Document:

EXHIBIT
      10.2

    

    SECURITY
      AGREEMENT

    

    

    SECURITY
      AGREEMENT,
      dated
      as of February 15, 2007 (this "Agreement")
      made
      by
      Nesco Industries, Inc.,
      a
      Nevada corporation (the "Company"),
      and
      the undersigned subsidiaries of the Company (each a "Grantor"
      and
      collectively and together with the Company the "Grantors"),
      in
      favor of
      Gottbetter Capital Master, Ltd.,
      a
      company
      organized under the laws of the Cayman Islands, in its capacity as collateral
      agent (in such capacity, the "Collateral
      Agent")
      for
      the "Buyers" (as defined below) party to the Securities Purchase Agreement,
      dated as of even date herewith (as amended, restated or otherwise modified
      from
      time to time, the "Securities
      Purchase Agreement").

    

    WITNESSETH:

    

    WHEREAS,
      the Company and each party listed as a "Buyer" on the Schedule of Buyers
      attached thereto (collectively, the "Buyers")
      are
      parties to the Securities Purchase Agreement, pursuant to which the Company
      shall be required to sell, and the Buyers shall purchase or have the right
      to
      purchase, the "Notes" (as defined therein) issued pursuant thereto (as such
      Notes may be amended, restated, replaced or otherwise modified from time to
      time
      in accordance with the terms thereof, collectively, the "Notes");

     

    WHEREAS,
      each of the Grantors (other than the Company) (collectively, the "Guarantors")
      has
      executed and delivered a Guaranty dated the date hereof (the “Guaranty”)
      in
      favor of the Collateral Agent for the benefit of itself and the Buyers, with
      respect to the Company’s obligations under the Securities Purchase Agreement,
      the Notes and the Transaction Documents (as defined below); and

    

    WHEREAS,
      it is a condition precedent to the Buyers purchasing the Notes pursuant to
      the
      Securities Purchase Agreement that the Grantors shall have executed and
      delivered to the Collateral Agent this Agreement providing for the grant to
      the
      Collateral Agent for the benefit of the Buyers of a security interest in all
      personal property of each Grantor to secure all of the Company's obligations
      under the Securities Purchase Agreement, the Notes and the other Transaction
      Documents as defined in the Securities Purchase Agreement (the “Transaction
      Documents”)
      and
      the Guarantors’ obligations under the Guaranty.

    

    NOW,
      THEREFORE, in consideration of the premises and the agreements herein and in
      order to induce the Buyers to perform under the Securities Purchase Agreement,
      each Grantor agrees with the Collateral Agent, for the benefit of the Buyers,
      as
      follows:

    

    SECTION
      1. DEFINITIONS.

    

    (a) Reference
      is hereby made to the Securities Purchase Agreement and the Notes for a
      statement of the terms thereof.  All terms used in this Agreement and the
      recitals hereto which are defined in the Securities Purchase Agreement, the
      Notes or in Articles 8 or 9 of the Uniform Commercial Code as in effect from
      time to time in the State of New York (the "Code"),
       and which are not otherwise defined herein shall have the same meanings
      herein as set forth therein;
      provided
      that
      terms used herein which are defined in the Code as in effect in the State of
      New
      York on the date hereof shall continue to have the same meaning notwithstanding
      any replacement or amendment of such statute except as the Collateral Agent
      may
      otherwise determine.  

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b) The
      following terms shall have the respective meanings provided for in the Code:
       "Accounts", "Cash Proceeds", "Chattel Paper", "Commercial Tort Claim",
      "Commodity Account", "Commodity Contracts", "Deposit Account", "Documents",
      "Equipment", "Fixtures", "General Intangibles", "Goods", "Instruments",
      "Inventory", "Investment Property", "Letter-of-Credit Rights", "Noncash
      Proceeds", "Payment Intangibles", "Proceeds", "Promissory Notes", "Security",
      "Record", "Security Account", "Software", and "Supporting
      Obligations".

    

    (c) As
      used
      in this Agreement, the following terms shall have the respective meanings
      indicated below, such meanings to be applicable equally to both the singular
      and
      plural forms of such terms:

    

    "Collateral"
      shall
      have the meaning set forth in Section 2 hereof.  

