Document:

BRIDGE
      NOTE # BN_____

     

    NEITHER
      THIS SECURED CONVERTIBLE PROMISSORY NOTE NOR THE SECURITIES TO BE ISSUED UPON
      ITS CONVERSION HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE
      OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS (I)
      PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OR (II) IN COMPLIANCE WITH
      AN
      EXEMPTION THEREFROM AND ACCOMPANIED, IF REQUESTED BY THE COMPANY, WITH AN
      OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER
      IS
      IN COMPLIANCE WITH AN EXEMPTION THEREFROM.

     

    
      	
              Principal
                Amount: $____________

            	
              _______
                __, 2008

            

    

     

    WHERIFY
      WIRELESS, INC. 

     

    SENIOR
      SECURED CONVERTIBLE PROMISSORY BRIDGE NOTE

    (the
      “Bridge
      Note”)

     

    FOR
      VALUE RECEIVED,
      the
      undersigned, Wherify Wireless, Inc., a Delaware corporation (the “Company”),
      hereby promises to pay to ______________ (the “Holder,”
and,
      together with the Company, the “Parties”),
      in
      the manner and at the place hereinafter provided, the principal sum of
      $[______].00 (__________________ Dollars) (the “Principal
      Amount”).
      From
      and after the date hereof, interest shall accrue on the unpaid principal balance
      and be payable to the Holder as set forth in Section
      1.

    

    This
      Bridge Note is being issued pursuant to the Bridge Note and Warrant Purchase
      Agreement by and between, the Company, the Holder and other purchasers of Bridge
      Notes (the “BWPA”).

    

    1. Interest.
      Interest
      shall be paid monthly in arrears in cash on the outstanding unpaid Principal
      Amount commencing on the date hereof, through and including the date of full
      repayment of the Principal Amount at the rate of twelve and one-half percent
      (12.5%) per annum (the “Interest”);
      provided,
      however,
      in the
      event that the Company shall elect to extend the Maturity Date (as defined
      below) of the Bridge Note as provided for in Section
      2
      below
      (or the Principal Amount and all accrued but unpaid Interest is not paid in
      full
      or converted pursuant to and in accordance with Section
      4
      of this
      Agreement on the Maturity Date), the rate of Interest will automatically and
      without any action by any person, increase on such date and continue until
      full
      repayment of the Principal Amount and Interest (on the Maturity Date) to
      seventeen and one-half percent (17.5%) (the “Extension
      Period Interest”).
      All
      Interest on the Bridge Note shall be computed on the basis of a year of 360
      days
      for the actual number of days elapsed. 

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    2. Maturity
      Date/Prepayment. 

     

    (a)
      Maturity
      Date.
      The
      entire unpaid Principal Amount of this Note, together with all fees and expenses
      (if any), and accrued, but unpaid, Interest thereon, shall be immediately due
      and payable at 12:01 p.m. on August 31, 2008 (the “Maturity
      Date”),
      provided,
      however,
      that
      the Company at its option may extend the Maturity Date until September 30,
      2008
      (the “Extended
      Maturity Date”).
      In
      the event that the Maturity Date or the Extended Maturity Date falls on a
      Saturday, Sunday or a holiday on which banks in the State of New York are
      closed, the Maturity Date or the Extended Maturity Date, as the case may be,
      shall be the first business day occurring immediately after such date.

     

    (b)
      Prepayment.
      The
      Company may at any time and from time to time prepay the outstanding Principal
      Amount of the Bridge Note (plus all accrued but unpaid interest thereon through
      the date of such prepayment) without premium. 

     

    3. Manner
      of Payment.
      Principal,
      interest, and all other amounts due under this Note shall be payable, in lawful
      money of the United States of America, to Holder at such address as designated
      from time to time by Holder in writing to Company or by electronic wire funds
      transfer of immediately available funds pursuant to written instructions
      provided to Company by Holder. All amounts due from Company to Holder under
      this
      Note shall be made without benefit of any setoff, counterclaim or other defense.
      All payments on this Note shall be applied first to the payment of fees and
      expenses, if any, then to accrued but unpaid Interest and then to the payment
      of
      the Principal Amount.

    

    4. Conversion.
      

    

    (a)
      Optional
      Conversion.
      Not
      applicable.

    

    (b)
      Mandatory
      Conversion.
      The
      Company may require the Holder to convert the Bridge Note in the event that
      the
      investors providing the Recapitalization Financing, as such term is defined
      in
      the BWPA, shall fail to permit proceeds from that financing to be used to payoff
      the Bridge Notes in their entirety. In that event, upon delivery by the Company
      of a Mandatory Conversion Notice to the Holder (the “Conversion
      Notice”),
      all
      then remaining unpaid Principal Amount plus
      any then
      accrued and unpaid Interest thereon (the “Mandatory
      Conversion Amount”)
      shall
      be converted into that principal amount of the securities issued in the
      Recapitalization Financing (the “Conversion
      Securities”)
      which
      is equal to 125% of the Mandatory Conversion Amount. 

     

    5. Delivery
      of Note.  Upon
      receipt of a Conversion Notice, the Holder shall provide notice to the Company
      of the name or names in which the certificate or certificates for Conversion
      Securities are to be issued (the “Issuance
      Notice”),
      and
      the Holder shall surrender this Bridge Note (or a certificate of lost Bridge
      Note) at the office of the Company at such time that the Holder delivers the
      Issuance Notice to the Company. The Company shall, as soon as practicable
      thereafter, issue and deliver (but no later than five (5) business days) at
      such
      office to such Holder or to the nominee or nominees of such Holder, a
      certificate or certificates for the number of Conversion Securities to which
      such Holder shall be entitled as aforesaid. Such Mandatory Conversion shall
      be
      deemed to have been made immediately prior to the close of business on the
      date
      of the closing of the Recapitalization Financing (the “Mandatory
      Conversion Date”)
      and,
      in the absence of receipt of the Issuance Notice from the Holder, the Company
      will issue to the Holder the Conversion Securities issuable upon such Mandatory
      Conversion Date. The persons receiving the Conversion Securities in accordance
      herewith shall be treated for all purposes as the record holder or holders
      of
      such Conversion Securities as of the Mandatory Conversion Date.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    6. Security. The
      Company’s obligations under this Bridge Note are secured, pursuant to and in
      accordance with the terms and conditions of the Security Agreement, dated even
      date herewith, issued by the Company and its subsidiaries, in favor of the
      Holder (the “Security
      Agreement”).
      The
      form of Security Agreement is annexed as Exhibit
      II
      to the
      BWPA.

