ex10-8.htm


    
      EXHIBIT
10.8

      
 

      AMENDED
AND RESTATED SECURITY AGREEMENT

      


      AMENDED
AND RESTATED SECURITY AGREEMENT, dated June 26, 2008 (this “Agreement”), among
Global Diversified Industries, Inc., a Nevada corporation (the “Company”) and all of
the Subsidiaries of the Company (such subsidiaries, the “Guarantors”) (the
Company and Guarantors are collectively referred to as the “Debtors”), Babirak
Carr, P.C., solely as administrative agent (the “Administrative
Agent”), the holder or holders of the Company’s Series B Convertible
Preferred Stock, par value $.001 (the “Series B Preferred
Stock”), signatory hereto, their endorsees, transferees and assigns (the
“Series B
Holders”), and the holder or holders of the Company’s Series C
Convertible Preferred Stock, par value $.001 (the “Series C Preferred Stock”),
signatory hereto, their endorsees, transferees and assigns (the “Series C Holders”)
(the Series B Holders and the Series C Holders are collectively referred to as,
the “Secured
Parties”).

      


      W
I T N E S S E T H:

      


      WHEREAS, this Agreement, amends and
restates the Security Agreement, dated February 22, 2008, among the Company, the
Guarantors, the Administrative Agent, and the Series B Holders (the “Original Security
Agreement”), in its entirety;

      


      WHEREAS, on or about February 22,
2008, the Series B Holders severally advanced funds to the Company evidenced by
the Series B Preferred Stock, subject to Series B Designations (as defined
herein), which among other matters provided for redemption on the 24th month
after issuance (the “Series B Redemption
Payment”);

      


      WHEREAS, on or about June 26, 2008,
the Series C Holders have agreed to severally advance funds to the Company
evidenced by the Series C Preferred Stock, subject to Series C Designations (as
defined herein), which among other matters provided for redemption on the 24th
month after issuance (the “Series C Redemption
Payment”);

      


      WHEREAS, pursuant to a certain
Amended and Restated Subsidiary Guarantee of even date herewith (the “Guaranty”), the
Guarantors have jointly and severally agreed to guaranty and act as surety for
payment of any Obligations (as defined in the Guaranty);

      


      WHEREAS, the Company has paid all
obligations due and owing to BFI Business Finance (defined as the “Senior
Lender” in the Original Security Agreement); and

      


      WHEREAS, in order to induce the
Series C Holders, each of which is also a Series B Holder, to advance additional
funds evidenced by the Series C Preferred Stock, each Debtor and each Series B
Holder has agreed to execute and deliver this Agreement.

      


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

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

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

      


      (a)           “Collateral”  means
the collateral in which the Secured Parties are granted a security interest by
this Amended and Restated Security and which shall include the following
personal property of the Debtors, whether presently owned or existing or
hereafter acquired or coming into existence, wherever situated, and all
additions and accessions thereto and all substitutions and replacements thereof,
and all proceeds, products and accounts thereof, including, without limitation,
all proceeds from the sale or transfer of the Collateral and of insurance
covering the same and of any tort claims in connection therewith, and all
dividends, interest, cash, notes, securities, equity interest or other property
at any time and from time to time acquired, receivable or otherwise distributed
in respect of, or in exchange for, any or all of the Pledged Securities (as
defined below):

      


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

      


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

       

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

      


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

      


      (v)           All
commercial tort claims;

      


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

      


      (vii)           All
investment property;

      


      (viii)                       All
supporting obligations; and

      


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

      


      (x)           the
products and proceeds of all of the foregoing Collateral set forth in clauses
(i)-(ix) above.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Without
limiting the generality of the foregoing, the “Collateral” shall
include all investment property and general intangibles respecting ownership
and/or other equity interests in each Guarantor, including, without limitation,
the shares of capital stock and the other equity interests listed on Schedule H hereto (as
the same may be modified from time to time pursuant to the terms hereof), and
any other shares of capital stock and/or other equity interests of any other
direct or indirect subsidiary of any Debtor obtained in the future, and, in each
case, all certificates representing such shares and/or equity interests and, in
each case, all rights, options, warrants, stock, other securities and/or equity
interests that may hereafter be received, receivable or distributed in respect
of, or exchanged for, any of the foregoing (all of the foregoing being referred
to herein as the “Pledged Securities”)
and all rights arising under or in connection with the Pledged Securities,
including, but not limited to, all dividends, interest and cash.

       

      Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an assignment of any
asset which, in the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise prohibited by applicable
law (in each case to the extent that such applicable law is not overridden by
Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
provided, however, that to the extent permitted by applicable law, this Amended
and Restated Security shall create a valid security interest in such asset and,
to the extent permitted by applicable law, this Amended and Restated Security
shall create a valid security interest in the proceeds of such
asset.

      


      (b)           “Intellectual
Property”  means the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including,
without limitation, (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished, all
registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, (ii) all letters patent of
the United States, any other country or any political subdivision thereof, all
reissues and extensions thereof, and all applications for letters patent of the
United States or any other country and all divisions, continuations and
continuations-in-part thereof, (iii) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade dress,
service marks, logos, domain names and other source or business identifiers, and
all goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark Office
or in any similar office or agency of the United States, any State thereof or
any other country or any political subdivision thereof, or otherwise, and all
common law rights related thereto, (iv) all trade secrets arising under the laws
of the United States, any other country or any political subdivision thereof,
(v) all rights to obtain any reissues, renewals or extensions of the foregoing,
(vi) all licenses for any of the foregoing, and (vii) all causes of action for
infringement of the foregoing.

