Document:

ex10-6.htm

    Exhibit
10.6

    SUBSIDIARY
GUARANTEE

    

    SUBSIDIARY
GUARANTEE, dated as of February 22, 2008 (this “Guarantee”), made by
each of the signatories hereto (together with any other entity that may become a
party hereto as provided herein, (the “Guarantors”), in
favor of the purchasers signatory (the "Purchasers") to that
certain Securities Purchase Agreement, dated as of the date hereof, between
Global Diversified Industries, Inc., a Nevada corporation (the “Company”) and the
Purchasers.

     

    

    W
I T N E S S E T H:

    

    WHEREAS,
pursuant to that certain Securities Purchase Agreement, dated as of the date
hereof, by and between the Company and the Purchasers (the “Purchase Agreement”),
the Company has agreed to sell and issue to the Purchasers, and the Purchasers
have agreed to purchase from the Company the Company’s Series B Convertible Preferred Stock,
par value $.001 (the “Series B
Preferred Stock”), issued
pursuant to the designations, preferences and limitations set forth on
Schedule
A attached hereto (the
“Series B
Designations”), which
among other matters provided for redemption on the 24th month after issuance
(the “Redemption
Payment”), subject
to the terms and conditions set forth therein; and

    

    WHEREAS, each Guarantor will directly
benefit from the advance of funds to the Company pursuant to the Purchase
Agreement; and

    

    NOW, THEREFORE, in consideration of the
premises and to induce the Purchasers to enter into the Purchase Agreement and
to carry out the transactions contemplated thereby, each Guarantor hereby agrees
with the Purchasers as follows:

    

    1. Definitions. Unless
otherwise defined herein, terms defined in the Purchase Agreement and used
herein shall have the meanings given to them in the Purchase Agreement. The
words “hereof,” “herein,” “hereto” and “hereunder” and words of similar import
when used in this Guarantee shall refer to this Guarantee as a whole and not to
any particular provision of this Guarantee, and Section and Schedule references
are to this Guarantee unless otherwise specified. The meanings given to terms
defined herein shall be equally applicable to both the singular and plural forms
of such terms.  The following terms shall have the following
meanings:

    

    “Guarantee” means this
Subsidiary Guarantee, as the same may be amended, supplemented or otherwise
modified from time to time.

    

                 “Obligations” means
the collective reference to all obligations and undertakings of the Company of
whatever nature, monetary or otherwise, under the Series B Designations,
including the Redemption Payment, the Purchase Agreement, the Security
Agreement, the Warrants, the Registration Rights Agreement or any other future
agreement or obligations undertaken by the Company to the Purchasers, together
with all reasonable attorneys’ fees, disbursements and all other costs and
expenses of collection incurred by Purchasers in enforcing any of such
Obligations and/or this Guarantee.

    

    2. Guarantee.

    

    (a) Guarantee.

    

    
      	
              (i)  

            	
              The
      Guarantors hereby, jointly and severally, unconditionally and irrevocably,
      guarantee to the Purchasers and their respective successors, indorsees,
      transferees and assigns, the prompt and complete payment and performance
      by the Company when due (whether at the stated maturity, by acceleration
      or otherwise) of the Obligations.

            

    

    

    
      	
              (ii)  

            	
              Anything
      herein or in any other Transaction Document to the contrary
      notwithstanding, the maximum liability of each Guarantor hereunder and
      under the other Transaction Documents shall in no event exceed the amount
      which can be guaranteed by such Guarantor under applicable federal and
      state laws, including laws relating to the insolvency of debtors,
      fraudulent conveyance or transfer or laws affecting the rights of
      creditors generally (after giving effect to the right of contribution
      established in Section 2(b)).

            

    

    

    
      	
              (iii)  

            	
              Each
      Guarantor agrees that the Obligations may at any time and from time to
      time exceed the amount of the liability of such Guarantor hereunder
      without impairing the guarantee contained in this Section 2 or affecting
      the rights and remedies of the Purchasers
  hereunder.