    

    7. Intercreditor
      Agreement.
      Pursuant
      to the Intercreditor Agreement between the Holder(s), the Company and YA Global
      Investments, L.P. (f/k/a Cornell Capital Partners, LP) (“YA
      Global”),
      the
      holder of the Company’s senior secured debt, YA Global has subordinated its
      security interest in the Collateral to the security interest and lien securing
      the Bridge Note, upon the terms set forth in such Intercreditor Agreement.
      The
      form of Intercreditor Agreement is annexed as Exhibit
      IV
      to the
      BWPA. 

     

    8. Issuance
      of Warrants.
      Upon the
      initial closing of the sale of a Bridge Note by the Company to the Holder
      pursuant to the BWPA, the Company will deliver to the Holder a warrant (the
      “Warrant”)
      of
      even date herewith entitling the Holder to purchase, for a period of five (5)
      years (the “Exercise
      Period”),
      four
      (4) shares of the Company’s common stock for each dollar of Bridge Note
      Principal Amount. The Warrant shall have the terms and conditions set forth
      in
      the form of Warrant, annexed as Exhibit
      III
      to the
      BWPA.

    

    9. Event
      of Default. 

     

    (a) An “Event
      of Default”
shall
      be deemed to have occurred under this Bridge Note upon the failure by the
      Company to perform, observe, or comply with any of the covenants, agreements,
      terms or conditions set forth herein or the occurrence of an event of
      default under the Security Agreement or an event of default in any of the
      Transaction Documents (as such term is defined in the BWPA), including but
      not
      limited to a termination of the Forbearance Agreement.

    

    (b) Cross
      Default. Each
      Grantor hereby acknowledges and agrees that any default or Event of Default
      under this Bridge Note, the Security Agreement or under any other Transaction
      Document shall constitute an Event of Default under each other Transaction
      Document.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    10. Miscellaneous.
      

    

    a. Notices. Except
      as
      may be otherwise provided herein, all notices, requests, waivers and other
      communications made pursuant to this Bridge Note shall be in writing and shall
      be conclusively deemed to have been duly given (a) when hand delivered to the
      other party; (b) when received when sent by facsimile at the address and number
      set forth below; (c) two business days after deposit in the U.S. mail with
      first
      class or certified mail receipt requested postage prepaid and addressed to
      the
      other party as set forth below; or (d) the next business day after deposit
      with
      a national overnight delivery service, postage prepaid, addressed to the parties
      as set forth below with next-business-day delivery guaranteed, provided that
      the
      sending party receives a confirmation of delivery from the delivery service
      provider.

     

    
      	
              To
                Holder:

            	
              To
                the Company:

            
	 	 
	 	
              Wherify
                Wireless, Inc. 

            
	 	
              63
                Bovet Road, #521, 

              San
                Mateo, California 94402-3104

            
	 	
              Attn:
                Chief Executive Officer

            
	
              Fax
                Number: 

            	
              Fax
                Number: 

            

    

    

    b.
      Expenses. The
      Company agrees to pay, as and when incurred, all costs and expenses, including
      but not limited to reasonable attorneys’ fees and costs of suit and preparation
      therefor incurred in connection with the collection and enforcement of this
      Bridge Note.

     

    c.
      Assignment.
      The
      rights, interests and obligations hereunder may not be assigned, by operation
      of
      law or otherwise, in whole or in part, by the Company without the prior written
      consent of the Holder. The Holder is entitled to assign its rights
      hereunder.

     

    d.
      No Waiver.
      No
      failure or delay on the part of Holder or any other holder of this Note to
      exercise any right, power or privilege under this Bridge Note and no course
      of
      dealing between the Company and Holder shall impair such right, power or
      privilege or operate as a waiver of any default or an acquiescence therein,
      nor
      shall any single or partial exercise of any such right, power or privilege
      preclude any other or further exercise thereof or the exercise of any other
      right, power or privilege. The rights and remedies expressly provided in this
      Bridge Note are cumulative to, and not exclusive of, any rights or remedies
      that
      Holder would otherwise have. No notice to or demand on the Company in any case
      shall entitle the Company to any other or further notice or demand in similar
      or
      other circumstances or constitute a waiver of the right of Holder to any other
      or further action in any circumstances without notice or demand.

     

    e.
      Severability. If
      any
      provision of this Note shall be illegal or unenforceable, such provision shall
      be deemed canceled to the same extent as though it never had appeared therein,
      but the remaining provisions shall not be affected thereby.

     

    f. 
      Governing Law.
      This
      Agreement shall be governed by and construed exclusively in accordance with
      the
      internal laws of the State of New York without regard to the conflicts of laws
      principles thereof. The parties hereto hereby irrevocably agree that any suit
      or
      proceeding arising directly and/or indirectly pursuant to or under this
      Agreement, shall be brought solely in a federal or state court located in the
      City, County and State of New York. By its execution hereof, the parties hereby
      covenant and irrevocably submit to the in personam
      jurisdiction of the federal and state courts located in the City, County and
      State of New York and agree that any process in any such action may be served
      upon any of them personally, or by certified mail or registered mail upon them
      or their agent, return receipt requested, with the same full force and effect
      as
      if personally served upon them in New York City. The parties hereto waive any
      claim that any such jurisdiction is not a convenient forum for any such suit
      or
      proceeding and any defense or lack of in personam
      jurisdiction with respect thereto. In the event of any such action or
      proceeding, the party prevailing therein shall be entitled to payment from
      the
      other party hereto of all of its reasonable legal fees and expenses.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    g. Titles
      and Subtitles.  The
      titles of the paragraphs and subparagraphs of this Note are for convenience
      of
      reference only and are not to be considered in construing this Note.

     

    h.
      Counterparts.
      This
      Agreement may be executed in any number of counterparts and by the different
      parties hereto on separate counterparts, each of which when so executed and
      delivered shall be an original, but all of which shall together constitute
      one
      and the same instrument.

     

    [Signature
      Page Follows]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF,
      the
      undersigned have executed this Bridge Note as of the day and year first above
      written.

     

    
      	
              THE
                COMPANY:

            
	 
	
              Wherify
                Wireless, Inc.

            
	
              a
                Delaware corporation

            
	 
	
              By:

            	 
	
              Name:

            	 
	
              Title:

            	 

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    EXHIBIT
      I

    

    FORM
      OF THE SECURITY AGREEMENTSECURITY
      AGREEMENT

     

    THIS
      SECURITY AGREEMENT
      (the
“Agreement”), is
      entered into and made effective as of _______ __, 2008, by and between
Wherify
      Wireless, Inc. a
      Delaware corporation with its principal place of business located at 63 Bovet
      Road, #521, San Mateo, California 94402-3104 (the “Company”),
      and
      the undersigned subsidiaries of the Company (each a “Guarantor,”
and
      collectively together with the Company, the “Grantors”),
      in
      favor of persons named on Schedule
      1
      of the
      Securities Purchase Agreement (as defined below) (the
      “Secured
      Party”).

