants) would purchase at such
VWAP.  Such adjustment shall be made whenever such rights or warrants
are issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights, options or
warrants.

    
      
         

      

      
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    d)           Pro Rata
Distributions. If the Company, at any time while this Debenture is
outstanding, distributes to all holders of Common Stock (and not to the Holders)
evidences of its indebtedness or assets (including cash and cash dividends) or
rights or warrants to subscribe for or purchase any security (other than the
Common Stock, which shall be subject to Section 5(b)), then in each such case
the Conversion Price shall be adjusted by multiplying such Conversion Price in
effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the VWAP determined as of the record date mentioned above,
and of which the numerator shall be such VWAP on such record date less the then
fair market value at such record date of the portion of such assets or evidence
of indebtedness so distributed applicable to 1 outstanding share of the Common
Stock as determined by the Board of Directors of the Company in good
faith.  In either case the adjustments shall be described in a
statement delivered to the Holder describing the portion of assets or evidences
of indebtedness so distributed or such subscription rights applicable to 1 share
of Common Stock.  Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.

    

    e)           Fundamental
Transaction. If, at any time while this Debenture is outstanding, (A) the
Company effects any merger or consolidation of the Company with or into another
Person, (B) the Company effects any sale of all or substantially all of its
assets in one transaction or a series of related transactions, (C) any tender
offer or exchange offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to tender or exchange
their shares for other securities, cash or property, or (D) the Company effects
any reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or exchanged
for other securities, cash or property (in any such case, a “Fundamental
Transaction”), then, upon any subsequent conversion of this Debenture,
the Holder shall have the right to receive, for each Conversion Share that would
have been issuable upon such conversion immediately prior to the occurrence of
such Fundamental Transaction, the same kind and amount of securities, cash or
property as it would have been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of 1 share of Common Stock (the “Alternate
Consideration”).  For purposes of any such conversion, the
determination of the Conversion Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of 1 share of Common Stock in such Fundamental Transaction,
and the Company shall apportion the Conversion Price among the Alternate
Consideration in a reasonable manner reflecting the relative value of any
different components of the Alternate Consideration.  If holders of
Common Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any conversion of this
Debenture following such Fundamental Transaction.  To the extent
necessary to effectuate the foregoing provisions, any successor to the Company
or surviving entity in such Fundamental Transaction shall issue to the Holder a
new debenture consistent with the foregoing provisions and evidencing the
Holder’s right to convert such debenture into Alternate Consideration. The terms
of any agreement pursuant to which a Fundamental Transaction is effected shall
include terms requiring any such successor or surviving entity to comply with
the provisions of this Section 5(e) and insuring that this Debenture (or any
such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.

    
      
         

      

      
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    f)           Calculations.  All
calculations under this Section 5 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be.  For purposes of this
Section 5, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding any treasury shares of the Company) issued and
outstanding.

    

    g)           Notice to the
Holder.

    

    i.           Adjustment to Conversion
Price.  Whenever the Conversion Price is adjusted pursuant to
any provision of this Section 5, the Company shall promptly deliver to each
Holder a notice setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such
adjustment.

    

    ii.           Notice to Allow Conversion
by Holder.  If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Company shall authorize the granting to all holders of the Common
Stock of rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the Common
Stock, any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property or (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company, then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of this Debenture, and shall
cause to be delivered to the Holder at its last address as it shall appear upon
the Debenture Register, at least 20 calendar days prior to the applicable record
or effective date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange, provided that the failure to deliver such
notice or any defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice.  The Holder is entitled to convert this Debenture during the
20-day period commencing on the date of such notice through the effective date
of the event triggering such notice.

    
      
         

      

      
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    Section
6.             Redemption and Forced
Conversion.

    

    a)           Optional Redemption at
Election of Company.  Subject to the provisions of this Section
6, at any time after the Effective Date, the Company may deliver a notice to the
Holder (an “Optional
Redemption Notice” and the date such notice is deemed delivered
hereunder, the “Optional Redemption Notice
Date”) of its irrevocable election to redeem some or all of the then
outstanding principal amount of this Debenture for cash in an amount equal to
the Optional Redemption Amount on the 30th Trading
Day following the Optional Redemption Notice Date (such date, the “Optional Redemption
Date” and such redemption, the “Optional
Redemption”).  The Optional Redemption Amount is payable in
full on the Optional Redemption Date.  The Company may only effect an
Optional Redemption if each of the Equity Conditions shall have been met (unless
waived in writing by the Holder) on each Trading Day during the period
commencing on the Optional Redemption Notice Date through to the Optional
Redemption Date and through and including the date payment of the Optional
Redemption Amount is actually made in full.  If any of the Equity
Conditions shall cease to be satisfied at any time during the 30 Trading Day
period, then the Holder may elect to nullify the Optional Redemption Notice by
notice to the Company within 3 Trading Days after the first day on which any
such Equity Condition has not been met (provided that if, by a provision of the
Transaction Documents, the Company is obligated to notify the Holder of the
non-existence of an Equity Condition, such notice period shall be extended to
the third Trading Day after proper notice from the Company) in which case the
Optional Redemption Notice shall be null and void, ab initio.  The
Company covenants and agrees that it will honor all Notices of Conversion
tendered from the time of delivery of the Optional Redemption Notice through the
date all amounts owing thereon are due and paid in full. The Company’s
determination to effect an Optional Redemption shall be applied ratably among
the Holders of Debentures.

    
      
         

      

      
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    b)           Monthly
Redemption.  On each Monthly Redemption Date, the Company shall
redeem the Monthly Redemption Amount (the “Monthly Redemption”).
The Monthly Redemption Amount payable on each Monthly Redemption Date shall be
paid in cash; provided, however, as to any
Monthly Redemption and upon 10 Trading Days’ prior written irrevocable notice
(the “Monthly
Redemption Notice”), in lieu of a cash redemption payment the Company may
elect to pay all or part of a Monthly Redemption Amount in Conversion Shares
based on a conversion price equal to the lesser of (i) the then Conversion Price
and (ii) 88% of the average of the VWAPs for the 10 consecutive Trading Days
ending on the Trading Day that is immediately prior to the applicable Monthly
Redemption Date (subject to adjustment for any stock dividend, stock split,
stock combination or other similar event affecting the Common Stock during such
10 Trading Day period) (the price calculated during the 10 Trading Day period
immediately prior to the Monthly Redemption Date, the “Monthly Conversion
Price” and such 10 Trading Day period, the “Monthly Conversion
Period”); provided, further, that the
Company may not pay the Monthly Redemption Amount in Conversion Shares unless
(y) from the date the Holder receives the duly delivered Monthly Redemption
Notice through and until the date such Monthly Redemption is paid in full, the
Equity Conditions have been satisfied, unless waived in writing by the Holder,
and (z) as to such Monthly Redemption, prior to such Monthly Conversion Period
(but not more than 5 Trading Days prior to the commencement of the Monthly
Conversion Period), the Company shall have delivered to the Holder’s account
with The Depository Trust Company a number of shares of Common Stock to be
applied against such Monthly Redemption Amount equal to the quotient of (x) the
applicable Monthly Redemption Amount divided by (y) the then Conversion Price
(the “Pre-Redemption
Conversion Shares”).  The Holder may convert, pursuant to
Section 4(a), any principal amount of this Debenture subject to a Monthly
Redemption at any time prior to the date that the Monthly Redemption Amount,
plus accrued but unpaid interest, liquidated damages and any other amounts then
owing to the Holder are due and paid in full.  Unless otherwise
indicated by the Holder in the applicable Notice of Conversion, any principal
amount of this Debenture converted during the applicable Monthly Conversion
Period until the date the Monthly Redemption Amount is paid in full shall be
first applied to the principal amount subject to the Monthly Redemption Amount
payable in cash and then to the Monthly Redemption  Amount payable in
Conversion Shares.  Any principal amount of this Debenture converted
during the applicable Monthly Conversion Period in excess of the Monthly
Redemption Amount shall be applied against the last principal amount of this
Debenture scheduled to be redeemed hereunder, in reverse time order from the
Maturity Date; provided, however, if any such
conversion is applied against such Monthly Redemption Amount, the Pre-Redemption
Conversion Shares, if any were issued in connection with such Monthly Redemption
or were not already applied to such conversions, shall be first applied against
such conversion.  The Company covenants and agrees that it will honor
all Notice of Conversions tendered up until such amounts are paid in
full.  The Company’s determination to pay a Monthly Redemption in
cash, shares of Common Stock or a combination thereof shall be applied ratably
to all of the holders of the then outstanding Debentures based on their (or
their predecessor’s) initial purchases of Debentures pursuant to the Purchase
Agreement.  At any time the Company delivers a notice to the Holder of
its election to pay the Monthly Redemption Amount in shares of Common Stock, the
Company shall file a prospectus supplement pursuant to Rule 424 disclosing such
election.

    
      
         

      

      
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    c)           Redemption
Procedure.  The payment of cash or issuance of Common Stock, as
applicable, pursuant to an Optional and Monthly Redemption shall be payable on
the Optional Redemption Date and Monthly Redemption Date, as
applicable.  If any portion of the payment pursuant to an Optional or
Monthly Redemption shall not be paid by the Company by the applicable due date,
interest shall accrue thereon at an interest rate equal to the lesser of 18% per
annum or the maximum rate permitted by applicable law until such amount is paid
in full.  Notwithstanding anything herein contained to the contrary,
if any portion of the Optional or Monthly Redemption Amount remains unpaid after
such date, the Holder may elect, by written notice to the Company given at any
time thereafter, to invalidate such Optional or Monthly Redemption, ab initio, and, with
respect to the Company’s failure to honor the Optional Redemption, the Company
shall have no further right to exercise such Optional
Redemption.  Notwithstanding anything to the contrary in this Section
6, the Company’s determination to redeem in cash or its elections under Section
6(b) shall be applied ratably among the Holders of Debentures. The Holder may
elect to convert the outstanding principal amount of the Debenture pursuant to
Section 4 prior to actual payment in cash for any redemption under this Section
6 by the delivery of a Notice of Conversion to the Company.