            

    

    

    
      	
              (iv)  

            	
              The
      guarantee contained in this Section 2 shall remain in full force and
      effect until all the Obligations and the obligations of each Guarantor
      under the guarantee contained in this Section 2 shall have been satisfied
      by payment in full.

            

    

    

    
      	
              (v)  

            	
              No
      payment made by the Company, any of the Guarantors, any other guarantor or
      any other Person or received or collected by the Purchasers from the
      Company, any of the Guarantors, any other guarantor or any other Person by
      virtue of any action or proceeding or any set-off or appropriation or
      application at any time or from time to time in reduction of or in payment
      of the Obligations shall be deemed to modify, reduce, release or otherwise
      affect the liability of any Guarantor hereunder which shall,
      notwithstanding any such payment (other than any payment made by such
      Guarantor in respect of the Obligations or any payment received or
      collected from such Guarantor in respect of the Obligations), remain
      liable for the Obligations up to the maximum liability of such Guarantor
      hereunder until the Obligations are paid in
  full.

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    
      	
              (vi)  

            	
              Notwithstanding
      anything to the contrary in this Agreement, with respect to any defaulted
      non-monetary Obligations the specific performance of which by the
      Guarantors is not reasonably possible (e.g. the issuance of the Company's
      Common Stock), the Guarantors shall only be liable for making the
      Purchasers whole on a monetary basis for the Company's failure to perform
      such Obligations in accordance with the Transaction
    Documents.

            

    

    

    (b) Right of
Contribution. Each Guarantor hereby agrees that to the extent that a
Guarantor shall have paid more than its proportionate share of any payment made
hereunder, such Guarantor shall be entitled to seek and receive contribution
from and against any other Guarantor hereunder which has not paid its
proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 2(c). The provisions of
this Section 2(b) shall in no respect limit the obligations and liabilities of
any Guarantor to the Purchasers, and each Guarantor shall remain liable to the
Purchasers for the full amount guaranteed by such Guarantor
hereunder.

    

    (c) No
Subrogation.  Notwithstanding any payment made by any Guarantor
hereunder or any set-off or application of funds of any Guarantor by the
Purchasers, no Guarantor shall be entitled to be subrogated to any of the rights
of the Purchasers against the Company or any other Guarantor or any collateral
security or guarantee or right of offset held by the Purchasers for the payment
of the Obligations, nor shall any Guarantor seek or be entitled to seek any
contribution or reimbursement from the Company or any other Guarantor in respect
of payments made by such Guarantor hereunder, until all amounts owing to the
Purchasers by the Company on account of the Obligations are paid in full. If any
amount shall be paid to any Guarantor on account of such subrogation rights at
any time when all of the Obligations shall not have been paid in full, such
amount shall be held by such Guarantor in trust for the Purchasers, segregated
from other funds of such Guarantor, and shall, forthwith upon receipt by such
Guarantor, be turned over to the Purchasers in the exact form received by such
Guarantor (duly indorsed by such Guarantor to the Purchasers, if required), to
be applied against the Obligations, whether matured or unmatured, in such order
as the Purchasers may determine.

    

    (d) Amendments, Etc. With
Respect to the Obligations. Each Guarantor shall remain obligated
hereunder notwithstanding that, without any reservation of rights against any
Guarantor and without notice to or further assent by any Guarantor, any demand
for payment of any of the Obligations made by the Purchasers may be rescinded by
the Purchasers and any of the Obligations continued, and the Obligations, or the
liability of any other Person upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Purchasers, and
the Purchase Agreement and the other Transaction Documents and any other
documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Purchasers may
deem advisable from time to time, and any collateral security, guarantee or
right of offset at any time held by the Purchasers for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. The
Purchasers shall have no obligation to protect, secure, perfect or insure any
Lien at any time held by them as security for the Obligations or for the
guarantee contained in this Section 2 or any property subject
thereto.

