Document:

Exhibit 10.1

                                PROMISSORY NOTE

FACE  AMOUNT                                       $1,412,500
PRICE                                              $1,130,000
INTEREST  RATE                                     0%  per  month
NOTE  NUMBER                                       March-2006-101
ISSUANCE  DATE                                     March  23,  2006
MATURITY  DATE                                     March  23,  2007

FOR VALUE RECEIVED, Hybrid Fuel Systems, Inc., a Georgia corporation, and all of
its  subsidiaries  (the  "Company") (OTC BB: HYFS) hereby promises to pay to the
order  of  DUTCHESS  PRIVATE EQUITIES FUND, L.P. (collectively, the "Holder") by
the  Maturity  Date, or earlier, the Face Amount of One Million Four Hundred and
Twelve  Thousand  Five  Hundred Dollars ($1,412,500) U.S., (this "Note") in such
amounts,  at such times and on such terms and conditions as are specified herein
(sometimes  hereinafter  the Company and the Holder are referred to collectively
as  "the  Parties").

Any  capitalized  term  not  defined  in this Note are defined in the Investment
Agreement  for the Equity Line of Credit between Dutchess Private Equities Fund,
LP  (as  the  "Investor") and the Company (the "Equity Line"), which definitions
the  Company  and  the  Holder  incorporate  herein  by  reference.

ARTICLE  1          Method  of  Payment

Section 1.1  Payments made to the Holder by the Company in satisfaction of  this
Note  (referred  to  as a "Payment," or "Payments") shall be drawn from each Put
under  the  Equity  Line  of Credit provided by the Investor to the Company. The
Company shall make payments to the Holder in the amount of the greater of a) one
hundred  percent  (100%)  of  each  Put  (as defined in the Investment Agreement
between  the  Company  and  the  Investor  dated  November 4, 2005) given to the
Investor  from  the Company; or, b) one hundred seventeen thousand seven hundred
and  eight  dollars  and thirty-three cents ($117,708.33) (the "Payment Amount")
until  the  Face  Amount  is paid in full, minus any fees due. The First Payment
will  be  due  on  May  1,  2006 and each subsequent Payment will be made at the
Closing  of each Put ("Payment Date" or "Payment Dates") until this Note is paid
in  full,  with a minimum amount of one hundred seventeen thousand seven hundred
and eight dollars and thirty-three cents ($117,708.33)per month. Notwithstanding
any  provision  to the contrary in this Note, the Company may pay in full to the
Holder  the  Face Amount, or any balance remaining thereon, in readily available
funds  at  any  time  and  from  time  to  time  without  penalty.

Section 1.2  Payments  pursuant  to  this Note shall be drawn directly from  the
Closing  of  each  Put  and shall be wired directly to the Holder on the Closing
Date  and  shall  be  included  in  the  calculation of the Threshold Amount (as
defined  in  Section  1.4,  below).  The  Company  agrees  to  fully execute and
diligently  carry  out  Puts  to  the  Investor,  on  the terms set forth in the
Investment  Agreement.  The  Company agrees that the Put Amount shall be for the
maximum  amount  allowed  under  the  Investment Agreement. Further, the Company
agrees to issue Puts to the Investor for the maximum frequency allowed under the
Investment  Agreement.  Failure  to  comply  with  the  terms  of the Investment
Agreement with respect to the Puts will result in an Event of Default as defined
in  this  Agreement  in  Article  4.

Section 1.3 In order to assist the Company in meeting its obligations under this
Note, the Company hereby authorizes the Investor to transfer funds from each Put
directly  to  the  Holder.  A  Put  shall  be  deemed closed after the funds are
transferred  to  the  Holder.

Section 1.4 After Closing, the Company must make a prepayment to the Holder when
the  aggregate  amount  of financing ("Financing") received by the Company is in
excess  of  one  million  dollars ($1,000,000) ("Threshold Amount"). The Company
agrees  to  pay one hundred percent (100%) of any proceeds raised by the Company
over  the  Threshold  Amount toward the prepayment of the Note, Interest and any
penalties  until  the Face Amount is paid in full. The prepayments shall be made
to  the  Holder  within  one  (1)  business  day of the Company's receipt of the
Financing.  Failure  to  do so will result in an Event of Default. The Threshold
Amount  shall also pertain to any assets sold, transferred or disposed of by the
Company  and  any cash balances in the Company bank or brokerage accounts at the
end  of  each  month.

ARTICLE  2             Collateral

Section 2.1  The  Company  does  hereby agree to issue to the Holder for use  as
Collateral  forty  (40)  signed  Put  Notices consistent with the conditions set
forth  in  Section 12. In the event, the Holder uses the Collateral in full, the
Company  shall  immediately  deliver  to  the  Holder  additional  Put Sheets as
requested  by  the  Holder.

Section 2.2 Upon the completion of the Company's obligation to the Holder of the
Face  Amount  of this Note, the Company will not be under any further obligation
to  complete additional Puts. All remaining Put sheets shall be marked "VOID" by
the  Holder  and  returned  to  the  Company  at  the  Company's  request.

ARTICLE  3             Unpaid  Amounts

Section 3.1 In the event that on the Maturity Date the Company has any remaining
amounts unpaid on this Note (the "Residual Amount"), the Holder can exercise its
right to increase the Face Amount by ten percent (10%) as an initial penalty AND
an  additional  two and one-half percent (2.5%) per month --- paid, pro rata for
partial periods, compounded daily, as liquidated damages ("Liquidated Damages").
If a Residual Amount remains, the Company is in Default and the Holder may elect
remedies  as  set  forth  in  Article  4,  below.  The  Parties acknowledge that
Liquidated  Damages  are  not  interest  and  should  not consititute a penalty.