     

    WHEREAS,
      in
      connection with the Bridge Note and Warrant Purchase Agreement by and among
      the
      Company and the Secured Party of even date herewith (the “Securities
      Purchase Agreement”),
      the
      Company has agreed, upon the terms and subject to the conditions of the
      Securities Purchase Agreement, to sell to the Secured Party (i) an aggregate
      original principal amount of up to $800,000 of senior secured convertible bridge
      notes (the “Bridge
      Notes”),
      and
      (ii) warrants (“Warrants”)
      to
      purchase shares of the Company’s common stock (“Common
      Stock”);
      and

     

    WHEREAS,
      each of
      the Guarantors (other than the Company) has executed and delivered a Guaranty
      dated the date hereof (the “Guaranty”)
      in
      favor of the Secured Party, with respect to the Company’s obligations under the
      Securities Purchase Agreement, the Bridge Notes, and the Transaction Documents
      (as defined in the Securities Purchase Agreement); and

     

    WHEREAS,
      each of
      the Guarantors shall receive a direct benefit from the Secured Party entering
      into the Securities Purchase Agreement, the Bridge Notes, and the Transaction
      Documents including among other things and without limitation, the working
      capital required to maintain the intellectual property of the Guarantor;
      and

     

    WHEREAS,
      it
      is a
      condition precedent to the Secured Party purchasing the Bridge Notes pursuant
      to
      the Securities Purchase Agreement that the Grantors shall have executed and
      delivered to the Secured Party this Agreement providing for the grant to the
      Secured Party of a security interest in all personal property of each Grantor
      to
      secure all of the Company's obligations under the (i) Transaction Documents
      and
      (ii) the Guarantors’ obligations under the Guaranty; 

     

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

     

    ARTICLE
      1

     

    DEFINITIONS
      AND INTERPRETATIONS

    

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

     

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

     

    Section
      1.3. Definitions. Reference
      is hereby made to the Securities Purchase Agreement and the Bridge Notes for
      a
      statement of the terms thereof. All capitalized terms used in this Agreement
      and
      the recitals hereto and not defined herein shall have the meanings set forth
      in
      the Securities Purchase Agreement, the Bridge Notes, or in Articles 8 or 9
      of
      the Uniform Commercial Code as in effect from time to time in the State of
      New
      Jersey (the "Code").

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      1.4. Other
      Definitions.
      As used
      in this Agreement, the following terms shall have the respective meanings
      indicated below, such meanings to be applicable equally to both the singular
      and
      plural forms of such terms:

     

    “Event
      of Default”
shall
      be deemed to have occurred under this Agreement upon the failure by the Company
      to perform, observe, or comply with any of the covenants, agreements, terms
      or
      conditions set forth herein or the occurrence of an event of default under
      the Bridge Notes or an event of default in any of the Transaction Documents,
      including but not limited to a termination of the Forbearance
      Agreement.

     

    ARTICLE
      2

     

    PLEDGED
      PROPERTY

    

    Section
      2.1. Grant
      of Security Interest.

     

    (a) As
      collateral security for all of the Obligations (as defined in Section
      2.2
      hereof),
      each Grantor hereby pledges and assigns to the Secured Party, and grants to
      the
      Secured Party for its benefit, a continuing security interest in and to all
      property of each Grantor, wherever located and whether now or hereinafter
      existing and whether now owned or hereafter acquired, of every kind and
      description, tangible or intangible, including without limitation, all Goods,
      Inventory, Equipment, Fixtures, Instruments (including promissory notes),
      Documents, Accounts (including health-care-insurance receivables, and license
      fees), Contracts, Contract Rights, Chattel Paper (whether tangible or
      electronic), Deposit Accounts (and in and to any deposits or other sums at
      any
      time credited to each such Deposit Account), Money, Letters of Credit and
      Letter-of-Credit Rights (whether or not the letter of credit is evidenced by
      a
      writing), Commercial Tort Claims, Securities and all other Investment Property,
      General Intangibles (including payment intangibles and software), Farm Products,
      all books and records relating to any of the foregoing, and all supporting
      obligations, and any and all proceeds and products of any thereof, including
      proceeds of insurance covering any or all of the foregoing, wherever located,
      whether now owned, or now due, in which a Grantor has an interest or the power
      to transfer rights, or hereafter acquired, arising, or to become due, or in
      which a Grantor obtains an interest, or the power to transfer rights, and as
      more particularly described on Exhibit
      A
      attached
      hereto (collectively, the “Pledged
      Property”).

     

    (b) Simultaneously
      with the execution and delivery of this Agreement, each Grantor shall make,
      execute, acknowledge, file, record and deliver to the Secured Party such
      documents, instruments, and agreements, including, without limitation, financing
      statements, certificates, affidavits and forms as may, in the Secured Party’s
      reasonable judgment, be necessary to effectuate, complete or perfect, or to
      continue and preserve, the security interest of the Secured Party in the Pledged
      Property.

     

    Section
      2.2 Security
      for Obligations.
      The
      security interest created hereby in the Pledged Property constitutes continuing
      collateral security for all of the following obligations, whether now existing
      or hereinafter incurred (collectively, the “Obligations”):

     

    (a)
      (i)
      the payment by the Company, as and when due and payable (by scheduled maturity,
      acceleration, demand or otherwise), of all amounts from time to time owing
      by it
      in respect of the Bridge Notes (including interest thereon) and the other
      Transaction Documents, , or (ii) in the case of any Guarantor, the payment
      by
      such Guarantor, as and when due and payable of all “Guaranteed Obligations”
under (and as defined in) the Guaranty; and

     

    (b)
      the
      due performance and observance by the each Grantor of all of its other
      obligations from time to time existing in respect of any of the Transaction
      Documents, including without limitation, with respect to any conversion,
      exercise or redemption rights of the Secured Party under the Bridge Notes and
      the Warrants.

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    ARTICLE
      3

     

    ATTORNEY-IN-FACT;
      PERFORMANCE

    

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

     

    The
      Grantors hereby appoint the Secured Party as its attorney-in-fact, with full
      authority in the place and stead of the Grantor and in the name of the Grantor
      or otherwise, exercisable after and during the continuance of an Event of
      Default, from time to time in the Secured Party’s discretion to take any action
      and to execute any instrument which the Secured Party may reasonably deem
      necessary to accomplish the purposes of this Agreement, including, without
      limitation, to (a) receive and collect all instruments made payable to the
      Grantor representing any payments in respect of the Pledged Property or any
      part
      thereof and to give full discharge for the same; (b) demand, collect, receipt
      for, settle, compromise, adjust, sue for, foreclose, or realize on the Pledged
      Property as and when the Secured Party may determine, and (c) to facilitate
      collection, the Secured Party may notify account debtors and obligors on any
      Pledged Property to make payments directly to the Secured Party. The foregoing
      power of attorney is a power coupled with an interest and shall be irrevocable
      until all Obligations are paid and performed in full. The Grantors agree that
      the powers conferred on the Secured Party hereunder are solely to protect the
      Secured Party’s interests in the Pledged Property and shall not impose any duty
      upon the Secured Party to exercise any such powers.