    

    (e) Guarantee Absolute and
Unconditional. Each Guarantor waives any and all notice of the creation,
renewal, extension or accrual of any of the Obligations and notice of or proof
of reliance by the Purchasers upon the guarantee contained in this Section 2 or
acceptance of the guarantee contained in this Section 2; the Obligations, and
any of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this Section 2; and all dealings between the Company and
any of the Guarantors, on the one hand, and the Purchasers, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon the guarantee contained in this Section 2. Each Guarantor waives
to the extent permitted by law diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Company or any of the Guarantors with respect to the Obligations. Each Guarantor
understands and agrees that the guarantee contained in this Section 2 shall be
construed as a continuing, absolute and unconditional guarantee of payment
without regard to (a) the validity or enforceability of the Purchase Agreement
or any other Transaction Document, any of the Obligations or any other
collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by the Purchasers, (b) any
defense, set-off or counterclaim (other than a defense of payment or performance
or fraud or misconduct by Purchasers) which may at any time be available to or
be asserted by the Company or any other Person against the Purchasers, or (c)
any other circumstance whatsoever (with or without notice to or knowledge of the
Company or such Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Company for the Obligations,
or of such Guarantor under the guarantee contained in this Section 2, in
bankruptcy or in any other instance. When making any demand hereunder or
otherwise pursuing its rights and remedies hereunder against any Guarantor, the
Purchasers may, but shall be under no obligation to, make a similar demand on or
otherwise pursue such rights and remedies as they may have against the Company,
any other Guarantor or any other Person or against any collateral security or
guarantee for the Obligations or any right of offset with respect thereto, and
any failure by the Purchasers to make any such demand, to pursue such other
rights or remedies or to collect any payments from the Company, any other
Guarantor or any other Person or to realize upon any such collateral security or
guarantee or to exercise any such right of offset, or any release of the
Company, any other Guarantor or any other Person or any such collateral
security, guarantee or right of offset, shall not relieve any Guarantor of any
obligation or liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the
Purchasers against any Guarantor. For the purposes hereof, "demand" shall
include the commencement and continuance of any legal proceedings.

    

    (f) Reinstatement. The
guarantee contained in this Section 2 shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
the Purchasers upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or any Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Company or any Guarantor or any substantial part of its
property, or otherwise, all as though such payments had not been
made.

    

    (g) Payments. Each
Guarantor hereby guarantees that payments hereunder will be paid to the
Purchasers without set-off or counterclaim in U.S. dollars at the address set
forth or referred to in the Purchase Agreement.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    3. Representations and
Warranties. Each Guarantor hereby makes the following representations and
warranties to Purchasers as of the date hereof:

    

    (a) Organization and
Qualification. The Guarantor is a corporation, duly incorporated, validly
existing and in good standing under the laws of the applicable jurisdiction set
forth on Schedule 1, with the requisite corporate power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. The Guarantor has no subsidiaries other than those identified as such
on the Disclosure Schedules to the Purchase Agreement. The Guarantor is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not, individually or
in the aggregate, (x) adversely affect the legality, validity or enforceability
of any of this Guaranty in any material respect, (y) have a material adverse
effect on the results of operations, assets, prospects, or financial condition
of the Guarantor or (z) adversely impair in any material respect the Guarantor's
ability to perform fully on a timely basis its obligations under this Guaranty
(a "Material Adverse
Effect").

    

    (b) Authorization;
Enforcement.  The Guarantor has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
this Guaranty, and otherwise to carry out its obligations hereunder. The
execution and delivery of this Guaranty by the Guarantor and the consummation by
it of the transactions contemplated hereby have been duly authorized by all
requisite corporate action on the part of the Guarantor. This Guaranty has been
duly executed and delivered by the Guarantor and constitutes the valid and
binding obligation of the Guarantor enforceable against the Guarantor in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general
application.