ARTICLE  4          Defaults  and  Remedies

Section 4.1     Events  of  Default. An "Event of Default" occurs if any one  of
the  following  occur:

     (a) The Company does not make a Payment within two (2) business days of (i)
the Closing of a Put; or (ii) a Payment Date; or, (iii) a Residual Amount on the
Note  exists  on  the  Maturity  Date;  or

     (b)  The  Company,  pursuant to or within the meaning of any Bankruptcy Law
(as  hereinafter  defined): (i) commences a voluntary case; (ii) consents to the
entry  of  an order for relief against it in an involuntary case; (iii) consents
to the appointment of a Custodian (as hereinafter defined) of the Company or for
its  property; (iv) makes an assignment for the benefit of its creditors; or (v)
a court of competent jurisdiction enters an order or decree under any Bankruptcy
Law  that:  (A)  is  for  relief against the Company in an involuntary case; (B)
appoints  a  Custodian  of  the  Company  or for its property; or (C) orders the
liquidation  of  the  Company,  and  the order or decree remains unstayed and in
effect  for  sixty  (60)  calendar  days;  or

     (c)  The  Company's  $0.001  par value common stock (the "Common Stock") is
suspended  or  is  no  longer  listed  on  any recognized exchange, including an
electronic over-the-counter bulletin board, for in excess of two (2) consecutive
trading  days;  or

     (d)  Either  the  registration  statement  for the underlying shares in the
Investment  Agreement  is  not  effective for any reason and is not cured within
five  (5)  days;  or,

     (e)  Any  of  the Company's representations or warranties contained in this
Agreement  were  false  when  made;  or,

     (f)  The  Company  breaches this Agreement, and such breach, if and only if
such  breach  is  subject  to cure, continues for a period of three (3) business
days.

As  used  in  this  Section 4.1, the term "Bankruptcy Law" means Title 11 of the
United  States  Code  or  any  similar  federal  or  state law for the relief of
debtors.  The term "Custodian" means any receiver, trustee, assignee, liquidator
or  similar  official  under  any  Bankruptcy  Law.

Section 4.2  Remedies. In the Event of Default, the Holder may elect to  garnish
Revenue  from  the  Company  in  an  amount  that  will  repay the Holder on the
schedules  outlined  in  this Agreement and fully enforce the Security Agreement
dated  this  date  between  the  Holder  and  the  Company.

     For  EACH  AND  EVERY  Event of Default, as outlined in this Agreement, the
          ----------------
Holder  can  exercise  its  right to increase the Face Amount of the Note by ten
percent  (10%)  as  an  initial  penalty.  In  addition, the Holder may elect to
increase  the  Face  Amount  of  the  Note by two and one-half percent (2.5%) as
Liquidated  Damages,  compounded daily.  The Parties acknowledge that Liquidated
Damages  are  not  interest  under  the  terms  of this Agreement, and shall not
constitute  a  penalty.

     In  the  event  of  a  Default hereunder, the Holder, at its sole election,
shall  have  the  right,  but  not  the  obligation,  to  either:

          a)  Switch  the Residual Amount to a three-year ("Convertible Maturity
Date"),  eighteen  percent  (18%)  interest bearing convertible debenture at the
terms  described  hereinafter  (the  "Convertible  Debenture").  In the event of
Default,  the  Convertible  Debenture  shall  be considered closed ("Convertible
Closing  Date"),  as of the date of the Event of Default.  If the Holder chooses
to  convert  the  Residual  Amount to a Convertible Debenture, the Company shall
have  twenty  (20)  business  days  after notice of default from the Holder (the
"Notice  of Convertible Debenture") to file a registration statement covering an
amount  of  shares equal to three hundred percent (300%) of the Residual Amount.
Such registration statement shall be declared effective under the Securities Act
of  1933,  as  amended  (the  "Securities  Act"), by the Securities and Exchange
Commission (the "Commission") within sixty (60) business days of the Convertible
Closing  Date.   In  the  event  the  Company  does  not  file such registration
statement  within  twenty  (20)  business  days of the Holder's request, or such
registration  statement  is not declared by the Commission to be effective under
the  Securities  Act  within the time period described above the Residual Amount
shall  increase  by  five  thousand  dollars ($5,000) per day.  In the event the
Company  is  given  the option for accelerated effectiveness of the registration
statement,  the  Company  will  cause such registration statement to be declared
effective  as  soon  as  reasonably  practicable and will not take any action to
delay  the  registration  to become effective.  In the event that the Company is
given  the  option  for accelerated effectiveness of the registration statement,
but chooses not to cause such registration statement to be declared effective on
such  accelerated  basis,  the  Residual  Amount shall increase by five thousand
dollars  ($5,000)  per  day  commencing  on  the  earliest date as of which such
registration  statement  would  have been declared to be effective if subject to
accelerated  effectiveness;  or

           b) The Holder may increase the Payment Amount described under Article
1  to  fulfill  the repayment of the Residual Amount.  The Company shall provide
full  cooperation to the Holder in directing funds owed to the Holder on any Put
made  by  the Company to the Investor.    The Company agrees to diligently carry
out  the  terms  outlined  in  the Investment Agreement for delivery of any such
shares.  In the event the Company is not diligently fulfilling its obligation to
direct  funds  owed  to  the  Holder  from  Puts  to the Investor, as reasonably
determined  by  the  Holder,  the  Holder  may, after giving the Company two (2)
business days advance notice to cure the same, elect to increase the Face Amount
of  the  Note by 2.5% each day, compounded daily, in additional to and on top of
additional  remedies  available  to  the  Holder  under  this  Note.

Section 4.3 Conversion  Privilege

     (a)  The  Holder  shall have the right to convert the Convertible Debenture
into  shares  of Common Stock at any time following the Convertible Closing Date
and before the close of business on the Convertible Maturity Date. The number of
shares of Common Stock issuable upon the conversion of the Convertible Debenture
shall  be  determined pursuant to Section 4.4, but the number of shares issuable
shall  be  rounded  up  to  the  nearest  whole  share.

     (b)  The  Holder may convert the Convertible Debenture in whole or in part,
at  any  time  and  from  time  to  time.

     (c)  In  the  event all or any portion of the Convertible Debenture remains
outstanding  on the Convertible Maturity Date (the "Debenture Residual Amount"),
the  unconverted  portion  of  such  Convertible Debenture will automatically be
converted  into  shares  of Common Stock on such date in the manner set forth in
Section  4.4.