     

    Section
      3.2. Secured
      Party May Perform.

     

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

     

    ARTICLE
      4

     

    REPRESENTATIONS
      AND WARRANTIES

    

    Section
      4.1. Authorization;
      Enforceability.

     

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

     

    Section
      4.2. Ownership
      of Pledged Property.

     

    Each
      Grantor represents and warrants that it is the legal and beneficial owner of
      the
      Pledged Property free and clear of any lien, security interest, option or other
      charge or encumbrance (each, a “Lien”)
      except
      for the security interest created by this Agreement and other Permitted Liens.
      For purposes of this Agreement, “Permitted
      Liens”
means:
      (1) the security interest created by this Agreement, (2) existing Liens which
      have been disclosed by the Company to the Secured Party on Schedule
      4.2
      attached
      hereto; (3) Liens for taxes, assessments or governmental charges or levies
      not
      yet due, as to which the grace period, if any, related thereto has not yet
      expired, or being contested in good faith and by appropriate proceedings for
      which adequate reserves have been established in accordance with GAAP; (4)
      existing Liens of carriers, materialmen, warehousemen, mechanics and landlords
      and other similar Liens which secure amounts which are not yet overdue or which
      are being contested in good faith by appropriate proceedings for which adequate
      reserves have been established in accordance with GAAP; (5) existing Liens
      securing capitalized lease obligations and purchase money indebtedness incurred
      solely for the purpose of financing an acquisition or lease; (6) easements,
      rights-of-way, restrictions, encroachments, municipal zoning ordinances and
      other similar charges or encumbrances, and minor title deficiencies, in each
      case not securing debt and not materially interfering with the conduct of the
      business of the Company and not materially detracting from the value of the
      property subject thereto; (7) existing Liens arising out of the existence of
      judgments or awards which judgments or awards do not constitute an Event of
      Default; (8) existing Liens incurred in the ordinary course of business in
      connection with workers compensation claims, unemployment insurance, pension
      liabilities and social security benefits and Liens securing the performance
      of
      bids, tenders, leases and contracts in the ordinary course of business,
      statutory obligations, surety bonds, performance bonds and other obligations
      of
      a like nature (other than appeal bonds) incurred in the ordinary course of
      business (exclusive of obligations in respect of the payment for borrowed
      money); and (9) existing Liens in favor of a banking institution arising by
      operation of law encumbering deposits (including the right of set-off) and
      contractual set-off rights held by such banking institution and which are within
      the general parameters customary in the banking industry and only burdening
      deposit accounts or other funds maintained with a creditor depository
      institution.

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    Section
      4.3 Location
      of Pledged Property.
      

     

    The
      Pledged Property is or will be kept at the address(es) of each Grantor set
      forth
      on the signature pages hereof. Unless otherwise provided herein, the Grantors
      will not remove any Pledged Property from such locations without the express
      prior written consent of the Secured Party except in the ordinary course of
      business.

     

    Section
      4.4 Location,
      State of Incorporation and Name of Grantors.

     

    Each
      Grantor’s principal place of business (and where its assets are kept if
      different), state of organization, organization identification number, and
      exact
      legal name is as set forth on each such Grantor’s signature page to this
      Agreement. 

     

    Section
      4.5 Priority
      of Security Interest. 

     

    The
      security interest granted hereto is a result of an Intercreditor Agreement
      dated
      ______, 2008 by and among the Company, the Secured Party and YA Global
      Investments, L.P. and shall be a first priority security interest subject to
      no
      other Liens. Except for the Permitted Liens, no financing statement covering
      any
      of the Pledged Property or any proceeds thereof is on file in any public office.
      

     

    ARTICLE
      5

     

    DEFAULT;
      REMEDIES

    

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

     

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

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (a) The
      Secured Party may exercise in respect of the Pledged Property, in addition
      to
      any other rights and remedies provided for herein or otherwise available to
      it,
      all of the rights and remedies of a secured party upon default under the Code
      (whether or not the Code applies to the affected Pledged Property), and also
      may
      (i) take absolute control of the Pledged Property, including, without
      limitation, transfer into the Secured Party's name or into the name of its
      nominee or nominees (to the extent the Secured Party has not theretofore done
      so) and thereafter receive, for the benefit of the Secured Party, all payments
      made thereon, give all consents, waivers and ratifications in respect thereof
      and otherwise act with respect thereto as though it were the outright owner
      thereof, (ii) require each Grantor to assemble all or part of the Pledged
      Property as directed by the Secured Party and make it available to the Secured
      Party at a place or places to be designated by the Secured Party that is
      reasonably convenient to both parties, and the Secured Party may enter into
      and
      occupy any premises owned or leased by a Grantor where the Pledged Property
      or
      any part thereof is located or assembled for a reasonable period in order to
      effectuate the Secured Party's rights and remedies hereunder or under law,
      without obligation to the Grantor in respect of such occupation, and
      (iii) without notice except as specified below and without any obligation
      to prepare or process the Pledged Property for sale, (A) sell the Pledged
      Property or any part thereof in one or more parcels at public or private sale,
      at any of the Secured Party's offices or elsewhere, for cash, on credit or
      for
      future delivery, and at such price or prices and upon such other terms as the
      Secured Party may deem commercially reasonable and/or (B) lease, license or
      dispose of the Pledged Property or any part thereof upon such terms as the
      Secured Party may deem commercially reasonable. Each Grantor agrees that, to
      the
      extent notice of sale or any other disposition of the Pledged Property shall
      be
      required by law, at least ten (10) days' notice to the Grantor of the time
      and
      place of any public sale or the time after which any private sale or other
      disposition of the Pledged Property is to be made shall constitute reasonable
      notification. The Secured Party shall not be obligated to make any sale or
      other
      disposition of any Pledged Property regardless of notice of sale having been
      given. The Secured Party may adjourn any public or private sale from time to
      time by announcement at the time and place fixed therefor, and such sale may,
      without further notice, be made at the time and place to which it was so
      adjourned. Each Grantor hereby waives any claims against the Secured Party
      arising by reason of the fact that the price at which the Pledged Property
      may
      have been sold at a private sale was less than the price which might have been
      obtained at a public sale or was less than the aggregate amount of the
      Obligations, even if the Secured Party accepts the first offer received and
      does
      not offer such Pledged Property to more than one offeree, and waives all rights
      that the Grantor may have to require that all or any part of such Pledged
      Property be marshaled upon any sale (public or private) thereof. Each Grantor
      hereby acknowledges that (i) any such sale of the Pledged Property by the
      Secured Party may be made without warranty, (ii) the Secured Party may
      specifically disclaim any warranties of title, possession, quiet enjoyment
      or
      the like, and (iii) such actions set forth in clauses (i) and (ii)
      above shall not adversely affect the commercial reasonableness of any such
      sale
      of Pledged Property. 