    

    "Copyright
      Licenses"
      means
      all licenses, contracts or other agreements, whether written or oral, naming
      any
      Grantor as licensee or licensor and providing for the grant of any right to
      use
      or sell any works covered by any copyright (including, without limitation,
      all
      Copyright Licenses set forth in Schedule
      II
      hereto).

    

    "Copyrights"
      means
      all domestic and foreign copyrights, whether registered or not, including,
      without limitation, all copyright rights throughout the universe (whether now
      or
      hereafter arising) in any and all media (whether now or hereafter developed),
      in
      and to all original works of authorship fixed in any tangible medium of
      expression, acquired or used by any Grantor (including, without limitation,
      all
      copyrights described in Schedule
      II
      hereto),
      all applications, registrations and recordings thereof (including, without
      limitation, applications, registrations and recordings in the United States
      Copyright Office or in any similar office or agency of the United States or
      any
      other country or any political subdivision thereof), and all reissues,
      divisions, continuations, continuations in part and extensions or renewals
      thereof.

    

    "Event
      of Default"
      shall
      have the meaning set forth in the Notes.

    

    "GAAP"
      shall
      have the meaning set forth in Section 4(a) hereof.   

    

    "Insolvency
      Proceeding"
      means
      any proceeding commenced by or against any Person under any provision of the
      Bankruptcy Code (Chapter 11 of Title 11 of the United States Code) or under
      any other bankruptcy or insolvency law, assignments for the benefit of
      creditors, formal or informal moratoria, compositions, or extensions generally
      with creditors, or proceedings seeking reorganization, arrangement, or other
      similar relief.

    

    "Intellectual
      Property"
      means
      the Copyrights, Trademarks and Patents.

    

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    "Licenses"
      means
      the Copyright Licenses, the Trademark Licenses and the Patent
      Licenses.

    

    "Lien"
      means
      any mortgage, deed of trust, pledge, lien (statutory or otherwise), security
      interest, charge or other encumbrance or security or preferential arrangement
      of
      any nature, including, without limitation, any conditional sale or title
      retention arrangement, any capitalized lease and any assignment, deposit
      arrangement or financing lease intended as, or having the effect of,
      security.

    

    “Obligations”
shall
      have the meaning set forth in Section 3 hereof.

    

    "Patent
      Licenses"
      means
      all licenses, contracts or other agreements, whether written or oral, naming
      any
      Grantor as licensee or licensor and providing for the grant of any right
      to
      manufacture, use or sell any invention covered by any Patent (including, without
      limitation, all Patent Licenses set forth in Schedule
      II
      hereto).

    

    "Patents"
      means
      all domestic and foreign letters patent, design patents, utility patents,
      industrial designs, inventions, trade secrets, ideas, concepts, methods,
      techniques, processes, proprietary information, technology, know-how, formulae,
      rights of publicity and other general intangibles of like nature, now existing
      or hereafter acquired (including, without limitation, all domestic and foreign
      letters patent, design patents, utility patents, industrial designs, inventions,
      trade secrets, ideas, concepts, methods, techniques, processes, proprietary
      information, technology, know-how and formulae described in Schedule
      II
      hereto),
      all applications, registrations and recordings thereof (including, without
      limitation, applications, registrations and recordings in the United States
      Patent and Trademark Office, or in any similar office or agency of the United
      States or any other country or any political subdivision thereof), and all
      reissues, divisions, continuations, continuations in part and extensions or
      renewals thereof.

    

    "Trademark
      Licenses"
      means
      all licenses, contracts or other agreements, whether written or oral, naming
      any
      Grantor as licensor or licensee and providing for the grant of any right
      concerning any Trademark, together with any goodwill connected with and
      symbolized by any such trademark licenses, contracts or agreements and the
      right
      to prepare for sale or lease and sell or lease any and all Inventory now or
      hereafter owned by any Grantor and now or hereafter covered by such licenses
      (including, without limitation, all Trademark Licenses described in Schedule
      II
      hereto).