    

    d)           Forced Conversion.
Notwithstanding anything herein to the contrary, if after the Effective Date,
the VWAP for 20 out of any 30 consecutive Trading Days, which period shall have
commenced only after the Effective Date (such period the “Threshold Period”),
exceeds $0.75 (subject to adjustment for reverse and forward stock splits, stock
dividends, stock combinations and other similar transactions of the Common Stock
that occur after the Original Issue Date), the Company may, within 1 Trading Day
after the end of any such Threshold Period, deliver a written notice to the
Holder (a “Forced
Conversion Notice” and the date such notice is delivered to the Holder,
the “Forced Conversion
Notice Date”) to cause the Holder to convert all or part of the then
outstanding principal amount of this Debenture plus, if so specified in the
Forced Conversion Notice, accrued but unpaid interest, liquidated damages and
other amounts owing to the Holder under this Debenture, it being agreed that the
“Conversion Date” for purposes of Section 4 shall be deemed to occur on the
third Trading Day following the Forced Conversion Notice Date (such third
Trading Day, the “Forced Conversion
Date”).  The Company may not deliver a Forced Conversion
Notice, and any Forced Conversion Notice delivered by the Company shall not be
effective, unless all of the Equity Conditions are met (unless waived in writing
by the Holder) on each Trading Day occurring during the applicable Threshold
Period through and including the later of the Forced Conversion Date and the
Trading Day after the date such Conversion Shares pursuant to such conversion
are delivered to the Holder.  Any Forced Conversion shall be applied
ratably to all Holders based on their initial purchases of Debentures pursuant
to the Purchase Agreement, provided that any voluntary conversions by a Holder
shall be applied against the Holder’s pro rata allocation, thereby decreasing
the aggregate amount forcibly converted hereunder if only a portion of this
Debenture is forcibly converted.  For purposes of clarification, a
Forced Conversion shall be subject to all of the provisions of Section 4,
including, without limitation, the provision requiring payment of liquidated
damages and limitations on conversions.

    
      
         

      

      
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    Section
7.             Covenants.

    

    a)           Negative Covenants.
As long as any portion of this Debenture remains outstanding, unless the holders
of at least 85% in principal amount of the then outstanding Debentures shall
have otherwise given prior written consent, the Company shall not, and shall not
permit any of its subsidiaries (whether or not a Subsidiary on the Original
Issue Date) to, directly or indirectly:

    

    i.      
     other than Permitted Indebtedness, enter into,
create, incur, assume, guarantee or suffer to exist any indebtedness for
borrowed money of any kind, including but not limited to, a guarantee, on or
with respect to any of its property or assets now owned or hereafter acquired or
any interest therein or any income or profits therefrom;

    

    ii.           other
than Permitted Liens, enter into, create, incur, assume or suffer to exist any
Liens of any kind, on or with respect to any of its property or assets now owned
or hereafter acquired or any interest therein or any income or profits
therefrom;

    

    iii.          amend
its charter documents, including, without limitation, its certificate of
incorporation and bylaws, in any manner that materially and adversely affects
any rights of the Holder;

    

    iv.          repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of
shares of its Common Stock or Common Stock Equivalents other than as to (a) the
Conversion Shares or Warrant Shares as permitted or required under the
Transaction Documents, (b) repurchases of Common Stock or Common Stock
Equivalents of departing officers and directors of the Company, provided that
such repurchases shall not exceed an aggregate of $100,000 for all officers and
directors during the term of this Debenture, (c) repurchases of Common Stock
pursuant to Section 2.1 of that certain agreement for purchase and sale of
assets dated September 17, 2007, among the Company, Innergy Power Corporation
and Portable Energy de Mexico, S.A. DE C.V., as in effect as of the date hereof
or (d) as permitted or required under the Existing Transaction
Documents;

    

    v.           pay
cash dividends or distributions on any equity securities of the
Company;

    

    vi.          enter
into any transaction with any Affiliate of the Company which would be required
to be disclosed in any public filing with the Commission, unless such
transaction is made on an arm’s-length basis and expressly approved by a
majority of the disinterested directors of the Company (even if less than a
quorum otherwise required for board approval); or

    

    viii.        enter
into any agreement with respect to any of the foregoing.

    

    b)         Additional Covenants.
The Company agrees to abide by the following additional
covenants.  Such covenants will remain effective so long as any of the
Debentures remain outstanding:

    
      
         

      

      
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    i.           Accounts
payable and accrued liabilities (excluding accrued interest) shall not exceed
$2,500,000 (excluding the $1,000,000 payable that may be incurred if the
targets are met as set forth in Section 7(b) of the Amendment to Debentures and
Warrants, Agreement and Waiver by and between the Company, the investors
signatory thereto and various other parties dated on or about May 15, 2009 (the
“May 2009 Amendment
Agreement”)) at the date here of through the earlier of (i) the date that
the Company has been awarded Stimulus Contracts (as defined in the May 2009
Amendment Agreement) totaling $20,000,000, or (ii) May 1, 2010, whichever comes
first. 

     

    ii.           By
October 1, 2009, the Company shall book $20,000,000 in new Stimulus Contracts
(as such term is defined in the May 2009 Amendment Agreement), evidenced by
signed purchase orders or contracts which, by their terms, are to be fulfilled
by October 1, 2010, provided that so long as the initial contract terms provide
for the orders or contracts to be fulfilled by October 1, 2010, any such
contract may be extended at the vendor’s request.

    

    iii.           The
Company shall maintain a total cash balance of no less than $250,000 at all
times from the date hereof through the earlier of (i) the date that the Company
has been awarded Stimulus Contracts totaling $20,000,000, or (ii) May 1, 2010,
whichever comes first.   

     

    iv.           The
Company shall have a monthly operating cash burn rate of no more than $125,000
for each month from the date hereof through the earlier of (i) the date that the
Company has been awarded Stimulus Contracts totaling $20,000,000, or (ii) May 1,
2010, whichever comes first.  Operating cash burn is defined by taking
consolidated net income (or loss) and adding back all non-cash items, and
excludes changes in assets, liabilities and financing activities. (i.e. the top
section of the Consolidated Statement of Cash Flows as publicly reported in the
Company’s Consolidated Financial Statements).  

     

    v.           The
Company shall have a minimum current ratio of 1.25 to 1 at all times from the
date hereof through the earlier of (i) the date that the Company has been
awarded Stimulus Contracts totaling $20,000,000, or (ii) May 1, 2010, whichever
comes first. This calculation is to be made by excluding accrued interest
and current portions of notes payable from current liabilities as well as the
$450,000 notes payable and $253,253 liability for purchase price related to the
Karner Group.  

    

    In the event that the Company fails to
comply with any of the covenants set forth in this Section 7 above (a “Covenant
Failure”), such failure shall constitute an Event of Default under this
Debenture.  The Company shall notify the Holder of the existence of an
Event of Default or any Covenant Failure within two (2) Business Days of the
Company’s knowledge of any Event of Default or Covenant
Failure.

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    

    Section
8.           Events of
Default.

    

    a)           “Event of Default”
means, wherever used herein, any of the following events (whatever the reason
for such event and whether such event shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):

    

    i.           any
default in the payment of (A) the principal amount of any Debenture or (B)
interest, liquidated damages and other amounts owing to a Holder on any
Debenture, as and when the same shall become due and payable (whether on a
Conversion Date or the Maturity Date or by acceleration or otherwise) which
default, solely in the case of an interest payment or other default under clause
(B) above, is not cured within 3 Trading Days;

    

    ii.          the
Company shall fail to observe or perform any other covenant or agreement
contained in the Debentures (other than a breach by the Company of its
obligations to deliver shares of Common Stock to the Holder upon conversion,
which breach is addressed in clause (xi) below) which failure is not cured, if
possible to cure, within the earlier to occur of (A) 5 Trading Days after notice
of such failure sent by the Holder or by any other Holder and (B) 10 Trading
Days after the Company has become or should have become aware of such
failure;

    

    iii.         a
default or event of default (subject to any grace or cure period provided in the
applicable agreement, document or instrument) shall occur under (A) any of the
Transaction Documents or (B) any other material agreement, lease, document or
instrument to which the Company or any Subsidiary is obligated (including,
without limitation, any default or event of default under the Existing
Transaction Documents) (and not covered by clause (vi) below);

    

    iv.         any
representation or warranty made in this Debenture, any other Transaction
Documents, any written statement pursuant hereto or thereto or any other report,
financial statement or certificate made or delivered to the Holder or any other
Holder shall be untrue or incorrect in any material respect as of the date when
made or deemed made;

    

    v.         
the Company or any Significant Subsidiary shall be subject to a Bankruptcy
Event;

    

    vi.         the
Company or any Subsidiary shall default on any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there
may be secured or evidenced, any indebtedness for borrowed money or money due
under any long term leasing or factoring arrangement that (a) involves an
obligation greater than $150,000, whether such indebtedness now exists or shall
hereafter be created, and (b) results in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become
due and payable;

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    vii.        the
Common Stock shall not be eligible for listing or quotation for trading on a
Trading Market and shall not be eligible to resume listing or quotation for
trading thereon within five Trading Days;

    

    viii.       the
Company shall be a party to any Change of Control Transaction or Fundamental
Transaction or shall agree to sell or dispose of all or in excess of 33% of its
assets in one transaction or a series of related transactions (whether or not
such sale would constitute a Change of Control Transaction);

    

    ix.         the
Company shall fail for any reason to deliver certificates to a Holder prior to
the fifth Trading Day after a Conversion Date or any Forced Conversion Date
pursuant to Section 4(d) or the Company shall provide at any time notice to the
Holder, including by way of public announcement, of the Company’s intention to
not honor requests for conversions of any Debentures in accordance with the
terms hereof; or

    

    x.          any
monetary judgment, writ or similar final process shall be entered or filed
against the Company, any subsidiary or any of their respective property or other
assets for more than $50,000, and such judgment, writ or similar final process
shall remain unvacated, unbonded or unstayed for a period of 45 calendar
days.