     

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

     

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

     

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

     

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

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    Section
      5.2 Duties
      Regarding Pledged Property.

     

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

     

    Section
      5.3 Cross
      Default.

     

    Each
      Grantor hereby acknowledges and agrees that any default or Event of Default
      under this Agreement or under any Transaction Document shall constitute an
      Event
      of Default under each other Transaction Document.

     

    ARTICLE
      6

     

    AFFIRMATIVE
      COVENANTS

    

    So
      long
      as any of the Obligations shall remain outstanding, unless the Secured Party
      shall otherwise consent in writing:

     

    Section
      6.1. Existence,
      Properties, Etc.

     

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

     

    Section
      6.2. Financial
      Statements and Reports.

     

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

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    Section
      6.3. Accounts
      and Reports.

     

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

     

    (a) as
      soon
      as available, a copy of any notice or other communication alleging any
      nonpayment or other material breach or default, or any foreclosure or other
      action respecting any material portion of its assets and properties, received
      respecting any of the indebtedness of the Grantor in excess of $10,000 (other
      than the Obligations), or any demand or other request for payment under any
      guaranty, assumption, purchase agreement or similar agreement or arrangement
      respecting the indebtedness or obligations of others in excess of $50,000;
      and

     

    (b) within
      five (5) business days after the making of each submission or filing, a
      copy of any report, financial statement, notice or other document, whether
      periodic or otherwise, submitted to the shareholders of the Grantor, or
      submitted to or filed by the Grantor with any governmental authority involving
      or affecting (i) the Grantor that would reasonably be expected to have a
      Material Adverse Effect; (ii) the Obligations; (iii) any part of the
      Pledged Property; or (iv) any of the transactions contemplated in this
      Agreement or the Loan Instruments.

     

    Section
      6.4. Maintenance
      of Books and Records; Inspection.

     

    Each
      Grantor shall maintain its books, accounts and records in accordance with GAAP,
      and permit the Secured Party, its officers and employees and any professionals
      designated by the Secured Party in writing, at any time during normal business
      hours and upon reasonable notice to visit and inspect any of its properties
      (including but not limited to the collateral security described in the
      Transaction Documents and/or the Loan Instruments), corporate books and
      financial records, and to discuss its accounts, affairs and finances with any
      employee, officer or director thereof.

     

    Section
      6.5. Maintenance
      and Insurance.

     

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

     

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

     

    Section
      6.6. Contracts
      and Other Collateral.

     

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

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    Section
      6.7. Defense
      of Collateral, Etc.

     

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

     

    Section
      6.8. Taxes
      and Assessments.

     

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

     

    Section
      6.9. Compliance
      with Law and Other Agreements.
      

     

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

     

    Section
      6.10. Notice
      of Default.
      

     

    The
      Grantors will immediately notify the Secured Party of any event causing a
      substantial loss or diminution in the value of all or any material part of
      the
      Pledged Property and the amount or an estimate of the amount of such loss or
      diminution. The Grantors shall promptly notify the Secured Party of any
      condition or event which constitutes, or would constitute with the passage
      of
      time or giving of notice or both, an Event of Default, and promptly inform
      the
      Secured Party of any events or changes in the financial condition of any Grantor
      occurring since the date of the last financial statement of such Grantor
      delivered to the Secured Party, which individually or cumulatively when viewed
      in light of prior financial statements, which would reasonably be expected
      to
      have a Material Adverse Effect on the business operations or financial condition
      of the Grantor.

     

    Section
      6.11. Notice
      of Litigation.

     

    Each
      Grantor shall give notice, in writing, to the Secured Party of (a) any
      actions, suits or proceedings wherein the amount at issue is in excess of
      $25,000, instituted by any persons against the Grantor, or affecting any of
      the
      assets of the Company, and (b) any dispute, not resolved within fifteen
      (15) days of the commencement thereof, between the Grantor on the one hand
      and
      any governmental or regulatory body on the other hand, which would reasonably
      be
      expected to have a Material Adverse Effect on the business operations or
      financial condition of the Grantor.

     

    Section
      6.12. Future
      Subsidiaries.

     

    If
      any
      Grantor shall hereafter create or acquire any subsidiary, simultaneously with
      the creation or acquisition of such subsidiary, such Grantor shall cause such
      subsidiary to become a party to this Agreement as an additional "Grantor"
      hereunder, and to duly execute and deliver a guaranty of the Obligations in
      favor of the Secured Party in form and substance reasonably acceptable to the
      Secured Party, and to duly execute and/or deliver such opinions of counsel
      and
      other documents, in form and substance reasonably acceptable to the Secured
      Party, as the Secured Party shall reasonably request with respect
      thereto.

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    Section
      6.13. Changes
      to Identity.

     

    Each
      Grantor will (a) give the Secured Party at least 30 days' prior written notice
      of any change in such Grantor's name, address, identity, organizational
      structure or other information pertinent to the Secured Party, (b) maintain
      its
      jurisdiction of incorporation, organization or formation as set forth on its
      respective signature page attached hereto, (C) immediately notify the Secured
      Party upon obtaining an organizational identification number, if on the date
      hereof such Grantor did not have such identification number.

     

    Section
      6.14. Establishment
      of Deposit Account, Dominion Account
      Agreements; Control. 
      

     

    Within
      five (5) days of the date hereof, each Grantor, the Secured Party, and each
      applicable bank or other depository institution shall enter into a deposit
      account agreement (“Deposit
      Account Agreement”)
      in the
      form of Exhibit
      B
      with
      respect to each of the Grantor’s Deposit Accounts, including, without
      limitation, all savings, passbook, money market or other depository accounts,
      and all certificates of deposit, maintained by each Company with any bank,
      savings and loan association, credit union or other depository institution
      maintained or used by each Grantor providing dominion and control over such
      accounts to the Secured Party such that upon notice by the Secured Party to
      such
      bank or other depository institution of the occurrence of an Event of Default
      all actions under such account shall be taken solely at the Secured Party’s
      direction. Each Grantor’s current Deposit Accounts are set forth on Schedule
      6.14
      attached
      hereto. 

     

    Each
      Grantor shall cause all cash, all collections and proceeds from accounts
      receivable, all receipts from credit card payments, and all proceeds from the
      sale of any Pledged Property to be deposited only into its Deposit Accounts
      in
      the ordinary course of business and consistent with past practices.

