SECURITY AGREEMENT
                               ------------------

     This  Security  Agreement is made and entered into and effective as of June
30,  2006,  by  and  between  Gateway  Distributors,  Ltd., a Nevada corporation
(Debtor),  and  Marshall Distributing, L.L.C., a Utah limited liability company,
EMS  Business  Development, Inc., a California corporation and Terry D. Nielsen,
(Secured  Party),  as  follows:

     For  value  received,  the  Debtor  grants  to the Secured Party a security
interest  in  the assets described on Exhibits I and II attached hereto together
with all accessions to, replacements of, and proceeds therefrom (the Collateral)
to  secure:  (1)  the  Debtor's  note of $5,230,000.00 to Marshall distributing,
L.L.C.,  a  Utah limited liability company and EMS Business Development, Inc., a
California  corporation  dated  as  of  June  30,  2006; and (2) Debtors note of
$770,000.00  to  Terry  D.  Nielsen  dated  as  of June 30, 2006; (3) any future
advances  by  the Secured Party to the Debtor, to be evidenced by similar notes;
(4)  any  expenditures  incurred  by  the  Secured  Party  in the collection and
enforcement  of  the  notes and/or other indebtedness of the Debtor; and (5) all
liabilities  of  the Debtor to the Secured Party now existing or incurred in the
future,  matured  or  unmatured,  direct  or  contingent,  and  any  renewals,
extensions,  and substitutions of those liabilities, specifically including, but
not limited to Debtor's obligations to Secured Party as provided in that certain
Contract  for  Sale  of  Business  and  Assets dated as of June 30, 2006 between
Debtor  and  Secured  Party  (the  "Agreement").

     The  Debtor  warrants,  covenants,  and  agrees  as  follows:

                                      Title

     1.  Except  for the security interest granted by this agreement, the Debtor
has,  or  on  acquisition  will have, full title to the Collateral free from any
lien,  security  interest,  encumbrance,  or  claim, and the Debtor will, at the
Debtor's cost and expense, defend any action that may affect the Secured Party's
security  interest  in,  or  the  Debtor's  title  to,  the  Collateral.

                               Financing Statement

     2.  No financing statement covering the Collateral or any part of it or any
proceeds  of it other than the financing statement to be executed in conjunction
with  this  Security  Agreement  is  on  file  in  any  public  office.

                        Sale or Disposition of Collateral

     3.  The  Debtor will not, without the written consent of the Secured Party,
sell,  contract  to sell, encumber, or dispose of the Collateral or any interest
in the Collateral until this Security Agreement and all debts secured by it have
been  fully  satisfied.


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                            Protection of Collateral

     4.  The  Debtor  will  keep  the Collateral free and clear of all liens and
claims  except  as  may be permitted herein.  Debtor shall maintain any personal
property  which  constitutes  part of the Collateral in good condition and shall
exercise  due  diligence  in  the  repair and maintenance of such portion of the
Collateral.  Debtor  will  provide Secured Party with such information as may be
reasonably  requested by Secured Party from time to time regarding the condition
and  location  of  such  portion  of  the  Collateral.

                              Taxes and Assessments

     5.  The  Debtor  will pay promptly when due all taxes, assessments and fees
or  licenses  attributable  to the Collateral, or any part of the Collateral, or
for  its  use  and  operation.

                  Security Interest in Proceeds and Accessions

     6.  The  Debtor  grants  to the Secured Party a security interest in and to
all  proceeds, increases, substitutions, replacements, additions, and accessions
to the Collateral and to any part of the Collateral. This provision shall not be
construed  to  mean  that  the  Debtor  is authorized to sell, or dispose of the
Collateral except sales of inventory in the ordinary course of business, without
the  prior  written  consent  of  the  Secured  Party.

                         Decrease in Value of Collateral

     7.  The Debtor shall, if in the Secured Party's judgment the Collateral has
materially  decreased  in  value  or if the Secured Party shall at any time deem
that the Secured Party is financially unstable, either provide enough additional
Collateral  to  satisfy the Secured Party or reduce the total indebtedness by an
amount  sufficient  to  satisfy  the  Secured  Party.

                            Reimbursement of Expenses

     8.  At  the  option  of  the Secured Party, the Secured Party may discharge
taxes, liens, interest, or perform or cause to be performed for and on behalf of
the Debtor any actions and conditions, obligations, or covenants that the Debtor
has  failed  or  refused  to  perform  as  provided herein or as provided in the
Agreement  and  may enter the premises where the Collateral or any part of it is
located  and cause to be performed as agent and on the account of the Debtor any
acts  that the Secured Party may deem necessary for the protection, preservation
or  proper  maintenance  of  the  Collateral or any part of it. Any and all sums
expended  by  the  Secured Party under this paragraph, including but not limited
to,  attorneys'  fees,  court  costs, agent's fees, or commissions, or any other
costs  or  expenses,  shall bear interest from the date of payment at the annual
rate  of  ten  (10)  percent and shall be payable at the place designated in the
Debtor's  notes  and  shall  be  secured  by  this  Security  Agreement.

                                     Payment

     9.  The  Debtor  will  pay the notes secured by this Security Agreement and
any  renewal  or  extension  of  it  and  any other indebtedness secured by this
Security  Agreement  in  accordance  with


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the terms and provisions of the indebtedness and/or the Agreement and will repay
immediately  all sums expended by the Secured Party in accordance with the terms
and  provisions of this Security Agreement. On full payment by the Debtor of all
indebtedness secured by this Security Agreement in accordance with this Security
Agreement,  this  Security  Agreement  shall  expire,  and  the  Secured Party's
security  interest  in  the Collateral, as set forth in this Security Agreement,
shall  terminate.