    

    "Trademarks"
      means
      all domestic and foreign trademarks, service marks, collective marks,
      certification marks, trade names, business names, d/b/a's, Internet domain
      names, trade styles, designs, logos and other source or business identifiers
      and
      all general intangibles of like nature, now or hereafter owned, adopted,
      acquired or used by any Grantor (including, without limitation, all domestic
      and
      foreign trademarks, service marks, collective marks, certification marks, trade
      names, business names, d/b/a's, Internet domain names, trade styles, designs,
      logos and other source or business identifiers described in Schedule
      II
      hereto),
      all applications, registrations and recordings thereof (including, without
      limitation, applications, registrations and recordings 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), and all reissues, extensions or renewals thereof, together with all
      goodwill of the business symbolized by such marks and all customer lists,
      formulae and other Records of any Grantor relating to the distribution of
      products and services in connection with which any of such marks are
      used.

    

    
      
        
        

      

      
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    SECTION
      2. GRANT
      OF SECURITY INTEREST.
       As collateral security for all of the Obligations, each Grantor hereby
      pledges and assigns to the Collateral Agent for the benefit of the Buyers,
      and
      grants to the Collateral Agent for the benefit of the Buyers a continuing
      security interest in, all personal property of each Grantor, wherever located
      and whether now or hereafter existing and whether now owned or hereafter
      acquired, of every kind and description, tangible or intangible (collectively,
      the "Collateral"),
      including, without limitation, the following:

    

    (a) all
      Accounts;

    

    (b) all
      Chattel Paper (whether tangible or electronic);

    

    (c) the
      Commercial Tort Claims;

    

    (d) all
      Deposit Accounts, all cash, and all other property from time to time deposited
      therein and the monies and property in the possession or under the control
      of
      the Collateral Agent or any Buyer or any affiliate, representative, agent or
      correspondent of the Collateral Agent or any Buyer;

    

    (e) all
      Documents;

    

    (f) all
      Equipment;

    

    (g) all
      Fixtures;

    

    (h) all
      General Intangibles (including, without limitation, all Payment
      Intangibles);

    

    (i) all
      Goods;

    

    (j) all
      Instruments (including, without limitation, Promissory Notes and each
      certificated Security);

    

    (k) all
      Inventory;

    

    (l) all
      Investment Property;

    

    (m) all
      Copyrights, Patents and Trademarks, and all Licenses;

    

    (n) all
      Letter-of-Credit Rights;

    

    (o) all
      Supporting Obligations;

    

    
      
        
        

      

      
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    (p) all
      other
      tangible and intangible personal property of each Grantor (whether or not
      subject to the Code), including, without limitation, all bank and other accounts
      and all cash and all investments therein, all proceeds, products, offspring,
      accessions, rents, profits, income, benefits, substitutions and replacements
      of
      and to any of the property of any Grantor described in the preceding clauses
      of
      this Section
      2
      (including, without limitation, any proceeds of insurance thereon and all causes
      of action, claims and warranties now or hereafter held by each Grantor in
respect
      of any of the items listed above), and all books, correspondence, files and
      other Records, including, without limitation, all tapes, desks, cards, Software,
      data and computer programs in the possession or under the control of any Grantor
      or any other Person from time to time acting for any Grantor that at any time
      evidence or contain information relating to any of the property described in
      the
      preceding clauses of this
      Section 2
      or are
      otherwise necessary or helpful in the collection or realization thereof;
      and

    

    (q) all
      Proceeds, including all Cash Proceeds and Noncash Proceeds, and products of
      any
      and all of the foregoing Collateral;

    

    in
      each
      case howsoever any Grantor's interest therein may arise or appear (whether
      by
      ownership, security interest, claim or otherwise).