     

    Each
      Grantor shall have valid and effective Deposit Account Agreements in place
      at
      all times with respect to all of its Deposit Accounts. No Deposit Account shall
      be established, used or maintained by the Company unless it first enters into
      a
      Deposit Account Agreement. 

     

    With
      respect to each Deposit Account, from an after the occurrence of an Event of
      Default, the Secured Party shall have the right, at any time and from time
      to
      time, to exercise its rights under such Deposit Account Agreement, including,
      for the avoidance of any doubt, the exclusive right to give instructions to
      the
      financial institution at which such Deposit Account is maintained as to the
      disposition of funds or other property on deposit therein or credited thereto.
      The Secured Party hereby covenants and agrees that it will not send any such
      notice to a financial institution at which any such Deposit Account is
      maintained directing the disposition of funds or other property therein unless
      and until the occurrence of an Event of Default and only during the continuance
      of such Event of Default. 

     

    In
      connection with the foregoing, each Grantor hereby authorizes and directs each
      bank or other depository institution which maintains any Deposit Account to
      pay
      or deliver to the Secured Party upon the Secured Party’s written demand thereof
      made at any time after the occurrence of an Event of Default has occurred all
      balances in each Deposit Account with such depository for application to the
      Obligations then outstanding and only during the continuance of such Event
      of
      Default. 

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    Section
      6.15 Perfection
      of Security Interests.

     

    (a) Financing
      Statements.
      The
      Grantors hereby irrevocably authorize the Secured Party, at the sole cost and
      expense of the Grantors, at any time and from time to time to file in any filing
      office in any jurisdiction any initial financing statements and amendments
      thereto that (a) indicate the Pledged Property (i) as all assets of Grantors
      or
      words of similar effect, regardless of whether any particular asset comprised
      in
      the Pledged Property falls within the scope of Article 9 of the Code of such
      jurisdiction, or (ii) as being of an equal or lesser scope or with greater
      detail, and (b) contain any other information required by Part 5 of Article
      9 of
      the Code for the sufficiency or filing office acceptance of any financing
      statement or amendment, including (i) whether such Grantor is an organization,
      the type of organization and any organization identification number issued
      to
      such Grantor, and (ii) in the case of a financing statement filed as a fixture
      filing, a sufficient description of real property to which the Pledged Property
      relates. Grantors agree to furnish any such information to the Secured Party
      promptly upon request. Grantors also ratify their authorization for the Secured
      Party to have filed in any jurisdiction any initial financing statements or
      amendments thereto if filed prior to the date hereof. The Grantors acknowledge
      that they are not authorized to file any financing statement or amendment or
      termination statement with respect to any financing statement without the prior
      written consent of the Secured Party and agree that they will not do so without
      the prior written consent of the Secured Party. The Grantors acknowledge and
      agree that this Agreement constitutes an authenticated record.

     

    (b) Possession.
      The
      Grantors (i) shall have possession of the Pledged Property, except where
      expressly otherwise provided in this Agreement or where the Secured Party
      chooses to perfect its security interest by possession in addition to the filing
      of a financing statement; and (ii) will, where Pledged Property is in the
      possession of a third party, join with the Secured Party in notifying the third
      party of the Secured Party’s security interest and obtaining an acknowledgment
      from the third party that it is holding the Pledged Property for the benefit
      of
      the Secured Party.

     

    (c) Control. In
      addition to the provisions set forth in Section
      6.14
      and
      Section 6.15, the Grantors will cooperate with the Secured Party in obtaining
      control with respect to the Pledged Property consisting of (i) Investment
      Property, (ii) Letters of Credit and Letter-of-Credit Rights and (iii)
      electronic Chattel Paper.

     

    (d) Chattel
      Paper. The
      Grantors will not create any Chattel Paper without placing a legend on the
      Chattel Paper acceptable to the Secured Party indicating that the Secured Party
      has a security interest in the Chattel Paper.

     

    Section
      6.16 Notice
      of Commercial Tort Claims.
      If any
      Grantor shall at any time acquire a Commercial Tort Claim, such Grantor shall
      immediately notify the Secured Party in a writing signed by such Grantor which
      shall (a) provide brief details of said claim and (b) grant to the Secured
      Party
      a security interest in said claim and in the proceeds thereof, all upon the
      terms of this Agreement, in such form and substance satisfactory to the Secured
      Party.

     

    ARTICLE
      7

     

    NEGATIVE
      COVENANTS

    

    So
      long
      as any of the Obligations shall remain outstanding, unless the Secured Party
      shall otherwise expressly consent in writing signed and dated by the Secured
      Party, each Grantor covenants and agrees that it shall not:

     

    Section
      7.1. Transfers,
      Liens and Encumbrances.

     

    (a) Sell,
      assign (by operation of law or otherwise), lease, license, exchange or otherwise
      transfer or dispose of any of the Pledged
      Property, except Grantor may (i) sell or dispose of Inventory in the ordinary
      course of business, provided the proceeds from such sale are, subject to
      standard deferred payment arrangments with customers, paid in cash and upon
      receipt are immediately deposited directly into a Company bank account, and
      (ii)
      sell or dispose of assets the Grantor has determined, in good faith, not to
      be
      useful in the conduct of its business, provided the proceeds from such sale
      are,
      subject to standard deferred payment arrangments with customers, paid in cash
      and upon receipt are immediately deposited directly into a Company bank account
      and (iii) sell or dispose of accounts in the course of collection in the
      ordinary course of business consistent with past practice, provided the proceeds
      from such sale are, subject to standard deferred payment arrangments with
      customers, paid in cash and upon receipt are immediately deposited directly
      into
      a Company bank account.

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

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

     

    Section
      7.2. Restriction
      on Redemption and Cash Dividends

     

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

     

    Section
      7.3. Incurrence
      of Indebtedness.

     

    Directly
      or indirectly, incur or guarantee, assume or suffer to exist any indebtedness,
      other than the indebtedness evidenced by the Bridge Notes and other Permitted
      Indebtedness. “Permitted
      Indebtedness”
means:
      (i) indebtedness evidenced by Bridge Notes; (ii) indebtedness described on
      the
      Disclosure Schedule to the Securities Purchase Agreement; (iii) indebtedness
      incurred solely for the purpose of financing the acquisition or lease of any
      equipment by the Company, including capital lease obligations with no recourse
      other than to such equipment; (iv) indebtedness (A) the repayment of which
      has
      been made expressly subordinated to the payment of the Bridge Notes on terms
      and
      conditions acceptable to the Secured Party, including with regard to interest
      payments, repayment of principal, and any fees and expenses (B) which does
      not
      mature or otherwise require or permit redemption or repayment prior to or on
      the
      91st
      day
      after the maturity date of any Bridge Notes then outstanding; and (C) which
      is
      not secured by any assets of the Company and/or any Guarantor; (v) indebtedness
      solely between the Grantor and/or one of its domestic subsidiaries, on the
      one
      hand, and the Grantor and/or one of its domestic subsidiaries, on the other
      which indebtedness is not secured by any assets of the Grantor or any of its
      subsidiaries, provided that (x) in each case a majority of the equity of any
      such domestic subsidiary is directly or indirectly owned by the Grantor, such
      domestic subsidiary is controlled by the Grantor and such domestic subsidiary
      has executed a security agreement in the form of this Agreement and (y) any
      such
      loan shall be evidenced by an intercompany note that is pledged by the Grantor
      or its subsidiary, as applicable, as collateral pursuant to this
      Agreement.