    

    (c) No Conflicts. The
execution, delivery and performance of this Guaranty by the Guarantor and the
consummation by the Guarantor of the transactions contemplated thereby do not
and will not (i) conflict with or violate any provision of its Certificate of
Incorporation or By-laws or (ii) conflict with, constitute a default (or an
event which 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 of, any agreement, indenture or instrument to which the Guarantor
is a party, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Guarantor is subject (including Federal and state
securities laws and regulations), or by which any material property or asset of
the Guarantor is bound or affected, except in the case of each of clauses (ii)
and (iii), such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as could not, individually or in the aggregate,
have or result in a Material Adverse Effect. The business of the Guarantor is
not being conducted in violation of any law, ordinance or regulation of any
governmental authority, except for violations which, individually or in the
aggregate, do not have a Material Adverse Effect.

    

    (d) Consents and
Approvals. Except as set forth on Schedule 3(d), the
Guarantor is not required to obtain any consent, waiver, authorization or order
of, or make any filing or registration with, any court or other federal, state,
local, foreign or other governmental authority or other person in connection
with the execution, delivery and performance by the Guarantor of this
Guaranty.

    

    (e) Purchase Agreement.
The representations and warranties of the Company set forth in the Purchase
Agreement as they relate to such Guarantor, each of which is hereby incorporated
herein by reference, are true and correct as of each time such representations
are deemed to be made pursuant to such Purchase Agreement, and the Purchasers
shall be entitled to rely on each of them as if they were fully set forth
herein, provided, that each reference in each such representation and warranty
to the Company's knowledge shall, for the purposes of this Section 3, be deemed
to be a reference to such Guarantor's knowledge.

    

    4. Miscellaneous.

    

    (a) Amendments in
Writing. None of the terms or provisions of this Guarantee may be waived,
amended, supplemented or otherwise modified except in writing by the
Purchasers.

    

    (b) Notices. All notices,
requests and demands to or upon the Purchasers or any Guarantor hereunder shall
be effected in the manner provided for in the Purchase Agreement; provided that any
such notice, request or demand to or upon any Guarantor shall be addressed to
such Guarantor at its notice address set forth on Schedule
4(b).

    

    (c) No Waiver By Course Of
Conduct; Cumulative Remedies. The Purchasers shall not by any act (except
by a written instrument pursuant to Section 4(a)), delay, indulgence, omission
or otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any default under the Transaction Documents or Event of Default.
No failure to exercise, nor any delay in exercising, on the part of the
Purchasers, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Purchasers of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Purchasers would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.

    

    (d) Enforcement Expenses;
Indemnification.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
              (i)  

            	
              Each
      Guarantor agrees to pay, or reimburse the Purchasers for, all its costs
      and expenses incurred in collecting against such Guarantor under the
      guarantee contained in Section 2 or otherwise enforcing or preserving any
      rights under this Guarantee and the other Transaction Documents to which
      such Guarantor is a party, including, without limitation, the reasonable
      fees and disbursements of counsel to the
  Purchasers.

            

    

    

    
      	
              (ii)  

            	
              Each
      Guarantor agrees to pay, and to save the Purchasers harmless from, any and
      all liabilities with respect to, or resulting from any delay in paying,
      any and all stamp, excise, sales or other taxes which may be payable or
      determined to be payable in connection with any of the transactions
      contemplated by this Guarantee.

            

    

    

    
      	
              (iii)  

            	
              Each
      Guarantor agrees to pay, and to save the Purchasers harmless from, any and
      all liabilities, obligations, losses, damages, penalties, actions,
      judgments, suits, costs, expenses or disbursements of any kind or nature
      whatsoever with respect to the execution, delivery, enforcement,
      performance and administration of this Guarantee to the extent the Company
      would be required to do so pursuant to the Purchase
    Agreement.