      


      (c)           “Majority in
Interest”  shall mean, at any time of determination, (i) the
majority in interest (based on then-outstanding stated value of the Series B
Preferred Stock at the time of such determination) of the Series B Holders, and
(ii) the majority in interest (based on then-outstanding stated value of the
Series C Preferred Stock at the time of such determination) of the Series C
Holders, voting as separate classes.

      


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

      


      (e)           “Obligations”  means
all of the liabilities and obligations (primary, secondary, direct, contingent,
sole, joint or several) due or to become due, or that are now or may be
hereafter contracted or acquired, or owing to, of any Debtor to any of the
Secured Parties, including, without limitation, all
obligations under this Amended and Restated Security, the Series B Preferred
Stock, the Series B Designations, including the Series B Redemption Payment, the
Series C Preferred Stock, the Series C Designations, including the Series C
Redemption Payment, the Guaranty and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or therewith, in each
case, whether now or hereafter existing, voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion of
such obligations or liabilities that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from any of the
Secured Parties as a preference, fraudulent transfer or otherwise as such
obligations may be amended, supplemented, converted, extended or modified from
time to time.  Without limiting the generality of the foregoing, the
term “Obligations” shall include, without limitation (i) any and all other fees,
indemnities, costs, obligations and liabilities of the Debtors from time to time
under or in connection with this Amended and Restated Security, the Series B
Preferred Stock, the Series B Designations, the Series C Preferred Stock, the
Series C Designations, the Guaranty and any other instruments, agreements or
other documents executed and/or delivered in connection herewith or therewith;
and (ii) all amounts (including but not limited to post-petition interest) in
respect of the foregoing that would be payable but for the fact that the
obligations to pay such amounts are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding involving any
Debtor.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (f)           “Organizational
Documents”  means with respect to any Debtor, the documents by
which such Debtor was organized (such as a certificate of incorporation,
certificate of limited partnership or articles of organization, and including,
without limitation, any certificates of designation for preferred stock or other
forms of preferred equity) and which relate to the internal governance of such
Debtor (such as bylaws, a partnership agreement or an operating, limited
liability or members agreement).

      


      (g)           “Series B
Designations” means the Certificate of Designation, Preferences and
Rights of Series B Convertible Preferred Stock filed with the State of Nevada on
or about February 22, 2008.

      


      (h)
“Series C
Designations” means the Certificate of Designation, Preferences and
Rights of Series C Convertible Preferred Stock filed with the State of Nevada on
or about June 26, 2008.

      


      (i)           “Series B
Obligations”  means
the obligations of the Company to Series C Holders pursuant to the Series B
Designations, as may be amended, restated and renewed from time to time,
including the Series B Obligations.

      


       (j)           “Series C
Obligations”  means
the obligations of the Company to Series C Holders pursuant to the Series C
Designations, as may be amended, restated and renewed from time to time,
including the Series C Obligations.

      (k)           “Transaction
Documents”  means this Agreement, the Series C Designations,
the Series C Convertible Preferred Stock, the Securities Purchase Agreement
dated of even date herewith (as defined in the Series C Designations), the
Series B Preferred Stock, the Series B Designations, the Securities Purchase
Agreement dated February 22, 2008 (as defined in the Series B Designations), the
Registration Rights Agreement dated February 22, 2008, and any other documents
or agreements executed in connection with the transactions contemplated
thereunder.

      


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

      


      2.           Grant of Perfected First Priority
Security Interest. As an inducement for the Secured Parties to extend the
funds as evidenced by the Series B Preferred Stock, the Series B Designations,
the Series C Preferred Stock, and the Series C Designation, and to secure the
complete and timely payment, performance and discharge in full, as the case may
be, of all of the Obligations, each Debtor hereby unconditionally and
irrevocably pledges, grants and hypothecates to the Secured Parties a continuing
and perfected security interest in and to, a lien upon and a right of set-off
against all of their respective right, title and interest of whatsoever kind and
nature in and to, the Collateral (the “Security
Interest”).

      


      3.           Delivery of Certain
Collateral.  Contemporaneously or prior to the execution of the
Agreement, each Debtor shall deliver or cause to be delivered to the
Administrative Agent, to the extent not previously delivered in connection with
the Original Security Agreement, (a) any and all certificates and other
instruments representing or evidencing the Pledged Securities, and (b) any and
all certificates and other instruments or documents representing any of the
other Collateral, in each case, together with all Necessary
Endorsements.  The Debtors are, contemporaneously with the execution
hereof, delivering to Administrative Agent, or have previously delivered to
Administrative Agent, a true and correct copy of each Organizational Document
governing any of the Pledged Securities, to the extent such Organization
Documents have been amended, restated, or modified since the Original Security
Agreement.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      4.           Representations, Warranties,
Covenants and Agreements of the Debtors. Each Debtor represents and
warrants to, and covenants and agrees with, the Secured Parties, as
follows:

      


      (a)           Each
Debtor has the requisite corporate, partnership, limited liability company or
other power and authority to enter into this Agreement and otherwise to carry
out its obligations hereunder. The execution, delivery and performance by each
Debtor of this Agreement and the filings contemplated therein have been duly
authorized by all necessary action on the part of such Debtor and no further
action is required by such Debtor.  This Agreement has been duly
executed by each Debtor.  This Agreement constitutes the legal, valid
and binding obligation of each Debtor, enforceable against each Debtor in
accordance with its terms except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization and similar laws of general
application relating to or affecting the rights and remedies of creditors and by
general principles of equity.