     

    Section
      7.4. Places
      of Business.

     

    Move
      any
      assets and/or change the location of its chief place of business, chief
      executive office or any place of business disclosed to the Secured
      Party.

     

    ARTICLE
      8.

     

    MISCELLANEOUS

    

    Section
      8.1. Notices.

     

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

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      	
              If
                to the Secured Party:

            	
              Laidlaw
                & Company (UK) Ltd.

            
	 	
              90
                Park Ave, 31st
                Floor

            
	 	
              New
                York, New York 10016

            
	 	
              Attention:    
                Hugh
                Regan

            
	 	 
	 	
              Telephone:    212-697-5200

            
	 	
              Facsimile:     212-297-0670

            
	 	 
	
              With
                a copy to:

            	
              Gusrae,
                Kaplan, Bruno & Nusbaum PLLC

            
	 	
              120
                Wall Street

            
	 	
              New
                York, New York 10005

            
	 	
              Attention:    
                LGN

            
	 	
              Telephone:   212-269-1500

            
	 	
              Facsimile:     212-809-5449

            
	 	 
	
              If
                to the Company:

            	
              Wherify
                Wireless, Inc

            
	 	
              63
                Bovet Road, #521,

            
	 	
              San
                Mateo, California 94402-3104

            
	 	
              Attention:
                Vince Sheeran

            
	 	
              Telephone: 

            
	 	
              Facsimile: 

            
	
              With
                a copy to:

            	 
	 	 
	 	
              Attention:
                

            
	 	
              Telephone: 

            
	 	
              Facsimile: 

            
	 	 
	
              If
                to any other Grantor

            	
              To
                the address listed on the respective signature pages attached
                hereto

            

    

    

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

     

    Section
      8.2. Severability.

     

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

     

    Section
      8.3. Expenses.

     

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

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    Section
      8.4. Waivers,
      Amendments, Etc.

     

    The
      Secured Party’s delay or failure at any time or times hereafter to require
      strict performance by Grantor of any undertakings, agreements or covenants
      shall
      not waive, affect, or diminish any right of the Secured Party under this
      Agreement to demand strict compliance and performance herewith. Any waiver
      by
      the Secured Party of any Event of Default shall not waive or affect any other
      Event of Default, whether such Event of Default is prior or subsequent thereto
      and whether of the same or a different type. None of the undertakings,
      agreements and covenants of the Grantor contained in this Agreement, and no
      Event of Default, shall be deemed to have been waived by the Secured Party,
      nor
      may this Agreement be amended, changed or modified, unless such waiver,
      amendment, change or modification is evidenced by an instrument in writing
      specifying such waiver, amendment, change or modification and signed by the
      Secured Party in the case of any such waiver, and signed by the Secured Party
      and the Grantor in the case of any such amendment, change or modification.
      Further, no such document, instrument, and/or agreement purported to be executed
      on behalf of the Secured Party shall be binding upon the Secured Party unless
      executed by a duly authorized representative of the Secured Party.

     

    Section
      8.5. Continuing
      Security Interest.

     

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

     

    Section
      8.6. Independent
      Representation.

     

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

     

    Section
      8.7. Applicable
      Law: Jurisdiction.

     

    This
      Agreement shall be governed by and construed exclusively in accordance with
      the
      internal laws of the State of New York without regard to the conflicts of laws
      principles thereof. The parties hereto hereby irrevocably agree that any suit
      or
      proceeding arising directly and/or indirectly pursuant to or under this
      Agreement, shall be brought solely in a federal or state court located in the
      City, County and State of New York. By its execution hereof, the parties hereby
      covenant and irrevocably submit to the in personam
      jurisdiction of the federal and state courts located in the City, County and
      State of New York and agree that any process in any such action may be served
      upon any of them personally, or by certified mail or registered mail upon them
      or their agent, return receipt requested, with the same full force and effect
      as
      if personally served upon them in New York City. The parties hereto waive any
      claim that any such jurisdiction is not a convenient forum for any such suit
      or
      proceeding and any defense or lack of in personam
      jurisdiction with respect thereto. In the event of any such action or
      proceeding, the party prevailing therein shall be entitled to payment from
      the
      other party hereto of all of its reasonable legal fees and expenses.,
Provided,
      however,
      that
      nothing herein or elsewhere shall prevent the Secured Party from enforcing
      its
      rights and remedies (including, without limitation, by filing a civil action)
      with respect to the Pledged Property and/or the Grantors in any other
      jurisdiction in which the Pledged Property and/or the Grantors may be
      located.

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    Section
      8.8. Waiver
      of Jury Trial.

     

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

     

    Section
      8.9 Right
      of Set Off.

     

    The
      Grantors each hereby grant to the Secured Party, a lien, security interest
      and
      right of setoff as security for all liabilities and obligations to the Secured
      Party, whether now existing or hereafter arising, upon and against all deposits,
      credits, collateral and property, now or hereafter in the possession, custody,
      safekeeping or control of the Secured Party or any of its affiliates, or any
      entity under the control of the Secured Party, or in transit to any of them.
      At
      any time, without demand or notice, the Secured Party may set off the same
      or
      any part thereof and apply the same to any liability or obligation of the
      Grantors even though unmatured and regardless of the adequacy of any other
      collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE THE SECURED
      PARTY TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL
      WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH
      RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE GRANTORS, ARE HEREBY
      KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

     

    Section
      8.10 Entire
      Agreement.

     

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

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

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

    

    
      	
              COMPANY:

            
	
              Wherify
                Wireless, Inc.