            

    

    

    
      	
              (iv)  

            	
              The
      agreements in this Section shall survive repayment of the Obligations and
      all other amounts payable under the Purchase Agreement and the other
      Transaction Documents.

            

    

    

    (e) Successor and
Assigns. This Guarantee shall be binding upon the successors and assigns
of each Guarantor and shall inure to the benefit of the Purchasers and their
respective successors and assigns; provided that no Guarantor may assign,
transfer or delegate any of its rights or obligations under this Guarantee
without the prior written consent of the Purchasers.

    

    (f) Set-Off. Each
Guarantor hereby irrevocably authorizes the Purchasers at any time and from time
to time while an Event of Default under any of the Transaction Documents shall
have occurred and be continuing, without notice to such Guarantor or any other
Guarantor, any such notice being expressly waived by each Guarantor, to set-off
and appropriate and apply any and all deposits, credits, indebtedness or claims,
in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by the Purchasers to
or for the credit or the account of such Guarantor, or any part thereof in such
amounts as the Purchasers may elect, against and on account of the obligations
and liabilities of such Guarantor to the Purchasers hereunder and claims of
every nature and description of the Purchasers against such Guarantor, in any
currency, whether arising hereunder, under the Purchase Agreement, any other
Transaction Document or otherwise, as the Purchasers may elect, whether or not
the Purchasers have made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. The Purchasers shall
notify such Guarantor promptly of any such set-off and the application made by
the Purchasers of the proceeds thereof, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of the Purchasers under this Section are in addition to other rights and
remedies(including, without limitation, other rights of set-off) which the
Purchasers may have.

    

    (g) Counterparts. This
Guarantee may be executed by one or more of the parties to this Guarantee on any
number of separate counterparts (including by telecopy), and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.

    

    (h) Severability. Any
provision of this Guarantee which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

    

    (i) Section Headings. The
Section headings used in this Guarantee are for convenience of reference only
and are not to affect the construction hereof or be taken into consideration in
the interpretation hereof.

    

    (j) Integration. This
Guarantee and the other Transaction Documents represent the agreement of the
Guarantors and the Purchasers with respect to the subject matter hereof and
thereof, and there are no promises, undertakings, representations or warranties
by the Purchasers relative to subject matter hereof and thereof not expressly
set forth or referred to herein or in the other Transaction
Documents.

    

    (k) Governing Law. THIS
GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY PRINCIPLES OF
CONFLICTS OF LAWS.

    

    (l) Submission to
Jurisdictional; Waiver. Each Guarantor hereby irrevocably
and unconditionally:

    

    
      	
              (i)  

            	
              submits
      for itself and its property in any legal action or proceeding relating to
      this Guarantee and the other Transaction Documents to which it is a party,
      or for recognition and enforcement of any judgment in respect thereof, to
      the non-exclusive general jurisdiction of the Courts of the State of New
      York, located in New York County, New York, the courts of the United
      States of America for the Southern District of New York, and appellate
      courts from any thereof;

            

    

    

    
      	
              (ii)  

            	
              consents
      that any such action or proceeding may be brought in such courts and
      waives any objection that it may now or hereafter have to the venue of any
      such action or proceeding in any such court or that such action or
      proceeding was brought in an inconvenient court and agrees not to plead or
      claim the same;

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
              (iii)  

            	
              agrees
      that service of process in any such action or proceeding may be effected
      by mailing a copy thereof by registered or certified mail (or any
      substantially similar form of mail), postage prepaid, to such Guarantor at
      its address referred to in the Purchase Agreement or at such other address
      of which the Purchasers shall have been notified pursuant
      thereto;

            

    

    

    
      	
              (iv)  

            	
              agrees
      that nothing herein shall affect the right to effect service of process in
      any other manner permitted by law or shall limit the right to sue in any
      other jurisdiction; and

            

    

    

    
      	
              (v)  

            	
              waives,
      to the maximum extent not prohibited by law, any right it may have to
      claim or recover in any legal action or proceeding referred to in this
      Section any special, exemplary, punitive or consequential
      damages.