Section 4.4     Conversion  Procedure.

     (a) The Holder may elect to convert the Residual Amount in whole or in part
any  time  and  from  time  to time following the Convertible Closing Date. Such
conversion  shall be effectuated by providing the Company, or its attorney, with
that  portion  of  the  Convertible  Debenture  to  be converted together with a
facsimile  or  original  of  the  signed  notice  of  conversion (the "Notice of
Conversion").  The  date  on  which  the  Notice  of  Conversion  is  effective
("Conversion  Date")  shall  be  deemed  to  be the date on which the Holder has
delivered  to  the  Company  a  facsimile  or  original  of the signed Notice of
Conversion, as long as the original Convertible Debenture(s) to be converted are
received  by  the  Company  within  five  (5) business days thereafter. When the
Convertible  Debenture has been provided to the Company, the Holder can elect to
either  reissue  the  Convertible Debenture, or continually convert the existing
Debenture.  Any  Notice  of  Conversion  faxed by the Holder to the Company on a
particular  day shall be deemed to have been received no later than the previous
business day (receipt being via a confirmation of the time such facsimile to the
Company  is  received).

     (b)  Common  Stock  to  be  Issued.  Upon the conversion of any Convertible
Debentures by the Holder, the Company shall instruct its transfer agent to issue
stock  certificates  without  restrictive legends or stop transfer instructions,
if, at that time, the aforementioned registration statement described in Section
4.2  has  been  declared  effective  (or  with proper restrictive legends if the
registration  statement  has  not  as  yet  been  declared  effective),  in such
denominations  representing  the  number of shares of Common Stock issuable upon
such  conversion.  In the event that the Debenture is deemed saleable under Rule
144  of the Securities Exchange Act of 1933, the Company shall, upon a Notice of
Conversion,  instruct  the  transfer  agent  to  issue free trading certificates
without  restrictive  legends,  subject to other applicable securities laws. The
Company  is  responsible  to  for  all costs associated with the issuance of the
shares,  including  but  not  limited  to  the  opinion  letter,  FedEx  of  the
certificates  and any other costs that arise. The Company shall act as registrar
of  the  Shares  of  Common Stock to be issued and shall maintain an appropriate
ledger  containing  the  necessary  information with respect to each Convertible
Debenture.  The Company warrants that no instructions have been given or will be
given  to  the  transfer agent which limit, or otherwise prevent resale and that
the  Common  Stock  shall otherwise be freely resold, except as may be set forth
herein  or  subject  to  applicable  law.

     (c)  Conversion  Rate.  The  Holder  is  entitled  to convert the Debenture
Residual  Amount,  plus  accrued  interest  and penalties, anytime following the
Convertible Closing Date, at the lesser of either (i) fifty percent (50%) of the
lowest  closing  bid  price  during  the  fifteen  (15) trading days immediately
preceding  the  Convertible  Maturity Date, or (ii) 100% of the lowest bid price
for  the  twenty (20) trading days immediately preceding the Convertible Closing
Date  ("Fixed  Conversion  Price").  No  fractional shares or scrip representing
fractions  of  shares  will  be  issued  on conversion, but the number of shares
issuable  shall  be  rounded  up  to  the  nearest  whole  share.

     (d)  Nothing  contained  in  the  Convertible  Debenture shall be deemed to
establish  or  require  the  Company  to pay interest to the Holder at a rate in
excess  of  the  maximum rate permitted by applicable law. In the event that the
rate  of  interest  required  to  be  paid exceeds the maximum rate permitted by
governing  law,  the  rate  of  interest required to be paid thereunder shall be
automatically  reduced to the maximum rate permitted under the governing law and
such  excess  shall  be returned with reasonable promptness by the Holder to the
Company.  In  the  event this Section 4.4(d) applies, the Parties agree that the
terms  of this Note shall remain in full force and effect except as is necessary
to  make  the  interest  rate  comply  with  applicable  law.

     (e)  The Holder shall be treated as a shareholder of record on the date the
Company  is  required  to  issue the Common Stock to the Holder. If prior to the
issuance  of  stock  certificates,  the  Holder designates another person as the
entity  in  the  name of which the stock certificates requesting the Convertible
Debenture  are  to  be  issued, the Holder shall provide to the Company evidence
that either no tax shall be due and payable as a result of such transfer or that
the  applicable  tax  has  been paid by the Holder or such person. If the Holder
converts  any  part of the Convertible Debentures, or will be, the Company shall
issue to the Holder a new Convertible Debenture equal to the unconverted amount,
immediately  upon  request  by  the  Holder.

     (f)  Within  three  (3)  business  days  after receipt of the documentation
referred  to  in  this Section, the Company shall deliver a certificate, for the
number  of shares of Common Stock issuable upon the conversion. In the event the
Company  does  not  make  delivery  of  the Common Stock as instructed by Holder
within  five  (5) business days after the Conversion Date, the Company shall pay
to  the Holder an additional one percent (1%) per day in cash of the full dollar
value  of  the  Debenture  Residual  Amount  then  remaining  after  conversion,
compounded  daily.

     (g)  The  Company  shall  at all times reserve (or make alternative written
arrangements  for  reservation or contribution of shares) and have available all
Common  Stock  necessary to meet conversion of the Convertible Debentures by the
Holder  of  the entire amount of Convertible Debentures then outstanding. If, at
any  time,  the  Holder  submits a Notice of Conversion and the Company does not
have  sufficient  authorized but unissued shares of Common Stock (or alternative
shares  of  Common  Stock  as may be contributed by stockholders of the Company)
available  to  effect,  in  full,  a conversion of the Convertible Debentures (a
"Conversion  Default,"  the date of such default being referred to herein as the
"Conversion  Default  Date"),  the  Company shall issue to the Holder all of the
shares  of  Common Stock which are available. Any Convertible Debentures, or any
portion  thereof,  which  cannot  be  converted  due  to  the  Compnay's lack of
sufficient authorized common stock (the "Unconverted Debentures"), may be deemed
null and void upon written notice sent by the Holder to the Company. The Company
shall provide notice of such Conversion Default ("Notice of Conversion Default")
to  the  Holder,  by  facsimile,  within  one (1) business days of such default.