     

    SECTION
      3. SECURITY
      FOR OBLIGATIONS.
       The security interest created hereby in the Collateral constitutes
      continuing collateral security for all of the following obligations, whether
      now
      existing or hereafter incurred (collectively, the "Obligations"):

    

    (a) the
      payment by the Company, as and when due and payable (by scheduled maturity,
      required prepayment, acceleration, demand or otherwise), of all amounts from
      time to time owing by it in respect of the Securities Purchase Agreement, the
      Notes and the other Transaction Documents, including, without limitation, (A)
      all principal of and interest on the Notes (including, without limitation,
      all
      interest that accrues after the commencement of any Insolvency Proceeding of
      any
      Grantor, whether or not the payment of such interest is unenforceable or is
      not
      allowable due to the existence of such Insolvency Proceeding), and (B) all
      fees,
      commissions, expense reimbursements, indemnifications and all other amounts
      due
      or to become due under any of the Transaction Documents; and

    

    (b) the
      due
      performance and observance by each Grantor of all of its other obligations
      from
      time to time existing in respect of any of the Transaction Documents, including
      without limitation, with respect to any conversion or redemption rights of
      the
      Buyers under the Notes, for so long as the Notes are outstanding.

    

    SECTION
      4. REPRESENTATIONS
      AND WARRANTIES.
       Each Grantor represents and warrants as follows:

    

    (a) Schedule
      I hereto sets forth (i) the exact legal name of each Grantor, and (ii) the
      organizational identification number of each Grantor or states that no such
      organizational identification number exists.

    

    
      
        
        

      

      
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    (b) There
      is
      no pending or written notice threatening any action, suit, proceeding or claim
      affecting any Grantor before any governmental authority or any arbitrator,
      or,
      to the knowledge of the Company, any order, judgment or award by any
      governmental authority or arbitrator, that may adversely affect the grant by
      any
      Grantor, or the perfection, of the security interest purported to be created
      hereby in the Collateral, or the exercise by the Collateral Agent of any of
      its
      rights or remedies hereunder.

    

    (c) Except
      as
      otherwise disclosed in the Securities Purchase Agreement, all Federal, state
      and
      local tax returns and other reports required by applicable law to be filed
      by
      any Grantor have been filed, or extensions have been obtained, and all
      taxes,
      assessments and other governmental charges imposed upon any Grantor or any
      property of any Grantor (including, without limitation, all Federal income
      and
      social security taxes on employees' wages) and which have become due and payable
      on or prior to the date hereof have been paid, except to the extent contested
      in
      good faith by proper proceedings which stay the imposition of any penalty,
      fine
      or Lien resulting from the non-payment thereof and with respect to which
      adequate reserves have been set aside for the payment thereof in accordance
      with
      accounting principles generally accepted in the United States ("GAAP")
      consistently applied.

    

    (d) All
      Equipment, Fixtures, Goods and Inventory of each Grantor now existing are,
      and
      all Equipment, Fixtures, Goods and Inventory of each Grantor hereafter existing
      will be, located and/or based at the addresses specified therefor in
Schedule
      III
      hereto,
      except that each Grantor will give the Collateral Agent written notice of any
      change in the location of any such Collateral within 20 days of such change,
      other than to locations set forth on Schedule
      III
      hereto
      (or a new Schedule III delivered by Grantors to Collateral Agent from time
      to
      time) and with respect to which the Collateral Agent has filed financing
      statements and otherwise fully perfected its Liens thereon.  Each Grantor's
      chief place of business and chief executive office, the place where each Grantor
      keeps its Records concerning Accounts and all originals of all Chattel Paper
      are
      located at the addresses specified therefor in Schedule
      III
      hereto.
 None of the Accounts is evidenced by Promissory Notes or other
      Instruments.  Set forth in Schedule
      IV
      hereto
      is a complete and accurate list, as of the date of this Agreement, of (i) each
      Promissory Note, Security and other Instrument owned by each Grantor and (ii)
      each Deposit Account, Securities Account and Commodities Account of each
      Grantor, together with the name and address of each institution at which each
      such Account is maintained, the account number for each such Account and a
      description of the purpose of each such Account.  Set forth in Schedule
      II
      hereto
      is a complete and correct list of each trade name used by each Grantor and
      the
      name of, and each trade name used by, each person from which each Grantor has
      acquired any substantial part of the Collateral.