            

    

    

             (m) Acknowledgements.  Each
Guarantor hereby acknowledges that:

    

    
      	
              (i)  

            	
              it
      has been advised by counsel in the negotiation, execution and delivery of
      this Guarantee and the other Transaction Documents to which it is a
      party;

            

    

    

    
      	
              (ii)  

            	
              the
      Purchasers have no fiduciary relationship with or duty to any Guarantor
      arising out of or in connection with this Guarantee or any of the other
      Transaction Documents, and the relationship between the Guarantors, on the
      one hand, and the Purchasers, on the other hand, in connection herewith or
      therewith is solely that of debtor and creditor;
  and

            

    

    

    
      	
              (iii)  

            	
              no
      joint venture is created hereby or by the other Transaction Documents or
      otherwise exists by virtue of the transactions contemplated hereby among
      the Guarantors and the Purchasers.

            

    

    

    (n) Waiver of Jury Trial.
EACH GUARANTOR AND, BY ACCEPTANCE OF THE BENEFITS HEREOF, THE PURCHASERS, HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS GUARANTEE AND FOR ANY COUNTERCLAIM
THEREIN.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be
duly executed and delivered as of February 21, 2008, effective as of the date
first above written.

    

                              LUTREX ENTERPRISE,
INC.

    

                             By:
/s/ Adam
DeBard                        

                                       Name:
Adam DeBard

                                       Title:   President

    

    

    

    GLOBAL MODULAR, INC.

    

                             By:
/s/ Adam
DeBard                      

                                       Name:  Adam
DeBard

                                       Title:  President

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    

    SCHEDULE
1

    

    GUARANTORS

    

    The
following are the names, notice addresses and jurisdiction of organization of
each Guarantor.

    

    

    
      	
               

               

               

              Guarantor

            	
              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
3(d)

    

    Consents

    

    
      	
              1.  

            	
              The
      consent of BFI Business Finance is required under the terms of that
      certain Loan and Security Agreement dated October 26, 2004, as amended, by
      and among Global Modular, Inc., a Nevada corporation, and Lutrex
      Enterprises, Inc., a California corporation, and Global Diversified
      Industries, Inc., as guarantor, and BFI Business Finance, as
      lender.

            

    

    

    
      	
              2.  

            	
              The
      consent of BFI Business Finance is required under the terms of that
      certain $229,166.66 Secured Promissory Note dated May 10, 2007, by and
      among Global Modular, Inc. and Lutrex Enterprises, Inc. and BFI Business
      Finance.

            

    

     

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    SCHEDULE
4(d)

    

    Notices

    

    

    

    1200
Airport Drive

    Chowchilla,
California 93610-9344ex10-7.htm

    Exhibit
10.7

    

    SECURITY
AGREEMENT

    

                SECURITY
AGREEMENT, dated as of February 22, 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”), and 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
(collectively referred to as, the “Secured
Parties”).

    

    W
I T N E S S E T H:

    

                WHEREAS,
the Secured Parties have severally agreed to advance funds to the Company
evidenced by the Series B Preferred Stock, subject to the designations,
preferences and limitations set forth on Exhibit A attached
hereto (the “Series B
Designations”), which among other matters provided for redemption on the
24th month after issuance (the “Redemption
Payment”);

    

                WHEREAS,
pursuant to a certain Subsidiary Guarantee dated as of the date hereof (the
“Guaranty”),
the Guarantors have jointly and severally agreed to guaranty and act as surety
for payment of any obligations arising under the Series B Preferred Stock or the
Series B Designations, including the Redemption Payment; and

    

                WHEREAS,
in order to induce the Secured Parties to make the investments evidenced by the
Series B Preferred Stock, each Debtor has agreed to execute and deliver to the
Secured Parties this Agreement and to grant the Secured Parties, pari passu with each other
Secured Party, a perfected security interest in certain property of such Debtor
to secure the prompt payment, performance and discharge in full of all of the
Company’s obligations arising under the Series B Preferred Stock or the Series B
Designations, including the Redemption Payment, and the other Debtor’s
obligations under the Guaranty.