     (h)  The Company agrees to pay the Holder payments for a Conversion Default
("Conversion  Default  Payments")  in  the  amount  of (N/365) multiplied by .24
multiplied  by the initial issuance price of the outstanding or tendered but not
converted Convertible Debentures held by the Holder where N = the number of days
from the Conversion Default Date to the date (the "Authorization Date") that the
Company  authorizes  a  sufficient  number  of  shares of Common Stock to effect
conversion  of  all  remaining  Convertible  Debentures.  The Company shall send
notice  ("Authorization  Notice") to the Holder that additional shares of Common
Stock  have  been authorized, the Authorization Date, and the amount of Holder's
accrued  Conversion  Default  Payments.  The accrued Conversion Default shall be
paid  in  cash  or shall be convertible into Common Stock at the conversion rate
set  forth  in the first sentence of this paragraph, upon written notice sent by
the Holder to the Company, which Conversion Default shall be payable as follows:
(i)  in  the  event the Holder elects to take such payment in cash, cash payment
shall  be made to the Holder within five (5) business days, or (ii) in the event
Holder  elects  to  take  such  payment  in stock, the Holder may convert at the
conversion  rate  set  forth  in  the first sentence of this paragraph until the
expiration  of  the  conversion  period.

     (i)  The  Company  acknowledges  that  its failure to maintain a sufficient
number  of  authorized  but  unissued shares of Common Stock to effect in full a
conversion of the Convertible Debentures in full will cause the Holder to suffer
irreparable harm, and that the actual damages to the Holder will be difficult to
ascertain.  Accordingly,  the parties agree that it is appropriate to include in
this  Agreement  a provision for liquidated damages. The Parties acknowledge and
agree that the liquidated damages provision set forth in this section represents
the parties' good faith effort to quantify such damages and, as such, agree that
the  form  and  amount  of such liquidated damages are reasonable, and under the
circumstances,  do  not  constitute a penalty. The payment of liquidated damages
shall  not  relieve the Company from its obligations to deliver the Common Stock
pursuant  to  the  terms  of  this  Convertible  Debenture.

     (j)  If,  by  the  third  (3rd) business day after the Conversion Date, any
portion  of  the shares of the Convertible Debentures have not been delivered to
the Holder and the Holder purchases, in an open market transaction or otherwise,
shares  of  Common  Stock  (the "Covering Shares") necessary to make delivery of
shares  which  would  had  been delivered if the full amount of the shares to be
converted  had  been  delivered to the Holder, then the Company shall pay to the
Holder,  in  addition  to  any  other  amounts  due  to  Holder pursuant to this
Convertible Debenture, and not in lieu thereof, the Buy-In Adjustment Amount (as
defined  below).  The  "Buy  In  Adjustment  Amount"  is the amount equal to the
excess,  if  any,  of (x) the Holder's total purchase price (including brokerage
commissions,  if  any) for the Covering Shares minus (y) the net proceeds (after
brokerage  commissions, if any) received by the Holder from the sale of the Sold
Shares.  The  Company  shall  pay  the Buy-In Adjustment Amount to the Holder in
immediately  available  funds within five (5) business days of written demand by
the  Holder.  By  way of illustration and not in limitation of the foregoing, if
the  Holder  purchases  shares  of  Common  Stock  having a total purchase price
(including  brokerage  commissions) of $11,000 to cover a Buy-In with respect to
shares  of  Common  Stock  it  sold  for  net  proceeds  of  $10,000, the Buy-In
Adjustment  Amount  which the Company will be required to pay to the Holder will
be  $1,000.

ARTICLE  5          Additional  Financing  and  Registration  Statements

Section 5.1 The Company will not enter into any additional financing  agreements
whether  for  debt  or  equity, without prior expressed written consent from the
Holder. Violation of this Section 5.1 will result in an Event of Default and the
Holder  may  elect  to  take  the  action  or  actions  outlined  in  Article 4.

Section 5.2 The Company agrees that it shall not file any registration statement
which  includes any of its Common Stock, including those on Form S-8, until such
time  as  the  Note  is paid off in full ("Lock-Up Period") or without the prior
written consent of the Holder. The Company also agrees that no further issuances
of  stock  will  be  made from the current S-8 on file with the SEC, File Number
333-130554.  Failure  by the Company to fully comply with this Section 5.2 shall
result  in  an  Event  of Default and the Holder may elect to take the action or
actions  outlined  in  Article  4  or  Section  5.3.

Section 5.3 If, at any time, while this Note is outstanding, the  Company issues
or  agrees  to  issue  to  any  entity  or person ("Third Party") for any reason
whatsoever,  any  common stock or securities convertible into or exercisable for
shares  of  common  stock  (or  modify  any  such  terms  in effect prior to the
execution  of  this  Note)  (a  "Third Party Financing"), at terms deemed by the
Holder  to  be more favorable to the Third Party, then the Company grants to the
Holder  the  right,  at the Holder's election, to modify the terms of this Note,
including  but not limited to the Incentive Shares outlined in Article 15 below,
to  match  or  conform  to  the  more favorable term or terms of the Third Party
Financing.  The  rights of the Holder in this Section 5.3 are in addition to all
other  rights  the  Holder  has pursuant to this Note and the Security Agreement
between  the  Holder  and  the  Company.

Section 5.4 During the period of time that this Note is in force, the  Company's
officers,  insiders,  affiliates  or  other  related  parties shall refrain from
selling  any  Stock.

ARTICLE  6          Notice.