    

    b)           Remedies Upon Event of
Default. If any Event of Default occurs, the outstanding principal amount
of this Debenture, plus accrued but unpaid interest, liquidated damages and
other amounts owing in respect thereof through the date of acceleration, shall
become, at the Holder’s election, immediately due and payable in cash at the
Mandatory Default Amount.  Commencing 5 days after the occurrence of
any Event of Default that results in the eventual acceleration of this
Debenture, the interest rate on this Debenture shall accrue at an interest rate
equal to the lesser of 18% per annum or the maximum rate permitted under
applicable law.  Upon the payment in full of the Mandatory Default
Amount, the Holder shall promptly surrender this Debenture to or as directed by
the Company.  In connection with such acceleration described herein,
the Holder need not provide, and the Company hereby waives, any presentment,
demand, protest or other notice of any kind, and the Holder may immediately and
without expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under applicable
law.  Such acceleration may be rescinded and annulled by Holder at any
time prior to payment hereunder and the Holder shall have all rights as a holder
of the Debenture until such time, if any, as the Holder receives full payment
pursuant to this Section 8(b).  No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent
thereon.

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    
      Section
9.           
Miscellaneous.

    

    

    a)           Notices.  Any
and all notices or other communications or deliveries to be provided by the
Holder hereunder, including, without limitation, any Notice of Conversion, shall
be in writing and delivered personally, by facsimile, or sent by a nationally
recognized overnight courier service, addressed to the Company, at the address
set forth above, or such other facsimile number or address as the Company may
specify for such purpose by notice to the Holder delivered in accordance with
this Section 9.  Any and all notices or other communications or
deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile number or address of
the Holder appearing on the books of the Company, or if no such facsimile number
or address appears, at the principal place of business of the
Holder.  Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section 9 prior to 5:30 p.m. (New York City
time), (ii) the date immediately following the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section 9 between 5:30 p.m. (New York City time) and 11:59
p.m. (New York City time) on any date, (iii) the second Business Day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be
given.

    

    b)           Absolute Obligation.
Except as expressly provided herein, no provision of this Debenture shall alter
or impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, liquidated damages and accrued interest, as applicable, on
this Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed.  This Debenture is a direct debt obligation of the
Company.  This Debenture ranks pari passu with all other
Debentures now or hereafter issued under the terms set forth
herein.

    

    c)           Lost or Mutilated
Debenture.  If this Debenture shall be mutilated, lost, stolen
or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu of
or in substitution for a lost, stolen or destroyed Debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen or
destroyed, but only upon receipt of evidence of such loss, theft or destruction
of such Debenture, and of the ownership hereof, reasonably satisfactory to the
Company.

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    d)           Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of this Debenture 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 conflict of laws
thereof.  Each party agrees that all legal proceedings concerning the
interpretation, enforcement and defense of the transactions contemplated by any
of the Transaction Documents (whether brought against a party hereto or its
respective Affiliates, directors, officers, shareholders, employees or agents)
shall be commenced in the state and federal courts sitting in the City of New
York, Borough of Manhattan (the “New York
Courts”).  Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of any of
the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding.  Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or 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 Debenture
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 other manner permitted by
applicable 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 Debenture or the
transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of this Debenture, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for
its attorneys fees and other costs and expenses incurred in the investigation,
preparation and prosecution of such action or proceeding.

    

    e)           Waiver.  Any
waiver by the Company or the Holder of a breach of any provision of this
Debenture shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Debenture.  The failure of the Company or the Holder to insist upon
strict adherence to any term of this Debenture on one or more occasions shall
not be considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this
Debenture.  Any waiver by the Company or the Holder must be in
writing.

    

    f)           Severability.  If
any provision of this Debenture is invalid, illegal or unenforceable, the
balance of this Debenture shall remain in effect, and if any provision is
inapplicable to any Person or circumstance, it shall nevertheless remain
applicable to all other Persons and circumstances.  If it shall be
found that any interest or other amount deemed interest due hereunder violates
the applicable law governing usury, the applicable rate of interest due
hereunder shall automatically be lowered to equal the maximum rate of interest
permitted under applicable law. The Company covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law or other law which would prohibit or forgive the Company from
paying all or any portion of the principal of or interest on this Debenture as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this indenture, and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by resort
to any such law, hinder, delay or impeded the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every such as
though no such law has been enacted.

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    g)           Next Business
Day.  Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.

    

    h)           Headings.  The
headings contained herein are for convenience only, do not constitute a part of
this Debenture and shall not be deemed to limit or affect any of the provisions
hereof.

    

    i)           Assumption.  Any
successor to the Company or any surviving entity in a Fundamental Transaction
shall (i) assume, prior to such Fundamental Transaction, all of the obligations
of the Company under this Debenture and the other Transaction Documents pursuant
to written agreements in form and substance satisfactory to the Holder (such
approval not to be unreasonably withheld or delayed) and (ii) issue to the
Holder a new debenture of such successor entity evidenced by a written
instrument substantially similar in form and substance to this Debenture,
including, without limitation, having a principal amount and interest rate equal
to the principal amount and the interest rate of this Debenture and having
similar ranking to this Debenture, which shall be satisfactory to the Holder
(any such approval not to be unreasonably withheld or delayed).  The
provisions of this Section 9(i) shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
of this Debenture.

    

    j)           Secured
Obligation.  The obligations of the Company under this
Debenture are secured by all assets of the Company and each Subsidiary pursuant
to the Security Agreement, dated as of July 2, 2009 between the Company, the
Subsidiaries of the Company and the Secured Parties (as defined
therein).

    

    k)           Amendments.  This
Debenture may be modified or amended or the provisions hereof waived with the
prior written consent of the Company and Holders holding Debentures at least
equal to 85% of the aggregate principal amount then outstanding under all
Debentures.

    

    *********************

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a
duly authorized officer as of the date first above indicated.

    

    
      
        
          	
                  ECOTALITY,
      INC.

                
	 
      
	
                  By: 

                	 
      
	
                  Name:

                
	
                  Title:

                
	
                  Facsimile
      No. for delivery of Notices:
__________________

                

        

      

    

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

    ANNEX
A

    

    NOTICE
OF CONVERSION

    

    The undersigned hereby elects to
convert principal under the 8% Secured Convertible Debenture due October 1, 2010
of Ecotality, Inc., a Nevada corporation (the “Company”), into
shares of common stock (the “Common Stock”), of
the Company according to the conditions hereof, as of the date written
below.  If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance
therewith.  No fee will be charged to the holder for any conversion,
except for such transfer taxes, if any.

    

    By the delivery of this Notice of
Conversion the undersigned represents and warrants to the Company that its
ownership of the Common Stock does not exceed the amounts specified under
Section 4 of this Debenture, as determined in accordance with Section 13(d) of
the Exchange Act.

    

    The undersigned agrees to comply with
the prospectus delivery requirements under the applicable securities laws in
connection with any transfer of the aforesaid shares of Common
Stock.

    

    Conversion
calculations:

    
      
        
          	
                  Date
      to Effect Conversion:

                
	 
      
	
                  Principal
      Amount of Debenture to be Converted:

                
	 
      
	
                  Number
      of shares of Common Stock to be issued:

                
	 
      
	
                  Signature:

                
	 
      
	
                  Name:

                
	 
      
	
                  Address
      for Delivery of Common Stock Certificates:

                
	 
      
	
                  Or

                
	 
      
	
                  DWAC
      Instructions:

                
	 
      
	
                  Broker
      No:________________

                
	
                  Account
      No:_______________

                

        

      

    

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    

    Schedule
1

    

    CONVERSION
SCHEDULE

    

    The 8%
Secured Convertible Debentures due on October 1, 2010 in the aggregate principal
amount of $____________ are issued by Ecotality, Inc.  This Conversion
Schedule reflects conversions made under Section 4 of the above referenced
Debenture.

    

    Dated:

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	
                                    Date of Conversion

                                    (or for first entry,

                                    Original Issue Date)

                                  	 	
                                    Amount of

                                    Conversion

                                  	 	
                                    Aggregate

                                    Principal

                                    Amount

                                    Remaining

                                    Subsequent to

                                    Conversion

                                    (or original

                                    Principal

                                    Amount)

                                  	 	
                                    Company Attest

                                  	 
	 
      	 	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 	 
      	 
	 
      	 	 
      	 	 
      	 	 
      	 

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
         

      

      
        29EXHIBIT 10.5
 

    SECURITY
AGREEMENT

    

    This SECURITY AGREEMENT, dated as of
July 2, 2009 (this “Agreement”), is among
Ecotality, Inc., a Nevada corporation (the “Company”), all of the
Subsidiaries of the Company (such subsidiaries,
the “Guarantors” and together
with the Company, the “Debtors”) and the
holders of the Company’s 8% Secured Convertible Debentures issued on or
about the date hereof signatory hereto, their endorsees, transferees and assigns
(collectively, the “Secured
Parties”).