      


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

      


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

      


      (d)           Except
as set forth on Schedule C attached
hereto, no written claim has been received that any Collateral or Debtor's use
of any Collateral violates the rights of any third party. There has been no
adverse decision to any Debtor's claim of ownership rights in or exclusive
rights to use the Collateral in any jurisdiction or to any Debtor's right to
keep and maintain such Collateral in full force and effect, and there is no
proceeding involving said rights pending or, to the best knowledge of any
Debtor, threatened before any court, judicial body, administrative or regulatory
agency, arbitrator or other governmental authority.

      


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

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (f)           This
Agreement creates in favor of the Secured Parties a valid, security interest in
the Collateral, subject only to Permitted Liens (as defined in the Securities
Purchase Agreement of even date herewith) securing the payment and performance
of the Obligations.  Upon making the filings described in the
immediately following paragraph, all security interests created hereunder in any
Collateral which may be perfected by filing Uniform Commercial Code financing
statements shall have been duly perfected.  Except for the filing of
the Uniform Commercial Code financing statements referred to in the immediately
following paragraph, the recordation of the Intellectual Property Security
Agreement (as defined below) with respect to copyrights and copyright
applications in the United States Copyright Office referred to in paragraph (m),
the execution and delivery of deposit account control agreements referred
to in paragraph (dd) satisfying the requirements of Section 9-104(a)(2) of the
UCC with respect to each deposit account of the Debtors, and the delivery of the
certificates and other instruments provided in Section 3, no action is
necessary to create, perfect or protect the security interests created
hereunder.  Without limiting the generality of the foregoing, except
for the filing of said financing statements, the recordation of said
Intellectual Property Security Agreement, and the execution and delivery of said
deposit account control agreements, no consent of any third parties and no
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for (i) the execution,
delivery and, except as set forth on Schedule D,
performance of this Agreement, (ii) the creation or perfection of the Security
Interests created hereunder in the Collateral or (iii) the enforcement of the
rights of the Secured Parties hereunder.

       

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

      


       (h)           The
execution, delivery and performance of this Agreement by the Debtors does not
(i) violate any of the provisions of any Organizational Documents of any Debtor
or any judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation applicable to any Debtor or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing any Debtor's debt or otherwise) or other understanding to
which any Debtor is a party or by which any property or asset of any Debtor is
bound or affected. No consent (including, without limitation, from stockholders
or creditors of any Debtor) is required for any Debtor to enter into and perform
its obligations hereunder.

      


      (i)           The
capital stock and other equity interests listed on Schedule J hereto
represent all of the capital stock and other equity interests of the Guarantors,
and represent all capital stock and other equity interests owned, directly or
indirectly, by the Company.  All of the Pledged Securities are validly
issued, fully paid and nonassessable, and the Company is the legal and
beneficial owner of the Pledged Securities, free and clear of any lien, security
interest or other encumbrance except for the security interests created by this
Agreement and other Permitted Liens (as defined in the Securities Purchase
Agreement of even date herewith).

      


      (j)           The
ownership and other equity interests in partnerships and limited liability
companies (if any) included in the Collateral (the “Pledged Interests”)
by their express terms do not provide that they are securities governed by
Article 8 of the UCC and are not held in a securities account or by any
financial intermediary.

      


      (k)           Each
Debtor 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 Parties until this Agreement and the
Security Interest hereunder shall be terminated pursuant to Section 11
hereof.  Each Debtor hereby agrees to defend the same against the
claims of any and all persons and entities.  Each Debtor shall
safeguard and protect all Collateral for the account of the Secured
Parties.  At the request of the Secured Parties, each Debtor will sign
and deliver to the Secured Parties at any time or from time to time one or more
financing statements pursuant to the UCC in form reasonably satisfactory to the
Secured Parties and will pay the cost of filing the same in all public offices
wherever filing is, or is deemed by the Secured Parties to be, necessary or
desirable to effect the rights and obligations provided for
herein.  Without limiting the generality of the foregoing, each Debtor
shall pay all fees, taxes and other amounts necessary to maintain the Collateral
and the Security Interest hereunder, and each Debtor shall obtain and furnish to
the Secured Parties 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.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (l)           Subject
to Permitted Liens, no Debtor will transfer, pledge, hypothecate, encumber,
license, sell or otherwise dispose of any of the Collateral (except for
non-exclusive licenses granted by a Debtor in its ordinary course of business
and sales of inventory by a Debtor in its ordinary course of business) without
the prior written consent of a Majority in Interest.