    

    (e) Each
      Grantor has delivered to the Collateral Agent complete and correct copies of
      each License described in Schedule
      II
      hereto,
      including all schedules and exhibits thereto, which represents all of the
      Licenses existing on the date of this Agreement.  Each such License sets
      forth the entire agreement and understanding of the parties thereto relating
      to
      the subject matter thereof, and there are no other agreements, arrangements
      or
      understandings, written or oral, relating to the matters covered thereby or
      the
      rights of such Grantor or any of its affiliates in respect thereof.  Each
      material License now existing is, and any material License entered into in
      the
      future will be, the legal, valid and binding obligation of the parties thereto,
      enforceable against such parties in accordance with its terms.  No default
      under any material License by any such party has occurred, nor does any defense,
      offset, deduction or counterclaim exist thereunder in favor of any such
      party.

    

    
      
        
        

      

      
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    (f) Each
      Grantor owns and controls, or otherwise possesses adequate rights to use, all
      its Trademarks, Patents and Copyrights, which are the only trademarks, patents,
      copyrights, inventions, trade secrets, proprietary information and technology,
      know-how, formulae, rights of publicity necessary to conduct its business in
      substantially the same manner as conducted as of the date hereof.
 Schedule
      II
      hereto
      sets forth a true and complete list of all registered copyrights, issued
      Patents, Trademarks, and Licenses annually owned or used by each Grantor as
      of
      the date hereof.  To the knowledge of the Grantors, all such Intellectual
      Property of each Grantor is in full force and effect, has not been adjudged
      invalid or unenforceable, is valid
      and
      enforceable and has not been abandoned in whole or in part.  Except as set
      forth in Schedule II, no such Intellectual Property is the subject of any
      licensing or franchising agreement.  No Grantor has any knowledge of any
      conflict with the rights of others to any Intellectual Property and, to the
      knowledge of the Grantors, each Grantor is not now infringing or in conflict
      with any such rights of others in any material respect, and to the knowledge
      of
      the Grantors, no other Person is now infringing or in conflict in any material
      respect with any such properties, assets and rights owned or used by each
      Grantor.  No Grantor has received any notice that it is violating or has
      violated the trademarks, patents, copyrights, inventions, trade secrets,
      proprietary information and technology, know-how, formulae, rights of publicity
      or other intellectual property rights of any third party.

    

    (g) Each
      Grantor is and will be at all times the sole and exclusive owner of, or
      otherwise has and will have adequate rights in, the Collateral pledged hereunder
      by such Grantor free and clear of any Liens, except for Permitted Liens on
      any
      Collateral and except as otherwise provided for herein.  No effective
      financing statement or other instrument similar in effect covering all or any
      part of the Collateral is on file in any recording or filing office except
      such
      (i) as may have been filed in favor of the Collateral Agent and/or the Buyers
      relating to this Agreement, (ii) as shall be filed at the Closing and (iii)
      as
      are identified in Schedule 4(g) hereto.

    

    (h) The
      exercise by the Collateral Agent of any of its rights and remedies hereunder
      will not contravene any law or any contractual restriction binding on or
      otherwise affecting each Grantor or any of its properties.

    
       

      
        
          
          

        