    

    WITNESSETH:

    

    WHEREAS, pursuant to the Purchase
Agreement (as defined in the Debentures), the Secured Parties have severally
agreed to extend the loans to the Company evidenced by the
Debentures;

    

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

    

    WHEREAS, in order to induce the
Secured Parties to extend the loans evidenced by the Debentures, each Debtor has
agreed to execute and deliver to the Secured Parties this Agreement and to grant
the Secured Parties, pari passu with each other
Secured Party and through the Agent, a security interest in certain property of
such Debtor to secure the prompt payment, performance and discharge in full of
all of the Company’s obligations under the Debentures and the Guarantors’
obligations under the Guarantee; and

    

    WHEREAS, pursuant to the terms of an
intercreditor agreement dated on or about the date hereof, the security interest
granted to the Secured Parties hereunder shall rank pari passu with the
security interest granted to the secured parties by the Debtors under that
certain Security Agreement dated November 6, 2007.

    

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

    

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

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    (a)           “Collateral” means the
collateral in which the Secured Parties are 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):

    

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

    

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

     

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

    

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

    

    (v)           All
commercial tort claims;

    

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

    

    (vii)         All
investment property;

    

    (viii)        All
supporting obligations; and

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    

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

    

    (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.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

    (c)           “Majority in Interest” means, at any time of determination, the majority in interest
(based on then-outstanding principal amounts of Debentures at the time of such
determination) of the Secured Parties.

    

    (d)           “Necessary
Endorsement” means undated stock powers endorsed in blank or other proper instruments of assignment duly
executed and such other instruments or documents as the Agent (as that term is
defined below) may reasonably request.

    

    (e)           “Obligations” means
all of the liabilities and obligations (primary, secondary, direct,
contingent, sole, joint or several) due or to become due, or that are now or may
be hereafter contracted or acquired, or owing to, of any Debtor to the Secured
Parties, including, without limitation, all obligations under this Agreement,
the Debentures, the Guarantee 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 any of the
Secured Parties as a preference, fraudulent transfer or otherwise as such
obligations may be amended, supplemented, converted, extended or modified from
time to time.  Without limiting the generality of the foregoing, the
term “Obligations” shall include, without limitation: (i) principal of, and
interest on the Debentures 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 Debentures,
the Guarantee 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.

    

    (f)           “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).

    

    (g)           “Pledged Interests”
shall have the meaning ascribed to such term in Section 4(j).

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

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

    

    (i)  
         “UCC” means the
Uniform Commercial Code of the State of New York and or any other applicable law
of any state or states which has jurisdiction with respect to all, or any
portion of, the Collateral or this Agreement, from time to time.  It
is the intent of the parties that defined terms in the UCC should be construed
in their broadest sense so that the term “Collateral” will be construed in its
broadest sense.  Accordingly if there are, from time to time, changes
to defined terms in the UCC that broaden the definitions, they are incorporated
herein and if existing definitions in the UCC are broader than the amended
definitions, the existing ones shall be controlling.

    

    2.    Grant of Security Interest in Collateral. As an
inducement for the Secured Parties to extend the loans as evidenced by the
Debentures and to secure the complete and timely payment, performance and
discharge in full, as the case may be, of all of the Obligations, each Debtor
hereby unconditionally and irrevocably pledges, grants and hypothecates to the
Secured Parties a security interest in and to, a lien upon and a right of
set-off against all of their respective right, title and interest of whatsoever
kind and nature in and to, the Collateral (a “Security Interest”
and, collectively, the “Security
Interests”).

    

    3.    Delivery of Certain
Collateral.  Contemporaneously or
prior to the execution of this Agreement, each Debtor shall deliver or cause to
be delivered to the Agent (a) any and all certificates and other instruments
representing or evidencing the Pledged
Securities, 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 Agent, or
have previously delivered to Agent, a true and correct copy of each
Organizational Document governing any of the Pledged
Securities.

    

    4.    Representations, Warranties,
Covenants and Agreements of the Debtors. Except as set forth under the
corresponding section of the disclosure schedules delivered to the Secured
Parties 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 Parties 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.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    

    (b)           The
Debtors have no place of business or offices where their respective books of
account and records are kept (other than temporarily at the offices of its
attorneys or accountants) or places where Collateral is stored or located,
except as set forth on Schedule A attached
hereto.  Except as specifically set forth on Schedule A, each
Debtor is the record owner of the real property where such Collateral is
located, and there exist no mortgages or other liens on any such real property
except for Permitted Liens (as defined in the Debentures).  Except as
disclosed on Schedule
A, none of such Collateral is in the possession of any consignee, bailee,
warehouseman, agent or processor.

    

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

    

    (d)           No
written claim has been received that any Collateral or any 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 and its Collateral at the
locations set forth on Schedule A attached
hereto and may not relocate such books of account and records or tangible
Collateral unless it delivers to the Secured Parties at least 30 days prior to
such relocation (i) written notice of such relocation and the new location
thereof (which must be within the United States) and (ii) evidence that
appropriate financing statements under the UCC and other necessary documents
have been filed and recorded and other steps have been taken to perfect the
Security Interests to create in favor of the Secured Parties a valid, perfected
and continuing perfected first priority lien in the Collateral.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    (f)  
         This Agreement creates in
favor of the Secured Parties a valid security interest in the Collateral,
subject only to Permitted Liens (as defined in the Debentures) securing the
payment and performance of the Obligations.  Upon making the filings
described in the immediately following paragraph, all security interests created
hereunder in any Collateral which may be perfected by filing Uniform Commercial
Code financing statements shall have been duly perfected.  Except for
the filing of the Uniform Commercial Code financing statements referred to in
the immediately following paragraph, the recordation of the Intellectual
Property Security Agreement (as defined below) with respect to copyrights
and copyright applications in the United States Copyright Office referred to in
paragraph (m), the execution and delivery of deposit account control agreements
satisfying the requirements of Section 9-104(a)(2) of the UCC with respect to
each deposit account of the Debtors, and the
delivery of the certificates and other instruments provided in Section 3,
no 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, the recordation of said
Intellectual Property Security Agreement, and the execution and delivery of said
deposit account control agreements, no consent of any third parties and no
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for (i) the execution,
delivery and performance of this Agreement, (ii) the creation or perfection of
the Security Interests created hereunder in the Collateral or (iii) the
enforcement of the rights of the Agent and the Secured Parties
hereunder.

    

    (g)           Each
Debtor hereby authorizes the Agent to file one or more financing statements
under the UCC, with respect to the Security Interests, with the proper filing
and recording agencies in any jurisdiction deemed proper by it.

    

    (h)           The
execution, delivery and performance of this Agreement by the Debtors does not
(i) violate any of the provisions of any Organizational Documents of any Debtor
or any judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation applicable to any Debtor or
(ii) conflict with, or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing any Debtor's debt or otherwise) or other understanding to
which any Debtor is a party or by which any property or asset of any Debtor is
bound or affected. 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 of the Guarantors, 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 (as
defined in the Debentures).

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

    (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 Debentures), 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 Parties until this Agreement and the Security Interest
hereunder shall be terminated pursuant to Section 14 hereof.  Each
Debtor hereby agrees to defend the same against the claims of any and all
persons and entities. Each Debtor shall safeguard and protect all Collateral for
the account of the Secured Parties.  At the request of the Agent, each
Debtor will sign and deliver to the Agent on behalf of the Secured Parties at
any time or from time to time one or more financing statements pursuant to the
UCC in form reasonably satisfactory to the Agent and will pay the cost of filing
the same in all public offices wherever filing is, or is deemed by the Agent to
be, necessary or desirable to effect the rights and obligations provided for
herein. Without limiting the generality of the foregoing, each Debtor shall pay
all fees, taxes and other amounts necessary to maintain the Collateral and the
Security Interests hereunder, and each Debtor shall obtain and furnish to the
Agent from time to time, upon demand, such releases and/or subordinations of
claims and liens which may be required to maintain the priority of the Security
Interests hereunder.

    

    (l) 
          No Debtor will
transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose of
any of the Collateral (except for non-exclusive 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 a Majority in Interest.

    

    (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.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    (n)           Each Debtor shall maintain with financially sound and
reputable insurers, insurance with respect to the Collateral, including Collateral hereafter acquired, against loss or damage of the kinds and in
the amounts customarily insured against by
entities of established reputation having similar properties similarly situated
and in such amounts as are customarily carried under similar circumstances by
other such entities and otherwise as is prudent for entities engaged in
similar businesses but in any event sufficient to cover the full replacement
cost thereof.  Each Debtor shall cause each insurance policy issued in
connection herewith to provide, and the insurer issuing such policy to certify
to the Agent, that (a) the Agent will be named as lender loss payee
and additional insured under each such insurance policy; (b) if such insurance
be proposed to be cancelled or materially changed for any reason whatsoever,
such insurer will promptly notify the Agent and such
cancellation or change shall not be effective as to the Agent for at least
thirty (30) days after receipt by the Agent of such notice, unless the effect of
such change is to extend or increase coverage under the policy; and (c) the
Agent will have the right (but no obligation) at its election to remedy
any default in the payment of premiums within thirty (30) days of notice from
the insurer of such default.  If no Event of Default (as defined in
the Debentures) 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 Agent on behalf of the
Secured Parties and, if received by such
Debtor, shall be held in trust for the
Secured Parties and immediately paid over
to the Agent unless otherwise directed in
writing by the Agent.   Copies of such policies or the related
certificates, in each case, naming the Agent as lender loss payee and additional
insured shall be delivered to the Agent at least annually and at the time any
new policy of insurance is issued.

    

    (o)           Each
Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
Secured Parties 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
Parties’ security interest, through the Agent, therein.

    

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

    

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

    

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

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    

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

    

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

    

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

    

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

    

    (w)          Except
in the ordinary course of business, no Debtor may consign any of its inventory
or sell any of its inventory on bill and hold, sale or return, sale on approval,
or other conditional terms of sale without the consent of the Agent which shall
not be unreasonably withheld.