      


      (m)           Each
Debtor shall keep and preserve its equipment, inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate
any such Collateral (or cause to be operated or located) in any area excluded
from insurance coverage.

      


      (n)           Each
Debtor shall maintain with financially sound and reputable insurers, insurance
with respect to the Collateral against loss or damage of the kinds and in the
amounts customarily insured against by entities of established reputation having
similar properties similarly situated and in such amounts as are customarily
carried under similar circumstances by other such entities and otherwise as is
prudent for entities engaged in similar businesses but in any event sufficient
to cover the full replacement cost thereof.  Each Debtor shall cause
each insurance policy issued in connection herewith to provide, and the insurer
issuing such policy to certify to the Administrative Agent that (a) the
Administrative Agent will be named as lender loss payee and additional insured
under each such insurance policy; (b) if such insurance be proposed to be
cancelled or materially changed for any reason whatsoever, such insurer will
promptly notify the Administrative Agent and such cancellation or change shall
not be effective as to the Administrative Agent for at least thirty (30) days
after receipt by the Administrative Agent of such notice, unless the effect of
such change is to extend or increase coverage under the policy; and (c) the
Administrative Agent will have the right (but no obligation) at its election to
remedy any default in the payment of premiums within thirty (30) days of notice
from the insurer of such default.  If no Event of Default (as defined
in the Securities Purchase Agreement of even date herewith) exists and if the
proceeds arising out of any claim or series of related claims do not exceed
$100,000, loss payments in each instance will be applied by the applicable
Debtor to the repair and/or replacement of property with respect to which the
loss was incurred to the extent reasonably feasible, and any loss payments or
the balance thereof remaining, to the extent not so applied, shall be
payable to the applicable Debtor, provided, however, that payments received by
any Debtor after an Event of Default occurs and is continuing or in excess of
$100,000 for any occurrence or series of related occurrences shall be paid
to the Administrative Agent and, if received by such Debtor, shall be held in
trust for and immediately paid over to the Administrative Agent unless otherwise
directed in writing by the Administrative Agent.  Copies of such
policies or the related certificates, in each case, naming the
Administrative Agent as lender loss payee and additional insured shall be
delivered to the Administrative Agent at least annually and at the time any new
policy of insurance is issued.

       

      (o)           Each
Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
Secured Parties promptly, in sufficient detail, of any 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 Parties’
security interest therein.

      


      (p)           Each
Debtor shall promptly execute and deliver to the Secured Parties such further
deeds, mortgages, assignments, security agreements, financing statements or
other instruments, documents, certificates and assurances and take such further
action as the Secured Parties 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, if applicable, the
execution and delivery of a separate security agreement with respect to each
Debtor’s Intellectual Property (“Intellectual Property
Security Agreement”) in which the Secured Parties have been granted a
security interest hereunder, substantially in a form acceptable to the Secured
Parties, which Intellectual Property Security Agreement, other than as stated
therein, shall be subject to all of the terms and conditions
hereof.

      


      (q)           Each
Debtor shall permit the Secured Parties and their representatives and agents to
inspect, upon reasonable advanced notice, the Collateral at any time, and to
make copies of records pertaining to the Collateral as may be requested by a
Secured Party from time to time.

      


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

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

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

       

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

      


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

      


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

      


      (w)           No
Debtor may consign any of its Inventory or sell any of its Inventory on bill and
hold, sale or return, sale on approval, or other conditional terms of sale
without the consent of a Majority in Interest which shall not be unreasonably
withheld, except to the extent such consignment or sale does not exceed 15%
of the total value of all of the Company’s finished goods in
Inventory.

      


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

      


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

      


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

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

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

      


      (bb)           Each
Debtor shall vote the Pledged Securities to comply with the covenants and
agreements set forth herein and in the Series B Designations and the Series C
Designations.

      


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

      


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

       

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

      


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

      


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

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      5.           Effect of Pledge on Certain
Rights. If
any of the Collateral subject to this Agreement consists of nonvoting equity or
ownership interests (regardless of class, designation, preference or rights)
that may be converted into voting equity or ownership interests upon the
occurrence of certain events (including, without limitation, upon the transfer
of all or any of the other stock or assets of the issuer), it is agreed that the
pledge of such equity or ownership interests pursuant to this Agreement or the
enforcement of any of Administrative Agent’s rights hereunder shall not be
deemed to be the type of event which would trigger such conversion rights
notwithstanding any provisions in the Organizational Documents or agreements to
which any Debtor is subject or to which any Debtor is party.

      


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

      


      (a)         The
occurrence of a Triggering Event (as defined in the Series B Designations) under
the Series B Designations, or the occurrence of a Triggering Event (as defined
in the Series C Designations) under the Series C Designations;

      


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

      


      (c)         The
failure by any Debtor to observe or perform any of its obligations hereunder for
five (5) days after delivery to such Debtor of notice of such failure by or on
behalf of a Secured Party unless such default is capable of cure but cannot be
cured within such time frame and such Debtor is using best efforts to cure same
in a timely fashion; or

      


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

      


      7.                 Duty To Hold In
Trust.

      


      (a)           Upon
the occurrence of any Event of Default and during the continuation of such Event
of Default, each Debtor shall, upon receipt of any revenue, income, dividend,
interest or other sums subject to the Security Interest, whether payable
pursuant to the Series B Designations, Series C Designations or otherwise, or of
any check, draft, note, trade acceptance or other instrument evidencing an
obligation to pay any such sum, hold the same in trust for the Secured Parties
and shall forthwith endorse and transfer any such sums or instruments, or both,
to the Secured Parties in accordance with Section 9 below.