Section 6.1  Any notices, consents, waivers or other communications required  or
permitted  to  be given under the terms of this Note must be in writing and will
be  deemed  to have been delivered (i) upon delivery, when delivered personally;
(ii)  upon  receipt,  when  sent  by  facsimile  (provided  a  confirmation  of
transmission is mechanically or electronically generated and kept on file by the
sending  party); or (iii) one (1) day after deposit with a nationally recognized
overnight  delivery  service, so long as it is properly addressed. The addresses
and  facsimile  numbers  for  such  communications  shall  be:

If  to  the  Company:

Mark  Clancy
Hybrid  Fuel  Systems
12409  Telecom  Drive
Tampa,  FL  33637
Telephone:  813-979-9222
Facsimile:  813-979-9224

With  copy  to:

Darrin  M.  Ocasio,  Esq.
Sichenzia  Ross  Friedman  Ference  LLP
1065  Avenue  of  the  Americas
New  York,  New  York  10018
Phone:  (212)  930-9700
Fax:  (212)  930-9725

If  to  the  Holder:

Dutchess  Capital  Management,  LLC
Douglas  Leighton
50  Commonwealth  Ave,  Suite  2
Boston,  MA  02116
Phone:  (617)  301-4700
Facsimile:  (617)  249-0947

Section 6.2     The  Parties  are  required to provide each other with  five (5)
business  days  prior  notice to the other party of any change in address, phone
number  or  facsimile  number.

ARTICLE  7          Time

     Where  this  Note  authorizes  or  requires  the  payment  of  money or the
performance of a condition or obligation on a Saturday or Sunday or a holiday on
which  the  United  States  Stock Markets ("US Markets") are closed ("Holiday"),
such  payment  shall  be  made  or condition or obligation performed on the last
business day preceding such Saturday, Sunday or Holiday.  A "business day" shall
mean  a  day  on  which  the  US  Markets are open for a full day or half day of
trading.

ARTICLE  8          No  Assignment.

      This  Note  and the obligations hereunder shall not be assigned, except as
otherwise  provided  herein.

ARTICLE  9          Rules  of  Construction.

     In  this Note, unless the context otherwise requires, words in the singular
number  include the plural, and in the plural include the singular, and words of
the  masculine gender include the feminine and the neuter, and when the tense so
indicates,  words of the neuter gender may refer to any gender.  The numbers and
titles  of  sections  contained  in  the  Note  are  inserted for convenience of
reference  only,  and  they  neither form a part of this Note nor are they to be
used  in  the  construction or interpretation hereof.  Wherever, in this Note, a
determination of the Company is required or allowed, such determination shall be
made  by  a majority of the Board of Directors of the Company and, if it is made
in  good  faith,  it  shall  be  conclusive  and  binding  upon  the  Company.

ARTICLE  10          Governing  Law

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

ARTICLE  11          Disputes  Subject  to  Arbitration

     The  parties  to  this  Note  will  submit all disputes arising under it to
arbitration  in Boston, Massachusetts before a single arbitrator of the American
Arbitration  Association  ("AAA").  The  arbitrator  shall  be  selected  by
application  of  the  rules  of  the AAA, or by mutual agreement of the parties,
except that such arbitrator shall be an attorney admitted to practice law in the
Commonwealth  of  Massachusetts.  No  party to this agreement will challenge the
jurisdiction  or  venue provisions as provided in this section.  Nothing in this
section  shall  limit the Holder's right to obtain an injunction for a breach of
this  Agreement  from  a  court  of  law.

ARTICLE  12          Conditions  to  Closing

     The Company shall have delivered the proper Collateral to the Holder before
Closing  of  this  Note.

ARTICLE  13          Structuring  and  Administration  Expense

     The Company agrees to pay for related expenses associated with the proposed
transaction  of  $90,000.  This  amount  shall cover, but is not limited to, the
following:  due  diligence  expenses,  UCC-1  filing  fees,  document  creation
expenses,  closing  costs,  and  transaction  administration  expenses. All such
structuring  and  administration  expenses  shall  be  deducted  from  the first
closing.

ARTICLE  14          Indemnification

     In  consideration  of the Holder's execution and delivery of this Agreement
and  the  acquisition  and funding by the Holder of this Note and in addition to
all  of the Company's other obligations under the documents contemplated hereby,
the  Company  shall  defend, protect, indemnify and hold harmless the Holder and
all  of its shareholders, officers, directors, employees, counsel, and direct or
indirect  investors  and  any  of  the  foregoing  person's  agents  or  other
representatives  (including,  without  limitation,  those retained in connection
with  the  transactions  contemplated  by  this  Agreement)  (collectively,  the
"Indemnities")  from  and  against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection  therewith (irrespective of whether any such Indemnitee is a party to
the  action  for  which  indemnification  hereunder  is  sought), and including,
without  limitation,  reasonable  attorneys'  fees  and  disbursements  (the
"Indemnified  Liabilities"),  incurred  by  any  Indemnitee  as  a result of, or
arising  out  of,  or  relating  to  (i)  any misrepresentation or breach of any
representation  or  warranty  made  by  the  Company  in  the Note, or any other
certificate,  instrument  or  document  contemplated  hereby or thereby (ii) any
breach  of any covenant, agreement or obligation of the Company contained in the
Note  or  any  other  certificate, instrument or document contemplated hereby or
thereby,  except  insofar  as  any  such misrepresentation, breach or any untrue
statement,  alleged  untrue  statement,  omission or alleged omission is made in
reliance  upon  and  in  conformity  with  written  information furnished to the
Company  by,  or  on behalf of, the Holder or is based on illegal trading of the
Common  Stock by the Holder. To the extent that the foregoing undertaking by the
Company  may be unenforceable for any reason, the Company shall make the maximum
contribution  to  the  payment  and  satisfaction  of  each  of  the Indemnified
Liabilities  that  is permissible under applicable law. The indemnity provisions
contained  herein  shall be in addition to any cause of action or similar rights
the  Holder  may  have,  and  any  liabilities  the  Holder  may  be subject to.

ARTICLE  15          Incentive  Shares

     The  Company shall issue one million eight hundred and fifty-eight thousand
(1,858,000)  shares of unregistered, restricted Common Stock to the Holder as an
incentive  for  the investment ("Incentive Shares").  The Incentive Shares shall
be  issued  and  delivered  immediately  to the Holder and shall carry piggyback
registration  rights.   In  the  event the Shares are not registered in the next
registration  statement,  the Company shall pay to the Holder, as a penalty, one
million  eight hundred and fifty-eight thousand (1,858,000) additional shares of
common  stock for each time a registration statement is filed and the Shares are
not  included.  The  Holder  at its sole discretion may waive such penalty.  The
Company's failure to issue the Incentive Shares constitutes an  Event of Default
and  the  Holder  may  elect to enforce the remedies outlined in Article 4.  The
Company's  obligation  to  provide  the Holder with the Incentive Shares, as set
forth  herein,  shall  survive the operation of the Agreement and any default on
this  obligation  shall provide the Holder with all rights, remedies and default
provisions  set  forth  in  this  Note,  or  otherwise  available  by  law.