    

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

    

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

    

    (z)           (i)
The actual name of each Debtor is the name set forth in Schedule D attached
hereto; (ii) no Debtor has any trade names except as set forth on Schedule E attached
hereto; (iii) no Debtor has used any name other than that stated in the preamble
hereto or as set forth on Schedule E for the
preceding five years; and (iv) no entity has merged into any Debtor or been
acquired by any Debtor within the past five years except as set forth on Schedule
E.

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    

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

    

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

     

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

    

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

    

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

    

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

    

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

    

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

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    

    (ii)           Each
Debtor shall cause each subsidiary of such
Debtor to immediately become a party hereto (an “Additional Debtor”),
by executing and delivering an Additional Debtor Joinder in substantially the
form of Annex A attached hereto
and comply with the provisions hereof applicable to the
Debtors.  Concurrent therewith, the Additional Debtor shall deliver
replacement schedules for, or supplements to all other Schedules to (or referred
to in) this Agreement, as applicable, which replacement schedules shall
supersede, or supplements shall modify, the Schedules then in
effect.  The Additional Debtor shall also deliver such opinions of
counsel, authorizing resolutions, good standing certificates, incumbency
certificates, organizational documents, financing statements and other
information and documentation as the Agent may reasonably
request.  Upon delivery of the foregoing to the Agent, the Additional
Debtor shall be and become a party to this Agreement with the same rights and
obligations as the Debtors, for all purposes hereof as fully and to the same
extent as if it were an original signatory hereto and shall be deemed to have
made the representations, warranties and covenants set forth herein as of the
date of execution and delivery of such Additional Debtor Joinder, and all
references herein to the “Debtors” shall be deemed to include each Additional
Debtor.

    

    (jj)           Each Debtor shall vote the Pledged Securities to comply
with the covenants and agreements set forth herein and in the Debentures.

    

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

    

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

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

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

    

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

    

    (oo)        Schedule F attached
hereto lists all of the patents, patent applications, trademarks, trademark
applications, registered copyrights, and domain names owned by any of the
Debtors as of the date hereof.  Schedule F lists all
material licenses in favor of any Debtor for the use of any patents, trademarks,
copyrights and domain names as of the date hereof.  All material
patents and trademarks of the Debtors have been duly recorded at the United
States Patent and Trademark Office and all material copyrights of the Debtors
have been duly recorded at the United States Copyright Office.

    

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

    

    (qq)        In
addition to, and without limiting the other obligations of the Debtors
hereunder, the Debtors agree to abide by the following covenants, which shall
remain effective so long as any Obligations (as defined herein) remain
outstanding:

    

    
      	
               
      

            	
              1)

            	
              The
      Debtors each agree, as soon as possible, and failure to do so will
      constitute a default of this Security Agreement and a default and
      acceleration of the Debentures:

            

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    

    
      	
               
      

            	
              i.

            	
              to
      cause the security interests contemplated by this Agreement with respect
      to all Intellectual Property registered at the United States Copyright
      Office or United States Patent and Trademark Office or any foreign patent
      or trademark office to be duly recorded at the applicable office,
      and

            

    

    

    
      	
               
      

            	
              ii.

            	
              to
      prepare and record an appropriate Assignment for Security in the United
      States Patent and Trademark Office and the United States Copyright Office
      and any applicable foreign patent or trademark office, with respect to any
      Intellectual Property of the Company currently existing and not covered by
      an appropriate Assignment for Security;
and

            

    

    

    
      	
               
      

            	
              iii.

            	
              to
      give each of the Secured Parties notice whenever it acquires (whether
      absolutely or by license) or creates any additional material Intellectual
      Property, and

            

    

    

    
      	
               
      

            	
              iv.

            	
              after
      acquiring any additional material Intellectual Property, to make any and
      all of the applicable filings and assignments required in subsections (i)
      or (ii) above within fifteen (15) days of such acquisition. The term
      “Intellectual Property” shall expressly include, but is not limited to,
      the patents, patent applications and trademarks listed in Schedule 4(qq)
      attached hereto.

            

    

    

    
      	
               
      

            	
              2)

            	
              In
      the event that any of the Debtors fail to comply with any of the covenants
      set forth in this subsection 4(qq) above (a “Covenant
      Failure”), such failure shall constitute an Event of Default under
      this Agreement, under the Debentures, and the Company’s Original Issue
      Discount 8% Secured Convertible Debentures due May 6, 2010 and issued to
      the Secured Parties on or about November 5, 2007 (the “November 2007
      Debentures”) and under the Company’s Original Issue Discount 8%
      Secured Convertible Debentures due June 6, 2010 and issued to the Secured
      Parties on or about December 6, 2007 (the “December 2007
      Debentures”).  The Company shall notify the Secured
      Parties within five (5) Business Days of the Company’s knowledge of any
      Covenant Failure, provided that, the Company shall not provide the Secured
      Parties with notification of any Covenant Failure if any Secured Parties
      has requested not to be provided with such information for a specified
      period of time.  In the event that the Company notifies the
      Secured Parties of Covenant Failure, then, the Company shall publicly
      disclose such Covenant Failure on a Form 8-K within five (5) business days
      of such disclosure to debt holders, or as otherwise required by the rules
      of the Commission.

            

    

    
      
         

      

      
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    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 Agent’s rights hereunder shall not be deemed to be the type of
event which would trigger such conversion rights
notwithstanding any provisions in the Organizational Documents or agreements to
which any Debtor is subject or to which any Debtor is party.

    

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

    

    (a)   The
occurrence of an Event of Default (as defined in the Debentures) under the
Debentures;

    

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

    

    (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 a Secured Party unless such default is capable of cure but cannot be
cured within such time frame and such Debtor is using best efforts to cure same
in a timely fashion; or

    

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

    

    7.    Duty To Hold In
Trust.

    

    (a)           Upon
the occurrence of any Event of Default and at any time thereafter, each Debtor
shall, upon receipt of any revenue, income,
dividend, interest or other sums subject to the Security Interests,
whether payable pursuant to the Debentures or otherwise, or of any check, draft,
note, trade acceptance or other instrument evidencing an obligation to pay any
such sum, hold the same in trust for the Secured Parties and shall forthwith
endorse and transfer any such sums or instruments, or both, to the Secured
Parties, pro-rata in proportion to their respective then-currently outstanding
principal amount of Debentures for application to the satisfaction of the
Obligations (and if any Debenture is not outstanding, pro-rata in proportion to
the initial purchases of the remaining Debentures).

    
      
         

      

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

    

    8.    Rights and Remedies Upon
Default.

    

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

    

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

    

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

    
      
         

      

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

    

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

    

    (v)     The Agent, for
the benefit of the Secured Parties, may (but is not obligated to) direct any
financial intermediary or any other person or entity holding any investment
property to transfer the same to the Agent, on behalf of the Secured Parties, or
its designee.

    

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

    

    (b)           The Agent shall
comply with any applicable law in connection with a disposition of Collateral
and such compliance will not be considered adversely to affect the commercial reasonableness of any sale of the
Collateral.  The Agent may sell the Collateral without giving any
warranties and may specifically disclaim such warranties.  If the
Agent sells any of the Collateral on credit, the Debtors will only be
credited with payments actually made by the
purchaser.  In addition, each Debtor waives any and all rights that it
may have to a judicial hearing in advance of the enforcement of any of the
Agent’s rights and remedies hereunder, including, without
limitation, 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 Agent to further
exercise rights and remedies under this Section 8 or elsewhere provided by agreement or applicable law,
each Debtor hereby grants to the Agent, for the benefit of the Agent and the
Secured Parties, an irrevocable, nonexclusive license (exercisable without
payment of royalty or other compensation to such Debtor) to use,
license or sublicense following an Event of Default, any Intellectual Property
now owned or hereafter acquired by such Debtor, and wherever the same may be
located, and including in such license access to all media in which any of the
licensed items may be recorded or stored and to all computer
software and programs used for the compilation or printout
thereof.

    
      
         

      

      
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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 expenses of retaking,
holding, storing, processing and preparing for sale, selling, and the like
(including, without limitation, any taxes, fees and other costs incurred in
connection therewith) of the Collateral, to the reasonable attorneys’ fees and
expenses incurred by the Agent in enforcing the Secured Parties’ rights
hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations pro rata among the
Secured Parties (based on then-outstanding principal amounts of Debentures at
the time of any such determination), and to the payment of any other amounts
required by applicable law, after which the Secured Parties shall pay to
the applicable Debtor any surplus proceeds. If, upon the sale, license or other
disposition of the Collateral, the proceeds thereof are insufficient to pay all
amounts to which the Secured Parties are legally entitled, the Debtors will be
liable for the deficiency, together with interest thereon, at the rate of 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 Parties to
collect such deficiency.  To the extent permitted by applicable law,
each Debtor waives all claims, damages and demands against the Secured Parties
arising out of the repossession, removal, retention or sale of the Collateral,
unless due solely to the gross negligence or willful misconduct of the Secured
Parties as determined by a final judgment (not subject to further appeal) of a
court of competent jurisdiction.