            
	 
	
              By:

            	     

	
              Name:

            	
              Vince
                Sheeran

            
	
              Title:

            	
              Chief
                Executive Officer

            
	 	 
	
              Jurisdiction
                of Incorporation, Organization or Formation: 

            
	 
	
              Organizational
                ID:

            

    

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

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

    

    
      	GUARANTOR:
	Wherify
              Wireless California
	 	 
	
              By:

            	     

	
              Name:

            	
              [                                                       ]

            
	
              Title:

            	
              [                                                       ]

            
	 
	
              Address
                For Notices:

            
	 
	 
	 
	
              Jurisdiction
                of Incorporation, Organization or Formation:

            
	 
	
              Organizational
                ID:

            

    

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

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

    

    
      	
              GUARANTOR:

            
	
              SUBSIDIARY
                2

            
	 
	
              By:

            	           
              
	
              Name:

            	 
	
              Title:

            	 
	 
	
              Address
                For Notices:

            
	 
	 
	 
	
              Jurisdiction
                of Incorporation, Organization or Formation:

            
	 
	
              Organizational
                ID:

            

    

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

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

    

    
      	
              GUARANTOR:

            
	
              SUBSIDIARY
                3

            
	 
	
              By:

            	      

	
              Name:

            	 
	
              Title:

            	 
	 
	
              Address
                For Notices:

            
	 
	 
	 
	
              Jurisdiction
                of Incorporation, Organization or Formation:

            
	 
	
              Organizational
                ID:

            

    

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

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

    

    
      	
              GUARANTOR:

            
	
              SUBSIDIARY
                4

            
	 
	
              By:

            	      

	
              Name:

            	 
	
              Title:

            	 
	 
	
              Address
                For Notices:

            
	 
	 
	 
	
              Jurisdiction
                of Incorporation, Organization or Formation:

            
	 
	
              Organizational
                ID:

            

    

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

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

    

    
      	
              SECURED
                PARTY:

            
	 
	
              By:

            	   

	
              Name:

            	 
	
              Title:

            	 

    

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      A

    DEFINITION
      OF PLEDGED PROPERTY

     

    For
      the
      purpose of securing prompt and complete payment and performance by the Grantor
      of all of the Obligations, the Grantors each unconditionally and irrevocably
      hereby grant to the Secured Party a continuing security interest in and to,
      and
      lien upon, the following Pledged Property of each Grantor (all capitalized
      terms
      used herein shall have the respective meanings ascribed thereto in the
      Code):

     

    All
      personal property of each Grantor, wherever located and whether now or
      hereinafter existing and whether now owned or hereafter acquired, of every
      kind
      and description, tangible or intangible, including without limitation,
      all:

     

    1. Goods;

     

    2.
       Inventory,
      including, without limitation, all goods, merchandise and other personal
      property now owned or hereafter acquired by the Grantor which are held for
      sale
      or lease, or are furnished or to be furnished under any contract of service
      or
      are raw materials, work-in-process, supplies or materials used or consumed
      in
      the Grantor’s business, and all products thereof, and all substitutions.
      replacements, additions or accessions therefor and thereto; and any cash or
      non-cash Proceeds of all of the foregoing;

     

    3.
       Equipment,
      including, without limitation, all machinery, equipment, furniture, parts,
      tools
      and dies, of every kind and description, of the Grantor (including automotive
      equipment and motor vehicles), now owned or hereafter acquired by the Grantor,
      and used or acquired for use in the business of the Grantor, together with
      all
      accessions thereto and all substitutions and replacements thereof and parts
      therefor and all cash or non-cash Proceeds of the foregoing;

     

    4. Fixtures,
      including, without limitation, all goods which are so related to particular
      real
      estate that an interest in them arises under real estate law and all accessions
      thereto, replacements thereof and substitutions therefor, including, but not
      limited to, plumbing, heating and lighting apparatus, mantels, floor coverings,
      furniture, furnishings, draperies, screens, storm windows and doors, awnings,
      shrubbery, plants, boilers, tanks, machinery, stoves, gas and electric ranges,
      wall cabinets, appliances, furnaces, dynamos, motors, elevators and elevator
      machinery, radiators, blinds and all laundry, refrigerating, gas, electric,
      ventilating, air-refrigerating, air-conditioning, incinerating and sprinkling
      and other fire prevention or extinguishing equipment of whatsoever kind and
      nature and any replacements, accessions and additions thereto, Proceeds thereof
      and substitutions therefor;

     

    5. Instruments
      (including promissory notes);

     

    6. Documents;

     

    7. Accounts,
      including, without limitation, all Contract Rights and accounts receivable,
      health-care-insurance receivables, and license fees; any other obligations
      or
      indebtedness owed to the Grantor from whatever source arising; all rights of
      Grantor to receive any payments in money or kind; all guarantees of Accounts
      and
      security therefor; all cash or non-cash Proceeds of all of the foregoing; all
      of
      the right, title and interest of Grantor in and with respect to the goods,
      services or other property which gave rise to or which secure any of the
      accounts and insurance policies and proceeds relating thereto, and all of the
      rights of the Grantor as an unpaid seller of goods or services, including,
      without limitation the rights of stoppage in transit, replevin, reclamation
      and
      resale and all of the foregoing, whether now existing or hereafter created
      or
      acquired;

     

    8.
       Contracts
      and Contract Rights, including, to the extent not included in the definition
      of
      Accounts, all rights to payment or performance under a contract not yet earned
      by performance and not evidenced by an Instrument or Chattel Paper;

     

    9.
       Chattel
      Paper (whether tangible or electronic);

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    10. Deposit
      Accounts (and in and to any deposits or other sums at any time credited to
      each
      such Deposit Account);

     

    11. Money,
      cash and cash equivalents;

     

    12. Letters
      of Credit and Letter-of-Credit Rights (whether or not the Letter of Credit
      is
      evidenced by a writing);

     

    13. Commercial
      Tort Claims [to
      the extent any currently exist, they need to be specifically listed
      here];

     

    14. Securities
      Accounts, Security Entitlements, Securities, Financial Assets and all other
      Investment Property, including, without limitation, all ownership or membership
      interests in any subsidiaries or affiliates (whether or not controlled by the
      Grantor);

     

    15. General
      Intangibles, including, without limitation, all payment intangibles, tax refunds
      and other claims of the Grantor against any governmental authority, and all
      choses in action, insurance proceeds, goodwill, patents, copyrights, trademarks,
      tradenames, customer lists, formulae, trade secrets, licenses, permits,
      franchises, designs, computer software, research and literary rights now owned
      or hereafter acquired;

     

    16. Farm
      Products;

     

    17. All
      books
      and records (including all ledger sheets, files, computer programs, tapes and
      related data processing software) evidencing an interest in or relating to
      any
      of the foregoing;

     

    18. To
      the
      extent not already included above, all supporting obligations, and any and
      all
      cash and non-cash Proceeds, products, accessions, and/or replacements of any
      of
      the foregoing, including proceeds of insurance covering any or all of the
      foregoing. 

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

    

    FORM
      OF DEPOSIT ACCOUNT AGREEMENT

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    DISCLOSURE
      SCHEDULE

    

    Schedule
      4.2 – Existing Liens

    
      
        
        

      

      
        24

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