                           Change of Place of Business

     10.  The Debtor will promptly notify the Secured Party of any change of the
Debtor's  residence,  chief place of business, or place where records concerning
the  Collateral  are  kept.

                         Time of Performance and Waiver

     11.  In  performing  any  act  under  this  Security Agreement and the note
secured  by  it, time shall be of the essence. The Secured Party's acceptance of
partial  or delinquent payments, or the failure of the Secured Party to exercise
any  right  or  remedy,  shall  not constitute a waiver of any obligation of the
Debtor  or  right  of the Secured Party and shall not constitute a waiver of any
other  similar  default  that  occurs  later.

                                     Default

     12.  The  Debtor  shall  be in default under this Security Agreement on the
occurrence  of  any  of  the  following  events  or  conditions:

          (1)  Default in the payment or performance of the Agreement and/or any
     note,  obligation,  covenant,  or  liability  secured  by  this  Security
     Agreement;

          (2) Any warranty, representation, or covenant made, furnished or to be
     performed  by  or  on  behalf  of  the  Debtor  herein  or in the Agreement
     proves  to have been false in any material respect or is not performed in a
     timely  manner;

          (3)  Any event that results in the acceleration of the maturity of the
     indebtedness  of  the  Debtor  to  others  under  any indenture, agreement,
     or  undertaking;

          (4)  Any sale or encumbrance (except as expressly permitted herein) to
     or  of  any  of  the  Collateral,  or  the  making of any levy, seizure, or
     attachment  of  or  on  the  Collateral;

          (5)  Any  time the Secured Party reasonably believes that the prospect
     of  payment  or  any  indebtedness  secured  by  this Security Agreement or
     the  performance  of  this  Security  Agreement  is  impaired;  or

          (6)  Dissolution,  termination  of  existence,  insolvency,  business
     failure,  appointment  of  a  receiver  for  any  part  of  the Collateral,
     assignment  for  the  benefit  of  creditors,  or  the


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<PAGE>
     commencement  of  any  proceeding  under  any  bankruptcy or insolvency law
     by  or  against  the  Debtor  or  any  guarantor  or surety for the Debtor.

                                    Remedies

     13.  On the occurrence of any event of default, and at any time thereafter,
the  Secured  Party  may  declare  all  obligations  secured  due  and  payable
immediately  and  may proceed to enforce payment and exercise any and all of the
rights and remedies provided either at law or in equity possessed by the Secured
Party.

     The  Secured  Party  may  require the Debtor to assemble the Collateral and
make  it  available  to  the  Secured Party at any place to be designated by the
Secured  Party that is with the United States of America.  Unless the Collateral
is  perishable,  threatens  to  decline  speedily  in  value,  or  is  of a type
customarily  sold on a recognized market, the Secured Party will give the Debtor
reasonable  notice of the time and place of any public sale or of the time after
which any private sale or any other intended disposition of the Collateral is to
be  made.  The  requirements  of reasonable notice shall be met if the notice is
mailed,  postage prepaid, to the address of the Debtor shown at the beginning of
this  Security  Agreement  at  least  five  days  before the time of the sale or
disposition.  Expenses of retaking, holding, preparing for sale, selling, or the
like  shall  include  the  Secured  Party's reasonable attorneys' fees and legal
expenses.

                            Miscellaneous Provisions

     14.  (a) This Security Agreement shall be construed under and in accordance
with  Nevada.

     (b) This Security Agreement shall be binding on and inure to the benefit of
the  parties  and  their  respective successors and assigns as permitted by this
Security  Agreement.

     (c) Should any litigation be commenced between the parties to this Security
Agreement  concerning the Collateral, this Security Agreement, or the rights and
duties  of  either  party  in  relation  to  them, the prevailing party shall be
entitled  to  a  reasonable  sum  as reimbursement for attorneys' fees and legal
expenses.

     (d)  In  case  any one or more of the provisions contained in this Security
Agreement shall for any reason be held invalid, illegal, or unenforceable in any
respect, the invalidity, illegality, or unenforceability of that provision shall
not  affect  any  other  provision of this Security Agreement, and this Security
Agreement  shall  be  construed  as  if  the  invalid, illegal, or unenforceable
provision  had  never  been  contained  in  it.

     (e)  This  Security  Agreement  the  Debtor's  notes  and  the  Agreement,
collectively  constitutes  the  agreement  of  the  parties  and  collectively
supersedes  any  prior  understandings or written or oral agreements between the
parties  respecting  the  subject  matter  of  this  Security  Agreement.


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<PAGE>
     Executed  and  effective  as  of  June  30,  2006.

                                        DEBTOR:

                                        Gateway Distributors, Ltd.
                                        a Nevada corporation

                                        By:
                                           -------------------------------------

                                          Its:
                                              ----------------------------------

                                        SECURED  PARTY:

                                        Marshall Distributing, L.L.C.
                                        a Utah limited liability company

                                        By:
                                           -------------------------------------

                                          Its:
                                              ----------------------------------

                                        By:
                                           -------------------------------------

                                          Its:
                                              ----------------------------------

                                        EMS Business Development, Inc.
                                        a California corporation

                                        By:
                                           -------------------------------------

                                          Its:
                                              ----------------------------------

                                        By:
                                           -------------------------------------

                                          Its:
                                              ----------------------------------


                                        ----------------------------------------
                                        Terry  D.  Nielsen


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                                    Exhibit I

                                 Business Assets


<PAGE>
                            Exhibit II - CBAY Shares


                                 To Be Attached