      


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

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      8.                 Rights and Remedies Upon
Default.

      


      (a)           Upon
the occurrence of any Event of Default and during the continuation of such Event
of Default, the Secured Parties, acting through any agent appointed by a
Majority in Interest of the Secured Parties for such purpose, shall have the
right to exercise all of the remedies conferred hereunder and under the Series B
Designations or the Series C Designations, and the Secured Parties shall have
all the rights and remedies of a secured party under the UCC.  Without
limitation, the Secured Parties shall have the following rights and
powers:

      


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

      


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

      


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

      


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

      


      (v)         The
Secured Parties may (but are not obligated to) direct any financial intermediary
or any other person or entity holding any investment property to transfer the
same to the Secured Parties or their designee.

      


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

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (b)           The
Administrative Agent may comply with any applicable law in connection with a
disposition of Collateral and such compliance will not be considered adversely
to affect the commercial reasonableness of any sale of the
Collateral.  The Administrative Agent may sell the Collateral without
giving any warranties and may specifically disclaim such
warranties.  If the Administrative Agent sells any of the Collateral
on credit, the Debtors will only be credited with payments actually made by the
purchaser.  In addition, each Debtor waives any and all rights that it
may have to a judicial hearing in advance of the enforcement of any of the
Administrative Agent’s rights and remedies hereunder, including, without
limitation, its right following an Event of Default to take immediate possession
of the Collateral and to exercise its rights and remedies with respect
thereto.

       

      (c)           For
the purpose of enabling the Administrative Agent to further exercise rights and
remedies under this Section 8 or elsewhere provided by agreement or applicable
law, each Debtor hereby grants to the Administrative Agent, for the benefit of
the Administrative Agent and the Secured Parties, an irrevocable, nonexclusive
license (exercisable without payment of royalty or other compensation to such
Debtor) to use, license or sublicense following, and during the continuation of,
an Event of Default, any Intellectual Property now owned or hereafter acquired
by such Debtor, and wherever the same may be located, and including in such
license access to all media in which any of the licensed items may be recorded
or stored and to all computer software and programs used for the compilation or
printout thereof.

      


      9.                               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, second, to the
reasonable attorneys’ fees and expenses incurred by the Series C Holders in
enforcing their rights hereunder and in connection with collecting, storing and
disposing of the Collateral, third, to Obligations
owing to the Series C Holders, including the Series C Redemption Payment, pro
rata among the Series C Holders (based on then-outstanding stated value of the
Series C Preferred Stock at the time of any such determination, fourth, to the
reasonable attorneys’ fees and expenses incurred by the Series B Holders in
enforcing their rights hereunder and in connection with collecting, storing and
disposing of the Collateral, and fifth to Obligations
owing to the Series B Holders, including the Series B Redemption Payment, pro
rata among the Series B Holders (based on then-outstanding stated value of the
Series B Preferred Stock at the time of any such determination), and to the
payment of any other amounts required by applicable law, after which the
Secured Parties shall pay to the applicable Debtor any surplus
proceeds.  If, upon the sale, license or other disposition of the
Collateral, the proceeds thereof are insufficient to pay all amounts to which
the Secured Parties are legally entitled, the Debtors will be liable for the
deficiency, together with interest thereon, at the rate of 10% per annum or the
lesser amount permitted by applicable law (the “Default Rate”), and the
reasonable fees of any attorneys employed by the Secured Parties to collect such
deficiency.  To the extent permitted by applicable law, each Debtor
waives all claims, damages and demands against the Secured Parties arising out
of the repossession, removal, retention or sale of the Collateral, unless due
solely to the gross negligence or willful misconduct of the Secured Parties as
determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction.

      


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

       

      11.           Costs and
Expenses.  Each Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements
pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Secured Parties.  The Debtors shall also
pay all other claims and charges which in the reasonable opinion of the Secured
Parties might materially prejudice, imperil or otherwise affect the Collateral
or the Security Interest therein.  The Debtors will also, upon demand,
pay to the Secured Parties 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 Parties may incur in connection with (i) the
enforcement of this Agreement, (ii) the custody or preservation of, or the sale
of, collection from, or other realization upon, any of the Collateral, or (iii)
the exercise or enforcement of any of the rights of the Secured Parties under
the Series B Designations or Series C Designations.  Until so paid,
any fees payable hereunder shall be added to the stated value of the Series B
Preferred Stock, or Series C Preferred Stock, and shall bear interest at the
Default Rate.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

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

      


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

      


      14.           Term of
Agreement.  This Agreement and the Security Interest shall
terminate on the date on which all payments under the Series B Designations and
Series C Designations, including the Series B Redemption Payment and Series C
Redemption Payment, have been indefeasibly paid in full and all other
Obligations have been paid or discharged; provided, however, that all
indemnities of the Debtors contained in this Agreement shall survive and remain
operative and in full force and effect regardless of the termination of this
Agreement.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      15.           Power of Attorney; Further
Assurances.