        
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    (i) No
      authorization or approval or other action by, and no notice to or filing with,
      any governmental authority or other regulatory body, or any other Person, is
      required for (i) the grant by each Grantor, or the perfection, of the
      security interest purported to be created hereby in the Collateral, or
      (ii) the exercise by the Collateral Agent any of its rights and remedies
      hereunder, except (A) for the filing under the Uniform Commercial Code as
      in effect in the applicable jurisdiction of the financing statements
described
      in Schedule
      V
      hereto
      (or a new Schedule
      V
      delivered by Grantors to Collateral Agent from time to time), all of which
      financing statements have been duly filed and are in full force and effect
      or
      will be duly filed and in full force and effect, (B) with respect to Deposit
      Accounts, and all cash and other property from time to time deposited therein,
      for the execution of a control agreement with the depository institution with
      which such account is maintained, as provided in Section
      5(i),
      (C) with respect to Commodity Contracts,
      for the execution of a control agreement with the commodity intermediary with
      which such commodity contract is carried, as provided in Section
      5(i),
      (D)
with
      respect to the perfection of the security interest created hereby in the
      Intellectual Property, for the recording of the appropriate Assignment for
      Security, substantially in the form of Exhibit
      A
      hereto,
      as applicable, in the United States Patent and Trademark Office or the United
      States Copyright Office, as applicable, (E) with respect to the perfection
      of the security interest created hereby in foreign Intellectual Property and
      Licenses, for registrations and filings in jurisdictions located outside of
      the
      United States and covering rights in such jurisdictions relating to the
      Intellectual Property and Licenses,
      (F)
      with
      respect to the perfection of the security interest created hereby in Titled
      Collateral, for the submission of an appropriate application requesting that
      the
      Lien of the Collateral Agent be noted on the Certificate of Title or certificate
      of ownership, completed and authenticated by the applicable Grantor, together
      with the Certificate of Title or certificate of ownership, with respect to
      such
      Titled Collateral, to the appropriate governmental authority, (G) with respect
      to the perfection of the security interest created hereby in any
      Letter-of-Credit Rights, for the consent of the issuer of the applicable letter
      of credit to the assignment of proceeds as provided in the Uniform Commercial
      Code as in effect in the applicable jurisdiction, (H) with respect to any action
      that may be necessary to obtain control of Collateral constituting Deposit
      Accounts, Commodity Contracts, Electronic Chattel Paper, Investment Property
      or
      Letter-of-Credit Rights, the taking of such actions, and (I) the Collateral
      Agent having possession of all Documents, Chattel Paper, Instruments and cash
      constituting Collateral (subclauses (A), (B), (C), (D), (E), (F), G), (H) and
      (I), each a "Perfection
      Requirement"
      and
      collectively, the "Perfection
      Requirements").

     

    (j) This
      Agreement creates in favor of the Collateral Agent a legal, valid and
      enforceable security interest in the Collateral, as security for the
      Obligations.  Collateral Agent’s satisfaction of the Perfection
      Requirements will result in the perfection of such security interests.
 Such security interests will be, perfected, first priority security
      interests, subject only to Permitted Liens and the recording of such instruments
      of assignment.   

    

    (k) As
      of the
      date hereof, no Grantor holds any Commercial Tort Claims nor is aware of any
      such pending claims.

    

    SECTION
      5. COVENANTS
      AS TO THE COLLATERAL.
       So long as any of the Obligations shall remain outstanding, unless the
      Collateral Agent shall otherwise consent in writing:

    
       

      
        
          
          

        

        
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    (a) Further
      Assurances.
       Each Grantor will at its expense, at any time and from time to time,
      promptly execute and deliver all further instruments and documents and take
      all
      further action that the Collateral Agent may reasonably request in order to:
       (i) perfect and protect the security interest purported to be created
      hereby; (ii) enable the Collateral Agent to exercise and enforce its rights
      and remedies hereunder in respect of the Collateral; or (iii) otherwise
      effect the purposes of this Agreement, including, without limitation:
 (A) marking conspicuously all Chattel Paper and each License and, at
      the request of the Collateral Agent, each of its Records pertaining to the
      Collateral with a legend, in form and substance satisfactory to the Collateral
      Agent, indicating that such Chattel Paper, License or Collateral is subject
      to
      the security interest created hereby, (B)  delivering and pledging to the
      Collateral Agent each Promissory Note, Security, Chattel Paper or other
      Instrument, now or hereafter owned by any Grantor,
      duly endorsed and accompanied by executed instruments of transfer or assignment,
      all in form and substance satisfactory to the Collateral Agent,
      (C) executing and filing (to the extent, if any, that any Grantor's
      signature is required thereon) or authenticating the filing of, such financing
      or continuation statements, or amendments thereto, as may be necessary or
      desirable or that the Collateral Agent may request in order to perfect and
      preserve the security interest purported to be created hereby,
      (D) furnishing to the Collateral Agent from time to time statements and
      schedules further identifying and describing the Collateral and such other
      reports in connection with the Collateral in each case as the Collateral Agent
      may reasonably request, all in reasonable detail, (E) if any Collateral
      shall be in the possession of a third party, notifying such Person of the
      Collateral Agent's security interest created hereby and obtaining a written
      acknowledgment from such Person that such Person holds possession of the
      Collateral for the benefit of the Collateral Agent, which such written
      acknowledgement shall be in form and substance satisfactory to the Collateral
      Agent (F) if at any time after the date hereof, any Grantor acquires or
      holds any Commercial Tort Claim, promptly notifying the Collateral Agent in
      a
      writing signed by such Grantor setting forth a brief description of such
      Commercial Tort Claim and granting to the Collateral Agent a security interest
      therein and in the proceeds thereof, which writing shall incorporate the
      provisions hereof and shall be in form and substance satisfactory to the
      Collateral Agent, (G) upon the acquisition after the date hereof by any
      Grantor of any motor vehicle or other Equipment subject to a certificate of
      title or ownership (other than a Motor Vehicle or Equipment that is subject
      to a
      purchase money security interest), causing the
      Collateral Agent to be listed as the lienholder on such certificate of title
      or
      ownership and delivering evidence of the same to the Collateral Agent in
      accordance with the Securities Purchase Agreement; and (H) taking all
      actions required by any earlier versions of the Uniform Commercial Code or
      by
      other law, as applicable, in any relevant Uniform Commercial Code jurisdiction,
      or by other law as applicable in any foreign jurisdiction.