    

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

    

    (i)   All
goods, including, without 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 therefor, all parts therefor, and all substitutes for any of the
foregoing and all other items used and useful in connection with any Debtor’s
businesses and all improvements thereto; and (B) all inventory;

    

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

     

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

    

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

    

    (v)           All
commercial tort claims;

    

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

    

    (vii)           All
investment property;

    
                                               (viii)         
All supporting obligations; and

    

    (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
Agreement shall create a valid security interest in such asset and, to the
extent permitted by applicable law, this Agreement shall create a valid security
interest in the proceeds of such asset.

    

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

    

    (c)           “Majority in Interest”
shall mean, at any time of determination, the majority in interest (based on
then-outstanding stated value of the Series B Preferred Stock at the time of
such determination) of the Secured Parties.

    

    (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 the Secured
Parties, including, without limitation, all
obligations under this Agreement, the Series B Preferred Stock and the Series B
Designations, including the 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 Agreement, the Series B Preferred Stock or
the Series B 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)           “Senior Lender” means
BFI Business Finance and its successors and assigns, or any replacement lender
with a credit limit no greater than now exists.

    

    (h)           “Senior
Lien” means the lien of Senior Lender against the Company and the
subsidiaries of the Company.

    

    (i)           “Senior
Obligation” means (a) the
obligations of the Company to Senior Lender pursuant to that certain General
Continuing Guaranty and that certain Security Agreement (All Assets) by and
between the Company and Senior Lender, each dated October 26, 2004, each as
amended, restated and renewed from time to time; and (b) the obligations of the
subsidiaries of the Company pursuant to that certain Loan and Security Agreement
dated October 26, 2004, as amended, restated and renewed from time to
time.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

    

    2.           Grant of Perfected First Priority
Security Interest. As an inducement for the Secured Parties to extend the
funds as evidenced by the Series B Preferred Stock or the Series B Designations.
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
this Agreement, each Debtor shall deliver or cause to be delivered to the
Administrative Agent (a) any and all certificates and other instruments
representing or evidencing the Pledged Securities, and (b) any and all
certificates and other instruments or documents representing any of the other
Collateral, in each case, together with all Necessary
Endorsements.  The Debtors are, contemporaneously with the execution
hereof, delivering to Administrative Agent, or have previously delivered to
Administrative Agent, a true and correct copy of each Organizational Document
governing any of the Pledged Securities.

    

             
      4.           Representations, Warranties,
Covenants and Agreements of the Debtors. 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.

    

    (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 an Event of Default (as defined in the Series B Designations)
under the Series B 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 or otherwise, or of any check, draft,
note, trade acceptance or other instrument evidencing an obligation to pay any
such sum, hold the same in trust for the Secured Parties and shall forthwith
endorse and transfer any such sums or instruments, or both, to the Secured
Parties, pro-rata in proportion to their initial purchases of Series B Preferred
Stock for application to the satisfaction of the Obligations (and if any Series
B Preferred Stock is not outstanding, pro-rata in proportion to the initial
purchases of the remaining Series B Preferred Stock).