      


      (a)           Each
Debtor authorizes the Secured Parties, and does hereby make, constitute and
appoint the Secured Parties and their respective officers, agents, successors or
assigns with full power of substitution, as such Debtor’s true and lawful
attorney-in-fact, with power, in the name of the various Secured Parties or such
Debtor, to, after the occurrence and during the continuance of an Event of
Default, (i) endorse any note, checks, drafts, money orders or other instruments
of payment (including payments payable under or in respect of any policy of
insurance) in respect of the Collateral that may come into possession of the
Secured Parties; (ii) to sign and endorse any financing statement pursuant to
the UCC or any invoice, freight or express bill, bill of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications and
notices in connection with accounts, and other documents relating to the
Collateral; (iii) to pay or discharge taxes, liens, security interests or other
encumbrances at any time levied or placed on or threatened against the
Collateral; (iv) to demand, collect, receipt for, compromise, settle and sue for
monies due in respect of the Collateral; (v) to transfer any Intellectual
Property or provide licenses respecting any Intellectual Property; and (vi)
generally, at the option of the Secured Parties, and at the expense of the
Debtors, at any time, or from time to time, to execute and deliver any and all
documents and instruments and to do all acts and things which the Secured
Parties deem 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 Series B Designations, and the Series C Designations all as fully
and effectually as the Debtors might or could do; and each Debtor hereby
ratifies all that said attorney shall lawfully do or cause to be done by virtue
hereof. This power of attorney is coupled with an interest and shall be
irrevocable for the term of this Agreement and thereafter as long as any of the
Obligations shall be outstanding.  The designation set forth herein
shall be deemed to amend and supersede any inconsistent provision in the
Organizational Documents or other documents or agreements to which any Debtor is
subject or to which any Debtor is a party.  Without limiting the
generality of the foregoing, after the occurrence and during the continuance of
an Event of Default, each Secured Party is specifically authorized to execute
and file any applications for or instruments of transfer and assignment of
any patents, trademarks, copyrights or other Intellectual Property with the
United States Patent and Trademark Office and the United States Copyright
Office.

      


      (b)           On
a continuing basis, each Debtor will make, execute, acknowledge, deliver, file
and record, as the case may be, with the proper filing and recording agencies in
any jurisdiction, including, without limitation, the jurisdictions indicated on
Schedule E
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 Parties, 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 Parties the grant or perfection of a
perfected security interest in all the Collateral under the UCC.

      


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

      


      16.           Notices. With respect to the
Series B Holders, all notices, requests, demands and other communications
hereunder shall be subject to the notice provision of the Securities Purchase
Agreement (as such term is defined in the Series B Designations). With respect
to the Series C Holders, all notices, requests, demands and other communications
hereunder shall be subject to the notice provision of the Securities
Purchase Agreement (as such term is defined in the Series C
Designations).

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

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

      


      18.           Appointment of Administrative
Agent.  The Secured Parties hereby appoint Babirak Carr, P.C.
(“Administrative
Agent”) to act as their administrative agent for purposes of exercising
certain rights and remedies of the Secured Parties hereunder.  Such
appointment shall continue until the earlier of (i) the termination of this
Agreement, (ii) the resignation of the Administrative Agent in accordance with
the terms set forth in Annex B hereto, or (iii)
such appointment is revoked in writing by a Majority in Interest, at which time
a Majority in Interest shall appoint a new Administrative Agent.  The
Administrative Agent shall have the rights, responsibilities and immunities set
forth in Annex
B hereto.

       

      19.           Miscellaneous.

      


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

      


      (b)           All
of the rights and remedies of the Secured Parties with respect to the
Collateral, whether established hereby, by the Series B Designations, Series C
Designations, by any other Transaction Document, 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 thereto. 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 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)           All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof.  Each party agrees that all
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement, the Series B Designation, and any
other Transaction Document (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, partners, members,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York, Borough of Manhattan.  Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such proceeding
is improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such proceeding by mailing a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to
it under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.  Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.  If any party shall commence a
proceeding to enforce any provisions of this Agreement, then the prevailing
party in such proceeding shall be reimbursed by the other party for its
reasonable attorney’s fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such proceeding.

       

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

      


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

      


      (k)           Each
Debtor shall indemnify, reimburse and hold harmless the Secured Parties and
their respective partners, members, shareholders, officers, directors, employees
and agents (collectively, “Indemnitees”) from
and against any and all losses, claims, liabilities, damages, penalties, suits,
costs and expenses, of any kind or nature, (including fees relating to the cost
of investigating and defending any of the foregoing) imposed on, incurred by or
asserted against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages, penalties, suits, costs and expenses which result
from the gross negligence or willful misconduct of the Indemnitee as determined
by a final, nonappealable decision of a court of competent
jurisdiction.  This indemnification provision is in addition to, and
not in limitation of, any other indemnification provision in the Series B
Designations, Series C Designations, the Securities Purchase Agreement (as such
term is defined in the Series B Designations), the Securities Purchase Agreement
(as such term is defined in the Series C Designations), or any other agreement,
instrument or other document executed or delivered in connection herewith or
therewith.