    

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

    
      
         

      

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

    

    12.           Responsibility for Collateral.
The Debtors assume all liabilities and responsibility in connection with all
Collateral, and the Obligations shall in no way be affected or diminished by
reason of the loss, destruction, damage or theft of any of the Collateral or its
unavailability for any reason.  Without limiting the generality of the
foregoing, (a) neither the Agent nor any Secured Party (i) has any duty (either
before or after an Event of Default) to collect any amounts in respect of the
Collateral or to preserve any rights relating to the Collateral, or (ii) has any
obligation to clean-up or otherwise prepare the Collateral for sale, and (b)
each Debtor shall remain obligated and liable under each contract or agreement
included in the Collateral to be observed or performed by such Debtor
thereunder.  Neither the Agent nor any Secured Party shall have any
obligation or liability under any such contract or agreement by reason of or
arising out of this Agreement or the receipt by the Agent or any Secured Party
of any payment relating to any of the Collateral, nor shall the Agent or any
Secured Party be obligated in any manner to perform any of the obligations of
any Debtor under or pursuant to any such contract or agreement, to make inquiry
as to the nature or sufficiency of any payment received by the Agent or any
Secured Party in respect of the Collateral or as to the sufficiency of any
performance by any party under any such contract or agreement, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to the Agent or to which the
Agent or any Secured Party may be entitled at any time or
times.

    
      
         

      

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

    

    14.           Term of Agreement. This
Agreement and the Security Interests shall terminate on the date on which all
payments under the Debentures have been indefeasibly paid in full and all other
Obligations have been paid or discharged; provided, however, that all
indemnities of the Debtors contained in this Agreement (including, without
limitation, Annex B hereto) shall survive and remain operative and in full force
and effect regardless of the termination of this Agreement.

    

    15.           Power of Attorney; Further
Assurances.

    

    (a)           Each
Debtor authorizes the Agent, and does hereby make, constitute and appoint the
Agent and its officers, agents, successors or assigns with full power of
substitution, as such Debtor’s true and lawful attorney-in-fact, with power, in
the name of the Agent or such Debtor, to, after the occurrence and during the
continuance of an Event of Default, (i) endorse any note, checks, drafts, money
orders or other instruments of payment (including payments payable under or in
respect of any policy of insurance) in respect of the Collateral that may come
into possession of the Agent; (ii) 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 Agent, 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 Agent 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 Debentures all as fully and effectually as the Debtors might or could do;
and each Debtor hereby ratifies all that said attorney shall lawfully do or
cause to be done by virtue hereof.  This power of attorney is coupled
with an interest and shall be irrevocable for the term of this Agreement and
thereafter as long as any of the Obligations shall be
outstanding.  The designation set forth
herein shall be deemed to amend and supersede any inconsistent provision in the
Organizational Documents or other documents or agreements to which any Debtor
is subject or to which any Debtor is a
party.  Without limiting the generality of the foregoing, after
the occurrence and during the continuance of an Event of Default, each Secured
Party is specifically authorized to execute and file any applications for or
instruments of transfer and assignment of any patents, trademarks, copyrights or
other Intellectual Property with the United States Patent and Trademark Office
and the United States Copyright Office.

    
      
         

      

      
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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
Agent, to perfect the Security Interests granted hereunder and otherwise to
carry out the intent and purposes of this Agreement, or for assuring and
confirming to the Agent the grant or perfection of a perfected security interest
in all the Collateral under the UCC.

    

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

    

    16.           Notices. All notices,
requests, demands and other communications hereunder shall be subject to the
notice provision of the Purchase Agreement (as such term is defined in the
Debentures).

    

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

    
      
         

      

      
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    18.   Appointment of Agent. The
Secured Parties hereby appoint Enable Growth Partners L.P. to act as their
agent (“Enable”
or “Agent”) for
purposes of exercising any and all rights and remedies of the Secured Parties
hereunder. Such appointment shall continue until revoked in writing by a Majority in Interest, at which time a Majority in Interest shall
appoint a new Agent, provided that Enable may not be removed as Agent
unless Enable shall then hold less than $75,000 in principal amount of
Debentures; provided, further, that such removal
may occur only if each of the other Secured
Parties shall then hold not less than an aggregate of $500,000 in
principal amount of Debentures. The
Agent shall have the rights, responsibilities and immunities set forth in Annex B
hereto.

    

    19.   Miscellaneous.

    

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

    

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

    

    (c)           This
Agreement, together with the exhibits and schedules hereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into this
Agreement and the exhibits and schedules hereto. No provision of this
Agreement may be waived, modified, supplemented or amended except in a written
instrument signed, in the case of an amendment, by the Debtors and the Secured
Parties holding 85% or more of the principal amount of Debentures then
outstanding or, in the case of a waiver, by the party against whom enforcement
of any such waived provision is sought.

    

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

    

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

    
      
         

      

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

    

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

    

    (h)           Except
to the extent mandatorily governed by the jurisdiction or situs where the
Collateral is located, 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.  Except to the extent mandatorily governed by the
jurisdiction or situs where the Collateral is located, each Debtor agrees that
all proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and the Debentures (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.  Except to the extent mandatorily governed by
the jurisdiction or situs where the Collateral is located, 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, 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.

    

    (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.

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    

    (j)           All
Debtors shall jointly and severally be liable for the obligations of each Debtor
to the Secured Parties hereunder.

    

    (k)           Each
Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured
Parties and their respective partners, members, shareholders, officers,
directors, employees and agents (and any other persons with other titles that
have similar functions) (collectively, “Indemnitees”) from
and against any and all losses, claims, liabilities, damages, penalties, suits,
costs and expenses, of any kind or nature, (including fees relating to the cost
of investigating and defending any of the foregoing) imposed on, incurred by or
asserted against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages, penalties, suits, costs and expenses which result
from 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 Debentures, the
Purchase Agreement (as such term is defined in the Debentures) 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
Agent or any Secured Party to liability as a partner in any Debtor or any if 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 Agent or any Secured
Party be deemed to have assumed any obligations under any partnership agreement
or limited liability company agreement, as applicable, of any such Debtor or any
of its
direct or indirect subsidiaries or otherwise, unless and until any such Secured
Party exercises its right to be substituted for such Debtor as a partner or
member, as applicable, pursuant hereto.

    

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

    

    [SIGNATURE
PAGES FOLLOW]

    

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    

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

    

    
      
        
          
            	
                    ECOTALITY,
      INC.

                  	 
      
	 
      	 
      	 
      
	
                    By:

                  	 
      	 
      
	 
      	
                    Name:

                  	 
      
	 
      	
                    Title:

                  	 
      
	 
      	 
      	 
      
	
                    [INSERT
      NAMES OF SUBS]

                  	 
      
	 
      	 
      	 
      
	
                    By:

                  	 
      	 
      
	 
      	
                    Name:

                  	 
      
	 
      	
                    Title:

                  	 
      

          

        

      

    

    

    [SIGNATURE
PAGE OF HOLDERS FOLLOWS]

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    [SIGNATURE
PAGE OF HOLDERS TO ETLY SA]

    

    Name of
Investing Entity: __________________________

     

    Signature of Authorized Signatory of
Investing entity: _________________________

     

    Name of
Authorized Signatory: _________________________

     

    Title of
Authorized Signatory: __________________________

    

    [SIGNATURE
PAGE OF HOLDERS FOLLOWS]

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    

    SCHEDULE
A

    

    Principal
Place of Business of Debtors:

    

    Locations
Where Collateral is Located or Stored:

    

    SCHEDULE
B

    

    SCHEDULE
C

    

    SCHEDULE
D

    Legal
Names and Organizational Identification Numbers

    

    SCHEDULE
E

    Names;
Mergers and Acquisitions

    

    SCHEDULE
F

    Intellectual
Property

    

    SCHEDULE
G

    Account
Debtors

    

    SCHEDULE
H

    Pledged
Securities

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

    ANNEX
A

    to

    SECURITY

    AGREEMENT

    

    
      FORM
OF ADDITIONAL DEBTOR JOINDER

    

    

    Security
Agreement dated as of June ___, 2009 made by

    Ecotality,
Inc.

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

    to and in
favor of

    the
Secured Parties identified therein (the “Security
Agreement”)

    

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

    

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

    

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

    

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

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the undersigned has
caused this Joinder to be executed in the name and on behalf of the
undersigned.

    

    
      
        
          	 
      	
                  [Name
      of Additional Debtor]

                
	 
      	 
      
	 
      	
                  By:

                
	 	 
	 
      	
                  Name:

                
	 
      	
                  Title:

                
	 
      	 
      
	 
      	
                  Address:

                
	 
      	 
      
	
                  Dated:

                	 
      

        

      

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    ANNEX
B

    to

    SECURITY

    AGREEMENT

    

    THE
AGENT

    

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

    

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

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

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

    

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

    

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

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    

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

    

    7. Resignation by the Agent.

    

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

    

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

    

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

    

    8.  Rights with respect to
Collateral.  Each Secured
Party agrees with all other Secured Parties and the Agent (i) that it shall not,
and shall not attempt to, exercise any rights with respect to its security
interest in the Collateral, whether pursuant to any other agreement or otherwise
(other than pursuant to this Agreement), or take or institute any action against
the Agent or any of the other Secured Parties in respect of the Collateral or
its rights hereunder (other than any such action arising from the breach of this
Agreement) and (ii) that such Secured Party has no other rights with
respect to the Collateral other than as set forth in this Agreement and the
other Transaction Documents. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent and the retiring Agent shall be discharged from its duties
and obligations under the Agreement.  After any retiring Agent’s
resignation or removal hereunder as Agent, the provisions of the Agreement
including this Annex B shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    DISCLOSURE
SCHEDULE

    

    to
the

    

    SECURITY
AGREEMENT

    

    between

    

    ECOTALITY,
INC.

    

    and

    

    THE
SECURED PARTIES NAMED THEREIN

    

    Dated
July 2, 2009

    

    This
Disclosure Schedule is being delivered pursuant to Section 2.2(a)(vi) of that
certain Securities Purchase Agreement, dated as of July 2, 2009, by and among
Ecotality, Inc., a Nevada corporation (the “Company), and the purchasers
identified on the signature page to the Purchase Agreement.  The
section numbers referenced in this Disclosure Schedule refer to the sections of
that certain Security Agreement, dated as of July 2, 2009 (the “Security Agreement”), by and
among the Company and the secured parties identified on the signature page to
the Security Agreement (the “Secured
Parties”).  Capitalized terms used, but not otherwise defined,
herein shall have the meanings ascribed to them in the Security
Agreement.