ARTICLE  16          Use  of  Proceeds

     Five  hundred  and  forty-one  thousand  five  hundred  forty-two  dollars
($541,542)  shall to go to redeem Alpha Capital, Whalehaven Funds and Ellis Fund
(the  "Previous  Investors").  The  Company  hereby  authorized  the  Holder  to
directly  transfer  funds  to  the Previous Investors directly from Closing.  In
addition,  the  Holder  shall directly transfer funds to Sichenzia Ross Friedman
Ference  LLP  in  the amount of $23,863.77 to cover outstanding legal fees.  The
remaining  proceeds shall be used for specifically for the purchase of equipment
outlined  below:

Final  Payment  for  Taylor  Dynomameter                   $ 165,000
Purchase  500  Electronic  Control  Unit  for  resale      $ 130,000
Purchase  component  parts  for  resale                    $ 110,000

The Holder shall have full right to the equipment through the Security Agreement
of  this  date,  as  outlined  in  Article  21.

The  remaining  $69,594.23  shall  be  used  for  miscellaneous  working capital

ARTICLE  17          Waiver

     The  Holder's  delay  or  failure at any time or times hereafter to require
strict  performance  by  Company of any obligations, undertakings, agreements or
covenants  shall  not  waive,  affect, or diminish any right of the Holder under
this  Note  to  demand strict compliance and performance herewith. Any waiver by
the  Holder of any Event of Default shall not waive or affect any other Event of
Default,  whether  such  Event  of  Default  is  prior or subsequent thereto and
whether  of  the  same or a different type. None of the undertakings, agreements
and  covenants  of  the Company contained in this Note, and no Event of Default,
shall be deemed to have been waived by the Holder, nor may this Note be amended,
changed  or  modified,  unless such waiver, amendment, change or modification is
evidenced by a separate instrument in writing specifying such waiver, amendment,
change  or  modification  and  signed  by  the  Holder.

ARTICLE  18          Senior  Obligation

     The  Company  shall cause this Note to be senior in right of payment to all
other  current  or future debt of the Company.  The Company warrants that it has
taken  all necessary steps to subordinate its other obligations to the rights of
the  Holder  in  this  Note.

ARTICLE  19          Transactions  With  Affiliates

     The  Company  shall  not,  and  shall cause each of its Subsidiaries to not
enter into, amend, modify or supplement, or permit any Subsidiary to enter into,
amend,  modify  or  supplement,  any  agreement,  transaction,  commitment  or
arrangement with any of its or any Subsidiary's officers, directors, persons who
were  officers  or  directors  at  any  time  during  the  previous  two  years,
shareholders who beneficially own five percent (5%) or more of the Common Stock,
or  affiliates  or with any individual related by blood, marriage or adoption to
any  such  individual  or with any entity in which any such entity or individual
owns  a  five  percent (5%) or more beneficial interest (each a "Related Party")
during  the  Lock  Up  Period.

ARTICLE  20          Equity  Line  Obligations

     At  the  request  of  the  Holder,  at any time after the Company's current
effective  registration  statement  for  the Equity Line of Credit with Dutchess
Private  Equities,  II,  LP (File No: 333-129928), has eight million (8,000,000)
shares  or  less remaining for issuance, the Company shall immediately execute a
new  Investment  Agreement for an Equity Line of Credit under the same terms and
conditions  as  the previous Equity Line.  The Company shall immediately prepare
and file a registration statement for the registration of shares as set forth in
the  new  Investment  Agreement.  The  Holder  shall  also  retain  the right to
determine  the date of the filing of such registration statement.  Failure to do
any  action  outlined  in  this  Article  will  result  in  an Event of Default.

ARTICLE  21          Security

     The Holder shall have full right to exercise the Security Agreement between
the  Company  and  the  Holder  dated  this  date.

ARTICLE  22          Miscellaneous

Section 22.1 This Note may be executed in two or more counterparts, all of which
taken  together  shall constitute one instrument. Execution and delivery of this
Note  by exchange of facsimile copies bearing the facsimile signature of a party
shall constitute a valid and binding execution and delivery of this Note by such
party.  Such  facsimile  copies shall constitute enforceable original documents.