    

    (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, 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, to the reasonable attorneys’ fees and expenses incurred by
the Secured Parties in enforcing their rights hereunder and in connection with
collecting, storing and disposing of the Collateral, and then to satisfaction of
the Obligations pro rata among the Secured Parties (based on then-outstanding
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. Until so paid, any fees payable hereunder shall be added to the
stated value of the Series B 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 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 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, including the 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 and the Series B 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. All notices,
requests, demands and other communications hereunder shall be subject to the
notice provision of the Purchase Agreement (as such term is defined in the
Series B 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, 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, 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, the Purchase
Agreement (as such term is defined in the Series B 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.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (n)           Notwithstanding
any contrary provision of this Agreement or any other agreement between Secured
Parties and the Company and any of the Subsidiaries of the Company, the lien of
the Secured Parties are and at all times shall at all times be junior and
subordinate to the Senior Lien of Senior Lender which secures the Senior
Obligations of the Corporation.  Until the Senior Obligation owing by
Corporation and any of the Subsidiaries of the Corporation to Senior Lender are
paid to Senior Lender in full, for a period of 180 days (the "Blockage Period")
from and after receipt by Secured Parties of notification pursuant to a notice
from the Senior Lender that a default on the Senior Obligations exists or would
be created by taking Action Against the Collateral (as defined below), the
Secured Parties will not, without Senior Lender’s prior written consent, assert
or seek to enforce or apply, by legal proceedings or otherwise, any security
interest or other rights that Secured Parties may now have or hereafter acquire
with respect to the Collateral or the proceeds thereof or attempt to collect any
proceeds or any payments due on the Collateral (“Actions Against the
Collateral”).  Nothing herein shall prevent the Secured Parties
from accepting payments in the ordinary course of business, or exercising rights
that do not involve Actions Against the Collateral.

    

    [SIGNATURE
PAGES FOLLOW]

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

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

    

    

    
      	
              “Debtors”

               

              GLOBAL
      DIVERSIFIED INDUSTRIES, INC.

               

            
	
              By:/s/ Adam
      DeBard                                              
      

                   Name:
      Adam DeBard

                   Title:
      Secretary

                   Signed
      on the 21 day of February, 2008.

            
	 
      
	
              LUTREX
      ENTERPRISES, INC.

               

               

            
	
              By:
      /s/ Adam
      DeBard                                              
      

                   Name:
      Adam DeBard

                   Title:
      President

                   Signed
      on the 21 day of February, 2008.

               

            
	
              GLOBAL
      MODULAR, INC.

               

            
	
              By: /s/ Adam
      DeBard                                               

                   Name:
      Adam DeBard

                   Title:
      President

                   Signed
      on the 21 day of February, 2008.

               

              “Administrative
      Agent”

               

            

    

    BABIRAK
CARR, P.C.

    

    

    

    By: /s/ Neil
Carr                                                        

         Name:
Neil R.R. Carr

         Title:
Member / Shareholder

         Signed
on the ____ day of February, 2008.

    

    

    

    [SIGNATURE
PAGE OF HOLDERS FOLLOWS]

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    [SIGNATURE
PAGE OF HOLDERS TO SECURITY AGREEMENT]

    

    Name of Investing Entity:
_______________________________________________

    Signature of Authorized Signatory of Investing
entity: _________________________

    Name of
Authorized Signatory: ___________________________________________

    Title of
Authorized Signatory: ____________________________________________

    

    

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    

    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

    

    
      	
              1.  

            	
              The
      consent of BFI Business Finance is required under the terms of that
      certain Loan and Security Agreement dated October 26, 2004, as amended, by
      and among Global Modular, Inc., a Nevada corporation, and Lutrex
      Enterprises, Inc., a California corporation, and Global Diversified
      Industries, Inc., as guarantor, and BFI Business Finance, as
      lender.

            

    

    

    
      	
              2.  

            	
              The
      consent of BFI Business Finance is required under the terms of that
      certain $229,166.66 Secured Promissory Note dated May 10, 2007, by and
      among Global Modular, Inc. and Lutrex Enterprises, Inc. and BFI Business
      Finance.

            

    

    

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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 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 therefor, 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 interpleader and expenses associated therewith, shall be payable
by the Debtors on demand.

    

    8.  Rights with respect to
Collateral.  Each Secured
Party agrees with all other Secured Parties and the 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.

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