    The
information and disclosures contained in this Disclosure Schedule (and any
schedule, exhibit, appendix or attachment to this Disclosure Schedule) shall
provide an exception to or otherwise qualify the representations, warranties and
covenants of the Company contained in the Security
Agreement.  Information or disclosures provided in any schedule,
exhibit, appendix or attachment to this Disclosure Schedule form an integral
part of this Disclosure Schedule and are incorporated herein by reference for
all purposes as if set forth fully herein.

    Any
matter disclosed in this Disclosure Schedule shall not be deemed an admission or
representation as to the materiality of the item so disclosed.  No
disclosure in this Disclosure Schedule relating to any possible breach or
violation of any agreement, law or regulation shall be construed as an admission
or indication that any such breach or violation exists or has actually occurred,
and nothing in this Disclosure Schedule constitutes an admission of any
liability or obligation of the Company to any third party or shall confer or
give to any third party any remedy, claim, liability, reimbursement, cause of
action or other right.  Unless otherwise stated, all statements made
herein are made as of the date of the execution of the Security
Agreement.

    The
headings contained in this Disclosure Schedule are for reference purposes only
and shall not in any way affect the meaning or interpretation of the information
and disclosures contained in this Disclosure Schedule.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
A

     

    The place
of business where each Debtor’s respective books of account and records are kept
is listed below:

    

    
      	
               
      

            	
              ·

            	
              The
      Company’s headquarters are located at 6821 E. Thomas Road, Scottsdale,
      Arizona.  On January 16, 2007, the Company purchased the
      Scottsdale office building for an aggregate price of
      $575,615.  A total of $287,959 has been paid and a tax credit
      has been recorded in the amount of $156.  The remaining balance
      of $287,500 is structured as an interest-only loan from C. Timothy
      Caldwell, bears an interest rate of 6.75% calculated annually, with
      monthly payments in the amount of $1,617 due beginning on February 16,
      2007.  The entire principal balance is due on or before January
      16, 2012.  The loan is secured by a deed of trust on the office
      building.

            

    

    

    
      	
               
      

            	
              ·

            	
              The
      Company operates Innergy Power Corporation, a division of Ecotality, Inc.,
      from offices located at 9375 Customhouse Plaza, Bldg. A, Suite J, San
      Diego, California, which are leased and not
  owned.

            

    

    

    
      	
               
      

            	
              ·

            	
              The
      offices of Ecotality Stores, Inc DBA Fuel Cell Store, are located at 3280
      Valmount Road, Boulder, Colorado, and are leased and not
      owned.

            

    

    

    
      	
               
      

            	
              ·

            	
              The
      offices of Portable Energy De Mexico, S.A. d C.V., are located at Calle
      Uno Oriente No. 128, Ciudad Industrial Nueva Tijuana, Baja California,
      Mexico, and are leased and not
owned.

            

    

    

    
      	
               
      

            	
              ·

            	
              The
      offices of Electric Transportation Engineering Corporation, The Clarity
      Group, Inc., G.H.V. Refrigeration, Inc., ETEC North, LLC, and 0810009
      Unlimited Liability Company are located at 420 S 2nd Ave., Phoenix,
      Arizona, which are leased and not
owned.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
B

     

    On
January 16, 2007, the Company purchased an office building located in
Scottsdale, Arizona, for an aggregate price of $575,615.  A total of
$287,959 has been paid and a tax credit has been recorded in the amount of $156.
 The remaining balance of $287,500 is structured as an interest-only loan
from C. Timothy Caldwell, bears an interest rate of 6.75% calculated annually,
with monthly payments in the amount of $1,617 due beginning on February 16,
2007.  The entire principal balance is due on or before January 16,
2012.  The loan is secured by a deed of trust on the office
building.

    

    In
accordance with the terms of that certain Amendment to Debentures and Warrants,
Amendment and Waiver by and among the Company, the holders of the securities
issued pursuant to the Existing Transaction Documents and certain other
individuals, dated as of May 15, 2009 (the “May 15 Amendment”), the
Company and Donald Karner (“Karner”) agreed that if Karner
continues to remain a full time employee of the Company, and the Company (with
Karner’s assistance) fails to secure executed Stimulus Contracts (as defined in
the May 15 Amendment) having an aggregate total contract value of $20,000,000 or
more during the period from May 15, 2009 through October 1, 2009, then the
Company must, on or prior to October 9, 2009, transfer ownership of all stock
and assets of The Clarity Group, Inc. to Karner.

    

    In
connection with the Existing Transaction Documents, the Company granted to the
purchasers of the securities purchased thereunder a security interest in and to
certain personal property of the Company and its subsidiaries.  In
connection with the Existing Transaction Documents, UCC-1 financing statements
were filed against the Company and its direct and indirect subsidiaries on or
about November 7, 2007 and Patent Assignments for Security were filed with the
United States Patent and Trademark Office, in each case to secure the
obligations under the securities purcahsed under the Existing Transaction
Documents.

     

    On August
29, 2008, the Company issued a 0% Bridge Note to Donald Karner and Kathryn
Forbes (“Forbes”) with a
face amount of $495,000 (the “Karner-Forbes Bridge
Note”).  The Karner-Forbes Bridge Note is secured by an
interest, junior to the lien of the Existing Holders (as defined in the May 15
Amendment) in all of the Company’s present and future accounts receivable and
other rights of any kind to receive payments for services rendered and goods
supplied by the Company.  On November 12, 2008 a UCC-1 Financing
Statement was filed in favor of Karner and Forbes to evidence the security
interest in the collateral for the Karner-Forbes Bridge Note.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
C

     

    In
connection with the Existing Transaction Documents, UCC-1 financing statements
were filed against the Company and its direct and indirect subsidiaries on or
about November 7, 2007 and Patent Assignments for Security were filed with the
United States Patent and Trademark Office, in each case to secure the
obligations under the securities purchased under the Existing Transaction
Documents.

     

    On August
29, 2008, the Company issued the Karner-Forbes Bridge Note.  The
Karner-Forbes Bridge Note is secured by an interest, junior to the lien of the
Existing Holders, in all of the Company’s present and future accounts receivable
and other rights of any kind to receive payments for services rendered and goods
supplied by the Company.  On November 12, 2008 a UCC-1 Financing
Statement was filed in favor of Karner and Forbes to evidence the security
interest in the collateral for the Karner-Forbes Bridge Note.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
D

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              	
                                      Entity Name

                                    	 	
                                      Jurisdiction of Organization

                                    	 	
                                      File Number

                                    
	 	 	 	 	 
	
                                      Ecotality,
      Inc.

                                    	 	
                                      Nevada

                                    	 	
                                      9618-1999

                                    
	 	 	 	 	 
	
                                      Ecotality
      Stores, Inc.

                                    	 	
                                      Nevada

                                    	 	
                                      0343482007-1

                                    
	 	 	 	 	 
	
                                      Electric
      Transportation Engineering Corporation

                                    	 	
                                      Arizona

                                    	 	
                                      0786542-0

                                    
	 	 	 	 	 
	
                                      The
      Clarity Group, Inc.

                                    	 	
                                      Arizona

                                    	 	
                                      0235296-0

                                    
	 	 	 	 	 
	
                                      G.H.V.
      Refrigeration, Inc.

                                    	 	
                                      California

                                    	 	
                                      1353019

                                    
	 	 	 	 	 
	
                                      ETEC
      North, LLC

                                    	 	
                                      Delaware

                                    	 	
                                      4463243

                                    
	 	 	 	 	 
	
                                      0810009
      Unlimited Liability Company

                                    	 	
                                      British
      Columbia, Canada

                                    	 	
                                      N/A

                                    
	 	 	 	 	 
	
                                      Portable
      Energy De Mexico, S.A. d C.V.

                                    	 	
                                      Mexico

                                    	 	
                                      N/A

                                    

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
E

     

    Ecotality
Stores, Inc. currently does business as “Fuel Cell Store”.

     

    Ecotality,
Inc. also does business as “Innergy Power Corporation, a division of Ecotality,
Inc.”

     

    Ecotality,
Inc. was originally incorporated under the “Alchemy Enterprises, Ltd.” and
amended its Articles of Incorporation to changed its name to “Ecotality, Inc.”
on November 27, 2006.

     

    Electric
Transportation Engineering Corporation uses the name “ETEC” in the course of its
business.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
F

     

    List of
all patents, patent applications, trademarks, trademark applications, registered
copyrights, and domain names owned by the Debtors:

     

    ECOTALITY,
INC.

     

    Patent
Properties

     

    
      
        
          
            
              
                
                  
                    
                      
                        	
                                Serial No.

                              	 	
                                Filing

                                Date

                              	 	
                                Priority Date

                              	 	
                                Title

                              	 	
                                Inventors

                              
	
                                11/800,737

                              	 	
                                05/07/2007

                              	 	
                                05/08/2006
      (Provisional Serial No. 60/798,545)

                              	 	
                                Method
      and System for Storing and Generating Hydrogen

                              	 	
                                Andrew
      Kindler, Sri R. Narayanan, Yuhong Huang

                              
	 	 	 	 	 	 	 	 	 
	
                                PCT/US07/011032

                              	 	
                                05/08/2007

                              	 	
                                05/08/2006
      (Provisional Serial No. 60/798,545)

                              	 	
                                Method
      and System for Storing and Generating Hydrogen

                              	 	
                                Andrew
      Kindler, Sri R. Narayanan, Yuhong
Huang

                              

                      

                    

                  

                

              

            

          

        

      

    

     

    Trademark
Properties

     

    
      
        	
                Mark

              	 
      	
                Serial No.