Section 22.2  The Company warrants that the execution, delivery and  performance
of  this  Note  by  the  Company  and  the  consummation  by  the Company of the
transactions  contemplated hereby and thereby will not (i) result in a violation
of  the  Articles of Incorporation, any Certificate of Designations, Preferences
and  Rights  of  any outstanding series of preferred stock of the Company or the
By-laws  or  (ii)  conflict  with, or constitute a material default (or an event
which  with  notice  or  lapse  of time or both would become a material default)
under,  or  give to others any rights of termination, amendment, acceleration or
cancellation  of,  any  material  agreement,  contract,  indenture  mortgage,
indebtedness  or instrument to which the Company or any of its Subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree,  including  United  States  federal  and  state  securities  laws  and
regulations  and  the rules and regulations of the principal securities exchange
or  trading market on which the Common Stock is traded or listed (the "Principal
Market"),  applicable  to the Company or any of its Subsidiaries or by which any
property  or  asset  of  the  Company  or  any  of  its Subsidiaries is bound or
affected.  Neither  the Company nor its Subsidiaries is in violation of any term
of,  or  in  default  under,  the  Articles of Incorporation, any Certificate of
Designations,  Preferences  and  Rights  of  any outstanding series of preferred
stock  of the Company or the By-laws or their organizational charter or by-laws,
respectively,  or  any  contract,  agreement, mortgage, indebtedness, indenture,
instrument,  judgment,  decree  or  order  or  any  statute,  rule or regulation
applicable  to  the  Company or its Subsidiaries, except for possible conflicts,
defaults,  terminations, amendments, accelerations, cancellations and violations
that  would  not individually or in the aggregate have a Material Adverse Effect
as  defined below. The business of the Company and its Subsidiaries is not being
conducted,  and  shall  not  be  conducted,  in  violation  of any law, statute,
ordinance,  rule,  order  or regulation of any governmental authority or agency,
regulatory  or  self-regulatory agency, or court, except for possible violations
the sanctions for which either individually or in the aggregate would not have a
Material  Adverse  Effect.  The  Company  is not required to obtain any consent,
authorization,  permit  or  order of, or make any filing or registration (except
the  filing of a registration statement) with, any court, governmental authority
or  agency,  regulatory  or self-regulatory agency or other third party in order
for  it  to  execute,  deliver  or  perform  any  of  its  obligations under, or
contemplated  by,  this Note in accordance with the terms hereof or thereof. All
consents,  authorizations,  permits, orders, filings and registrations which the
Company  is  required  to  obtain  pursuant  to the preceding sentence have been
obtained  or  effected  on or prior to the date hereof and are in full force and
effect  as  of  the date hereof. The Company and its Subsidiaries are unaware of
any  facts  or  circumstances which might give rise to any of the foregoing. The
Company is not, and will not be, in violation of the listing requirements of the
Principal  Market  as  in  effect  on the date hereof and on each of the Closing
Dates  and is not aware of any facts which would lead to delisting of the Common
Stock  by  the  Principal  Market.

Section 22.3 The Company and its "Subsidiaries" (which for purposes of this Note
means  any  entity  in  which  the Company, directly or indirectly, owns capital
stock  or  holds  an equity or similar interest) are corporations duly organized
and  validly  existing  in  good  standing  under  the  laws  of  the respective
jurisdictions of their incorporation, and have the requisite corporate power and
authorization  to  own  their  properties  and to carry on their business as now
being  conducted. Both the Company and its Subsidiaries are duly qualified to do
business and are in good standing in every jurisdiction in which their ownership
of  property  or  the  nature  of  the  business  conducted  by  them makes such
qualification  necessary,  except  to  the  extent  that  the  failure  to be so
qualified  or  be  in good standing would not have a Material Adverse Effect. As
used  in  this Note, "Material Adverse Effect" means any material adverse effect
on  the  business,  properties,  assets,  operations,  results  of  operations,
financial  condition  or  prospects of the Company and its Subsidiaries, if any,
taken  as  a  whole,  or  on  the  transactions  contemplated  hereby  or by the
agreements  and instruments to be entered into in connection herewith, or on the
authority  or  ability of the Company to perform its obligations under the Note.

Section 22.4 Authorization; Enforcement; Compliance with Other Instruments.  (i)
The  Company  has  the requisite corporate power and authority to enter into and
perform  its  obligations  under this Note, and to issue this Note and Incentive
Shares  in  accordance with the terms hereof and thereof, (ii) the execution and
delivery  of  this  Note  by  the  Company  and  the  consummation  by it of the
transactions  contemplated  hereby and thereby, including without limitation the
reservation  for  issuance  and the issuance of the Incentive Shares pursuant to
this  Note,  have  been  duly  and  validly authorized by the Company's Board of
Directors  and  no  further consent or authorization is required by the Company,
its  Board  of Directors, or its shareholders, (iii) this Note has been duly and
validly executed and delivered by the Company, and (iv) the Note constitutes the
valid  and binding obligations of the Company enforceable against the Company in
accordance  with  their  terms,  except as such enforceability may be limited by
general  principles  of  equity  or  applicable  bankruptcy,  insolvency,
reorganization,  moratorium,  liquidation  or  similar  laws  relating  to,  or
affecting  generally,  the  enforcement  of  creditors'  rights  and  remedies.

Section 22.5  The execution and delivery of this Note shall not  alter the prior
written  agreements  between  the  Company  and  the  Holder,  consisting of the
Transaction  Documents,  associated with Debenture Number November 2005 101, and
the  Note Number December 2005 101. This Note is the FINAL AGREEMENT between the
Company  and  the  Holder  with  respect  to  the terms and conditions set forth
herein,  and,  the  terms  of  this  Note may not be contradicted by evidence of
prior,  contemporaneous,  or  subsequent  oral  agreements  of  the Parties. The
execution and delivery of this Note is done in conjunction with the execution of
the  Security  Agreement,  as  defined  in  Article  21.

Section 22.6  There  are  no  disagreements  of any kind presently existing,  or
reasonably  anticipated  by  the  Company  to arise, between the Company and the
accountants,  auditors  and  lawyers  formerly or presently used by the Company,
including  but  not  limited  to disputes or conflicts over payment owed to such
accountants,  auditors  or  lawyers.

Section 22.7  All  representations  made  by  or  relating  to the Company  of a
historical  nature  and all undertakings described herein shall relate and refer
to  the  Company,  its  predecessors,  and  the  Subsidiaries.

Section 22.8 The only officer, director, employee and consultant stock option or
stock incentive plan currently in effect or contemplated by the Company has been
submitted  to  the Holder or is described or within past filings with the United
States  Securities  and Exchange Commission. The Company aggress not to initiate
or  institute  any  such  plan  or  to  issue  stock  options.

Section 22.9 The Company acknowledges that its failure to timely meet any of its
obligations  hereunder,  including,  but  without limitation, its obligations to
make  Payments,  deliver  shares  and,  as  necessary,  to register and maintain
sufficient  number  of  Shares, will cause the Holder to suffer irreparable harm
and  that  the  actual  damage  to  the  Holder  will be difficult to ascertain.
Accordingly,  the  parties  agree  that  it  is  appropriate  to include in this
Debenture  a provision for liquidated damages. The parties acknowledge and agree
that  the  liquidated damages provision set forth in this section represents the
parties' good faith effort to quantify such damages and, as such, agree that the
form  and amount of such liquidated damages are reasonable and do not constitute
a  penalty. The payment of liquidated damages shall not relieve the Company from
its  obligations  to  deliver  the  Common  Stock  pursuant to the terms of this
Debenture.