      


      (l)           Nothing
in this Agreement shall be construed to subject Administrative Agent or any
Secured Party to liability as a partner in any Debtor or any if its direct or
indirect subsidiaries that is a partnership or as a member in any Debtor or any
of its direct or indirect subsidiaries that is a limited liability company, nor
shall Administrative Agent or any Secured Party be deemed to have assumed any
obligations under any partnership agreement or limited liability company
agreement, as applicable, of any such Debtor or any if its direct or indirect
subsidiaries or otherwise, unless and until any such Secured Party exercises its
right to be substituted for such Debtor as a partner or member, as applicable,
pursuant hereto.

      


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

      


      


      


      [SIGNATURE
PAGES FOLLOW]

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      


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

      


      


      
        	
                “Debtors”

                 

                GLOBAL
      DIVERSIFIED INDUSTRIES, INC.

                 

              
	
                By:__________________________________________

                     Name:

                     Title:

                     Signed
      on the ____ day of June, 2008.

              
	 
      
	
                LUTREX
      ENTERPRISES, INC.

                 

                 

              
	
                By:__________________________________________

                     Name:

                     Title:

                     Signed
      on the ____ day of June, 2008.

                 

              
	
                GLOBAL
      MODULAR, INC.

                 

              
	
                By:__________________________________________

                     Name:

                     Title:

                     Signed
      on the ____ day of June, 2008.

                 

                “Administrative
      Agent”

                 

              


      

      BABIRAK
CARR, P.C.

      


      


      


      By:__________________________________________

           Name:

           Title:

           Signed
on the ____ day of June, 2008.

      


      


      [SIGNATURE
PAGE OF HOLDERS FOLLOWS]

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      “Series B Holders”

      


      ___________________________

      Rebecca
Manandic, an individual

      


      


      BEAR
CREEK TRUST

      


      


      By:
_______________________

      Its:

      


      ___________________________

      Joseph
Salmeri, an individual

      


      


      SIERRA
CASEWORK, INC.

      


      


      By:
_______________________

      Its:

      


      


      ___________________________

      Mike
Trevino, an individual

      


      


      IMPACT
MODULAR LEASING

      


      


      By:
_______________________

      Its:

      


      “Series B and Series C
Holder”

      


      VICIS
CAPITAL MASTER FUND

      


      


      By:
_______________________

      Its:

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      


      SCHEDULE
A

      


      Location of
Collateral

      


      Principal Place of Business of
Debtors:

      


      1200
Airport Road, Chowchilla, California 93610-9344

      


      Other Locations Where Collateral is
Located or Stored:

      


      None.

      


      Ownership of Real
Property:

      


      The
Company and the Guarantors lease the real property located at 1200 Airport Road,
Chowchilla, California 93610-9344.

      


      


      The
Company has pledged all of the issued and outstanding capital stock of Lutrex
Enterprises, Inc. and Global Modular, Inc. to BFI Business Finance pursuant to
the terms of that certain Amended and Restated Stock Pledge Agreement dated as
of October 26, 2004.  These securities are currently in BFI Business
Finance’s possession.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
B

      


      Liens other than Permitted
Liens

      


      


      None.

       

       

       

       

      
 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
C

      


      No Claims or
Litigation

      


      


      None.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
D

      


      Consents

       

       

       

       

      
 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
E

      


      Organizational
Identification Numbers

      


      


      
        	
                Debtor/Guarantor

              	
                Jurisdiction
      of Incorporation

              	
                Organizational Identification Number

              
	
                Global
      Diversified Industries, Inc.

                 

              	
                Nevada

              	
                C8500-1990

              
	
                Global
      Modular, Inc.

                 

              	
                Nevada

              	
                 C31195-2001

              
	
                Lutrex
      Enterprises, Inc.

                 

              	
                California

              	
                C2330293

              


      

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
F

      


      Names; Mergers and
Acquisitions

      


      None.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      SCHEDULE
G

      


      Intellectual
Property

      


      


      None.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      SCHEDULE
H

      


      Pledged
Securities

      


      


      
        	
                Subsidiary

              	
                Jurisdiction
      of Incorporation

              	
                Address

              	
                Percentage
      owned by Global Diversified Industries,
      Inc.

              
	
                Global
      Modular, Inc.

              	
                Nevada

              	
                1200
      Airport Drive

                Chowchilla,
      CA 93610

              	
                100%

              
	
                Lutrex
      Enterprises, Inc.

              	
                California

              	
                1200
      Airport Drive

                Chowchilla,
      CA 93610

              	
                100%

              


      

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
I

      


      Account
Debtors

      


      None.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
J

      


      Capital
Stock

      


      The
Company owns 100% of all stock of Global Modular, Inc. and Lutrex Enterprises,
Inc.