              	 
      	
                Filing

                Date

              	 
      	
                Goods and Services

              
	
                ECOTALITYTM

              	 
      	
                77/043,949

              	 
      	
                11/14/2006

              	 
      	
                Fuel
      cells (Class 9)

                 

                Research
      and development and consultation in the field of fuel cell systems,
      batteries, hydrogen, solar energy, biofuels, hydroelectricity, and
      wind-generated energy production, storage, distribution and recycling
      systems; research and development and consultation in the field of
      renewable energy installations and  waste to energy
      installations (Class 42)

              

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      
        	
                Mark

              	 
      	
                Serial No.

              	 
      	
                Filing

                Date

              	 
      	
                Goods and Services

              
	
                

              	 
      	
                77/044,042

              	 
      	
                11/14/2006

              	 
      	
                Fuel
      cells (Class 9)

                 

                Research
      and development and consultation in the field of fuel cell systems,
      batteries, hydrogen, solar energy, biofuels, hydroelectricity, and
      wind-generated energy production, storage, distribution and recycling
      systems; research and development and consultation in the field of
      renewable energy installations and  waste to energy
      installations (Class 42)

                 

              
	
                HYDRALITYTM

              	 
      	
                77/286,357

              	 
      	
                09/21/2007

              	 
      	
                Fuel
      cells; hydrogen generators; hydrogen generation apparatus; hydrogen
      reactors; hydrogen production, storage and distribution apparatus;
      hydroelectrical apparatus (Class 9)

                 

                Research
      and development and consultation in the field of fuel cell systems,
      hydrogen generation systems, hydrogen reactors, hydrogen production,
      storage and distribution systems, and regeneration and recycling of metal
      compounds and other energy carriers (Class 42)

                 

              
	
                

              	 
      	
                77/286,360

              	 
      	
                09/21/2007

              	 
      	
                Fuel
      cells; hydrogen generators; hydrogen generation apparatus; hydrogen
      reactors; hydrogen production, storage and distribution apparatus;
      hydroelectrical apparatus (Class 9)

                 

                Research
      and development and consultation in the field of fuel cell systems,
      hydrogen generation systems, hydrogen reactors, hydrogen production,
      storage and distribution systems, and regeneration and recycling of metal
      compounds and other energy carriers (Class
42)

              

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      
        	
                Mark

              	 
      	
                Serial No.

              	 
      	
                Filing

                Date

              	 
      	
                Goods and Services

              
	
                MAKING
      HYDROGEN POWER A REALITYTM

              	 
      	
                77/286,358

              	 
      	
                09/21/2007

              	 
      	
                Fuel
      cells; hydrogen generators; hydrogen generation apparatus; hydrogen
      reactors; hydrogen production, storage and distribution apparatus;
      hydroelectrical apparatus (Class 9)

                 

                Research
      and development and consultation in the field of fuel cell systems,
      hydrogen generation systems, hydrogen reactors, hydrogen production,
      storage and distribution systems, and regeneration and recycling of metal
      compounds and other energy carriers (Class 42)

                 

              
	
                SOLATRICITYTM

              	 
      	
                77/043,968

              	 
      	
                11/14/2006

              	 
      	
                Solar-powered
      electricity generators (Class 7)

                 

                Fuel
      cells; solar cells; solar collectors (Class 9)

                 

                Research
      and development and consultation in the field of fuel cell systems, solar
      energy production and storage systems (Class 42)

                 

              
	
                

              	 
      	
                77/044,054

              	 
      	
                11/14/2006

              	 
      	
                Solar-powered
      electricity generators (Class 7)

                 

                Fuel
      cells; solar cells; solar collectors (Class 9)

                 

                Research
      and development and consultation in the field of fuel cell systems, solar
      energy production and storage systems (Class
42)

              

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      
        	
                Mark

              	 
      	
                Serial No.

              	 
      	
                Filing

                Date

              	 
      	
                Goods and Services

              
	
                ELETRICELLTM

              	 
      	
                77/043,958

              	 
      	
                11/14/2006

              	 
      	
                Fuel
      cells; batteries; battery charge devices; battery packs; electric storage
      batteries; electrical cells and batteries; integrated battery backup
      systems comprising a battery, an electronic measurement apparatus for use
      in the measurement of battery health and performance, and a remote
      computer software program that uses the foregoing data to trend, predict,
      and store data related to the health of the battery; rechargeable electric
      batteries (Class 9)

                 

                Research
      and development and consultation in the field of fuel cell
      systems,  hydrogen production and storage systems (Class
      42)

                 

              
	
                

              	 
      	
                77/044,046

              	 
      	
                11/14/2006

              	 
      	
                Fuel
      cells; batteries; battery charge devices; battery packs; electric storage
      batteries; electrical cells and batteries; integrated battery backup
      systems comprising a battery, an electronic measurement apparatus for use
      in the measurement of battery health and performance, and a remote
      computer software program that uses the foregoing data to trend, predict,
      and store data related to the health of the battery; rechargeable electric
      batteries (Class 9)

                 

                Research
      and development and consultation in the field of fuel cell
      systems,  hydrogen production and storage systems (Class
      42)

                 

              
	
                ELECTRAWINDTM

              	 
      	
                77/043,965

              	 
      	
                11/14/2006

              	 
      	
                Wind-powered
      electricity generators (Class 7)

                 

                Fuel
      cells (Class 9)

                 

                Research
      and development and consultation in the field of fuel cell systems,
      wind-generated energy production and storage systems (Class
      42)

              

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      
        	
                Mark

              	 
      	
                Serial No.

              	 
      	
                Filing

                Date

              	 
      	
                Goods and Services

              
	
                

              	 
      	
                77/044,052

              	 
      	
                11/14/2006

              	 
      	
                Wind-powered
      electricity generators (Class 7)

                 

                Fuel
      cells (Class 9)

                 

                Research
      and development and consultation in the field of fuel cell systems,
      wind-generated energy production and storage systems (Class
      42)

                 

              
	
                BIOSOLINATM

              	 
      	
                77/043,961

              	 
      	
                11/14/2006

              	 
      	
                Fuel
      cells; biofuels (Class 9)

                 

                Research
      and development and consultation in the field of fuel cell systems;
      biofuel production, storage and distribution systems (Class
      42)

                 

              
	
                

              	 
      	
                77/044,048

              	 
      	
                11/14/2006

              	 
      	
                Fuel
      cells; biofuels (Class 9)

                 

                Research
      and development and consultation in the field of fuel cell systems;
      biofuel production, storage and distribution systems (Class
      42)

              

      

    

     

    INNERGY POWER
CORPORATION

     

    Patent
Properties

     

    
      
        
          
            
              
                
                  
                    
                      	
                              Patent No.

                            	 	
                              Issue Date

                            	 	
                              Title

                            	 	
                              Inventors

                            
	
                              4,996,128

                            	 	
                              02/26/1991

                            	 	
                              Rechargeable
      Battery

                            	 	
                              Julio
      Aldecoa, Lawrence Miller

                            
	 	 	 	 	 	 	 
	
                              5,626,990

                            	 	
                              05/06/1997

                            	 	
                              Recombinant
      Lead Acid Battery and Method of Making Same

                            	 	
                              Robert
      Miller, Larry
Miller

                            

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Trademark
Properties

     

    
      
        
          
            
              
                
                  
                    
                      	
                              Mark

                            	 	
                              Reg. No.

                            	 	
                              Reg. Date

                            	 	
                              Goods and Services

                            
	
                              POWER
      PLANT®

                            	 	
                              2,942,127

                            	 	
                              04/19/2005

                            	 	
                              Batteries
      for portable devices and electric vehicles (Class 9)

                            
	 	 	 	 	 	 	 
	
                              INNERGY
      POWER®

                            	 	
                              2,752,914

                            	 	
                              08/19/2003

                            	 	
                              Thin
      sealed lead-acid batteries (Class 9)

                            
	 	 	 	 	 	 	 
	
                              THINLINE®

                            	 	
                              1,864,556

                            	 	
                              11/29/1994

                            	 	
                              Batteries
      for portable devices and electric vehicles (Class
  9)

                            

                    

                  

                

              

            

          

        

      

    

     

    ELECTRIC TRANSPORTATION
ENGINEERING CORPORATION

     

    Patent
Properties

     

    Norvik
Traction Fast Charging Algorithm Patents

     

    ETEC
Bridge Power Manager – Patent Pending

     

    Trademark
Properties

     

    ETEC
SuperCharge (Nationally)

     

    ETEC
(State of Arizona)

     

    Electric
Transportation Engineering Corporation (State of Arizona)

     

    ETA
(State of Arizona)

     

    List of
all material licenses in favor of the Debtors for the use of any patents,
trademarks, copyrights or domain names:

     

    In the
ordinary course of business, the Debtors license from third parties readily
available off-the-shelf software programs.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
H

     

    The
Company owns 100% of the issued and outstanding shares of each of (a) Ecotality
Stores, Inc. DBA Fuel Cell Store; (b) Electric Transportation Engineering
Corporation (“ETEC”);
and (c) The Clarity Group.  The Company is the record owner of
certificate Number 1 representing 99 of the 100 issued and outstanding shares of
Energy De Mexico, S.A. d C.V. and Ecotality Stores, Inc. is the record owner of
certificate Number 2 representing the remaining 1 of the 100 issued and
outstanding shares.  ETEC owns (a) 100% of the issued and outstanding
shares of G.H.V. Refrigeration, Inc. and (b) 100% of the membership interests in
ETEC North, LLC.  ETEC North, LLC owns 100% of the equity interests in
0810009 Unlimited Liability Company.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00160-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00160-of-00352.parquet"}]]