                                      *.* *
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<PAGE>

Any  misrepresentations shall be considered a breach of contract and an Event of
Default  under  this  Agreement  and  the  Holder  may  seek  to take actions as
described  under  Article  4  of  this  Agreement.

IN WITNESS WHEREOF, the Company has duly executed this Note as of the date first
written  above.

HYBRID  FUEL  SYSTEMS,  INC.

By     /s/  Mark  Clancy
       -----------------
Name:  Mark  Clancy
Title: Chief  Executive  Officer

DUTCHESS  PRIVATE  EQUITIES  FUND,  L.P.
BY  ITS  GENERAL  PARTNER  DUTCHESS
CAPITAL  MANAGEMENT,  LLC

By:    /s/  Douglas  H.  Leighton
       --------------------------
Name:  Douglas  H.  Leighton
Title: A  Managing  MemberExhibit 10.2

                               SECURITY AGREEMENT

     SECURITY  AGREEMENT  (this "Agreement"), dated as of March 23, 2006, by and
among  Hybrid Fuel Systems, Inc., a George corporation ("Company"), and Dutchess
Private  Equities  Fund,  LP,  a  Delaware  Limited  partnership, as the secured
parties signatory hereto and their respective endorsees, transferees and assigns
(collectively,  the  "Secured Party") (sometimes hereinafter the Company and the
Secured  Party  are  collectively  referred  to  as  the  "parties").

                              W I T N E S S E T H:

     WHEREAS,  pursuant  to  Note  Agreement,  dated the date hereof between the
Company and the Secured Party (the "Note Agreement"), and the prior Note between
the  Company  and  the  Secured  Party  dated December 20, 2005, the Company has
agreed  to  issue  to  the  Secured  Party  and  the Secured Party has agreed to
purchase  from  Company certain of Company's 0% Secured Notes, due one year from
the  date  of  issue  (the  "Note")

     WHEREAS, pursuant to Subscription Agreement, dated November 4, 2005 between
Company and the Secured Party (the "Subscription Agreement"), Company has issued
to the Secured Party and the Secured Party has purchased from Company certain of
Company's  twelve  percent  (12%) Secured Convertible Debentures, due five years
from  the date of issue (the "Debentures"), which are convertible into shares of
Company's  Common  Stock,  par  value  $.001  per share (the "Common Stock"). In
connection  therewith,  Company  shall issue to the Secured Party certain Common
Stock  purchase  warrants  dated as of the date hereof to purchase the number of
shares  of  Common  Stock  (the  "Warrants");  and

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

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

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

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

               (i)  All Goods of the Company, including, without limitation, 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  the  Company's  businesses  and  all  improvements  thereto
          (collectively,  the  "Equipment");  and

               (ii)  All  Inventory  of  the  Company;  and

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

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

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

          (b)  "Company"  shall  mean,  collectively,  Company  and  all  of the
     subsidiaries  of  Company,  a  list  of  which  is contained in Schedule A,
     attached  hereto.

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

          (d) "UCC" means the Uniform Commercial Code, as currently in effect in
     the  Commonwealth  of  Massachusetts.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

          (m)  The  Company  shall  promptly  execute and deliver to the Secured
     Party  such  further  deeds,  mortgages,  assignments, security agreements,
     financing  statements  or  other  instruments,  documents, certificates and
     assurances  and take such further action as the Secured Party may from time
     to  time  request and may in its sole discretion deem necessary to perfect,
     protect  or  enforce  its  security  interest  in the Collateral including,
     without  limitation,  the  execution  and  delivery  of a separate security
     agreement  with  respect  to  the  Company's  intellectual  property
     ("Intellectual Property Security Agreement") in which the Secured Party has
     been  granted  a  security  interest  hereunder,  substantially  in  a form
     acceptable  to  the  Secured  Party,  which  Intellectual Property Security
     Agreement,  other  than  as  stated therein, shall be subject to all of the
     terms  and  conditions  hereof.

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

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

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

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

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

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

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

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

          (c)  The  failure  by  the  Company  to  observe or perform any of its
     obligations  hereunder  or  in the Intellectual Property Security Agreement
     for  ten  (10)  days after receipt by the Company of notice of such failure
     from  the  Secured  Party.

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

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

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

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

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

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

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

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

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

12.  Power of  Attorney;  Further  Assurances.

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

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

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

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

If  the  to  the  Company:

  Mark  Clancy
  Hybrid  Fuel  Systems
  12409  Telecom  Drive
  Tampa,  FL  33637
  Telephone:  813-979-9222
  Facsimile:  813-979-9224

With  copy  to:

  Darrin  M.  Ocasio,  Esq.
  Sichenzia  Ross  Friedman  Ference  LLP
  1065  Avenue  of  the  Americas
  New  York,  New  York  10018
  Phone:  (212)  930-9700
  Fax:  (212)  930-9725

If  to  the  Holder:

  Dutchess  Capital  Management,  LLC
  Douglas  Leighton
  50  Commonwealth  Ave,  Suite  2
  Boston,  MA  02116
  Phone:  (617)  301-4700
  Facsimile:  (617)  249-0947

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

15.     Miscellaneous.

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

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

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

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

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

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

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

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

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

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

          (k)  This  Agreement  shall  supersede  the  prior  executed  Security
     Agreement dated November 4, 2005, and upon execution of this Agreement, the
     prior  Security  Agreement  shall  be  void.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

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

                      HYBRID FUEL SYSTEMS, INC.

                      By:  /s/  Mark  Clancy
                           -----------------
                    Name:  Mark  Clancy
                   Title:  Chief  Executive  Officer

                      DUTCHESS PRIVATE EQUITIES FUND, L.P.
                      BY  ITS  GENERAL  PARTNER  DUTCHESS
                      CAPITAL  MANAGEMENT,  LLC

                      By:  /s/  Douglas  H.  Leighton
                           --------------------------
                    Name:  Douglas  H.  Leighton
                   Title:  A  Managing  Member

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00101-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00101-of-00352.parquet"}]]