       

       

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      ANNEX
B

      to

      SECURITY

      AGREEMENT

      


      THE
ADMINISTRATIVE AGENT

      


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

      


      2.      Nature of Duties.  The
Administrative Agent shall have no duties or responsibilities except those
expressly set forth in the Agreement.  Notwithstanding any other
provision hereof or the Agreement, neither the Administrative Agent nor any of
its partners, members, shareholders, officers, directors, employees or agents
shall be liable for any action taken or omitted by it as such under the
Agreement or hereunder or in connection herewith or therewith, be responsible
for the consequence of any oversight or error of judgment or answerable for any
loss.  The duties of the Administrative Agent shall be mechanical and
administrative in nature; the Administrative Agent shall not have by reason of
the Agreement or any other Transaction Document a fiduciary relationship in
respect of any Debtor or any Secured Party; and nothing in the Agreement or any
other Transaction Document, expressed or implied, is intended to or
shall be so construed as to impose upon the Administrative Agent any
obligations in respect of the Agreement or any other Transaction Document except
as expressly set forth herein and therein.  Specifically, and without
limitation, the Administrative Agent shall have no duties or responsibilities to
secure or re-secure, perfect or re-perfect (except for perfection by custody of
the Collateral by the Administrative Agent as contemplated in the Agreement) or
defend against any legal challenge any security interest of the Secured
Parties in the Collateral.

      


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

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      4.      Certain Rights of the Administrative
Agent.  The Administrative Agent shall have the right to take
any action with respect to the Collateral, on behalf of all of the Secured
Parties.  To the extent practical, the Administrative Agent shall
request instructions from the Secured Parties with respect to any material act
or action (including any failure to act) in connection with the Agreement, and
shall be entitled to act or refrain from acting in accordance with the
instructions of Secured Parties holding a majority in stated value of Series B
Preferred Stock (based on then-outstanding stated value of the Series B
Preferred Stock at the time of any such determination); if such instructions are
not provided despite the Agent’s request therefore, the Administrative Agent
shall be entitled to refrain from such act or taking such action, and if such
action is taken, shall be entitled to be indemnified and held harmless by the
Secured Parties in respect of action taken or to be taken by the
Administrative Agent; and the Administrative Agent shall not incur any liability
to any person or entity by reason of so refraining.  Without limiting
the foregoing: (a) no Secured Party shall have any right of action whatsoever
against the Administrative Agent as a result of the Administrative Agent acting
or refraining from acting hereunder in accordance with the terms of the
Agreement or the Transaction Documents, and the Debtors shall have no right to
question or challenge the authority of, or the instructions given to, the
Administrative Agent pursuant to the foregoing, (b) the Administrative Agent
shall not be required to take any action which the Administrative Agent believes
(i) could reasonably be expected to expose it to any personal liability or (ii)
is contrary to the Agreement, the Transaction Documents, or applicable law, and
(c) notwithstanding any other provision hereof or the Agreement, the
Administrative Agent shall have no liability to the Debtors, the Guarantors or
any Secured Party for any action taken by the Administrative Agent, or for any
inaction, on the basis of the advice of its legal counsel.

      


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

      


      6.      Indemnification;
Contribution.  The Secured
Parties shall jointly and severally indemnify and hold harmless the
Administrative Agent, its directors, officers, shareholders, members, partners,
employees and agents (and any other persons with a functionally equivalent role
of a person holding such titles notwithstanding a lack of such title or any
other title) (individually, an “Indemnified Party”; collectively, “Indemnified
Parties”), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
(including reasonable legal fees) of any kind or nature whatsoever (“Loss”)
which may be imposed on, incurred by or asserted against the Indemnified Party
in performing the Administrative Agent’s duties hereunder or under the Agreement
or any other Transaction Document or in any way relating to or arising out of
the Agreement or any other Transaction Document.  The Secured Parties
shall reimburse the Administrative Agent for any Loss as incurred but in any
event within ten (10) business days of the delivery by the Administrative Agent
to the Secured Parties of a written notice setting forth the nature and amount
of any such Loss. If the indemnification under this Section 6 is unavailable to
an Indemnified Party or insufficient to hold an Indemnified Party harmless for
any Loss, then each Secured Party shall contribute to the amount paid or payable
by such Indemnified Party in proportion to the Secured Parties’ initially
purchased respective stated value of Series B Preferred Stock.  The
indemnity and contribution agreements contained in this Section are in addition
to any other liability that the Secured Parties may have to the Indemnified
Parties under the Agreement or otherwise.  Prior to taking any action
hereunder or under the Agreement as Administrative Agent, the Administrative
Agent may require each Secured Party to deposit with it sufficient sums as it
determines in good faith is necessary to protect the Administrative Agent for
costs and expenses associated with taking such action and the Administrative
Agent may delay taking any such action until such time as it shall have received
such sums and shall have no liability hereunder to any party for any such
delay.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      7.      Resignation by the Administrative
Agent.

      


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

      


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

      


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

      


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

      


      9.      Compensation. The Company will
pay the Administrative Agent a fee of $3,000 for its agreement to serve as the
Administrative Agent which fee shall be paid upon execution of this Agreement by
wire transfer in immediately available United States’ funds to an account
designated by the Administrative Agent.  In addition, the
Administrative Agent shall be entitled to be paid by the Secured Parties an
hourly fee at standard hourly rates for services rendered as Administrative
Agent and to be reimbursed by the Secured Parties for all reasonable costs
associated therewith.  Such fees or costs shall be paid or reimbursed
to the Administrative Agent by the Secured Parties in proportion to the Secured
Parties’ initially purchased respective stated value of Series B Preferred
Stock.