     

    (b) Location
      of Equipment and Inventory.
       Each Grantor will keep the Equipment and Inventory at the locations
      specified therefor on Schedule II hereto, or, at such other locations in the
      United States, provided that within 10 days following the relocation of
      Equipment or Inventory to such other location, Grantor shall deliver to the
      Collateral Agent a new Schedule II indicating such new location.

    

    (c) Condition
      of Equipment.
       Each Grantor will maintain or cause the Equipment (necessary or useful to
      its business) to be maintained and preserved in good condition, repair and
      working order, ordinary wear and tear excepted, and will forthwith, or in the
      case of any loss or damage to any Equipment of any Grantor within a commercially
      reasonable time after the occurrence thereof, make or cause to be made all
      repairs, replacements and other improvements in connection therewith which
      are
      necessary or desirable, consistent with past practice, or which the Collateral
      Agent may request to such end.  Any Grantor will promptly furnish to the
      Collateral Agent a statement describing in reasonable detail any such loss
      or
      damage in excess of $250,000 per occurrence to any Equipment.

    

    (d) Taxes,
      Etc. Each
      Grantor agrees to pay promptly when due all property and other taxes,
      assessments and governmental charges or levies imposed upon, and all claims
      (including claims for labor, materials and supplies) against, the Equipment
      and
      Inventory, except to the extent the validity thereof is being contested in
      good
      faith by proper proceedings which stay the imposition of any penalty, fine
      or
      Lien resulting from the non-payment thereof and with respect to which adequate
      reserves in accordance with GAAP have been set aside for the payment
      thereof.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    (e) Insurance.

    

    (i) Each
      Grantor will, at its own expense, maintain insurance (including, without
      limitation, commercial general liability and property insurance) with respect
      to
      the Equipment and Inventory in such amounts, against such risks, in such form
      and with responsible and reputable insurance companies or associations as is
      required by any governmental authority having jurisdiction with respect thereto
      or as is carried generally in accordance with sound business practice by
      companies in similar businesses similarly situated and in any event, in amount,
      adequacy and scope reasonably satisfactory to the Collateral Agent.
 To
      the
      extent requested by the Collateral Agent at any time and from time to time,
      each
      such policy for liability insurance shall provide for all losses to be paid
      on
      behalf of the Collateral Agent and any Grantor as their respective interests
      may
      appear, and each policy for property damage insurance shall provide for all
      losses to be adjusted with, and paid directly to, the Collateral Agent. To
      the
      extent requested by the Collateral Agent at any time and from time to time,
      each
      such policy shall in addition (A) name the Collateral Agent as an additional
      insured party thereunder (without any representation or warranty by or
      obligation upon the Collateral Agent) as their interests may appear, (B) contain
      an agreement by the insurer that any loss thereunder shall be payable to the
      Collateral Agent on its own account notwithstanding any action, inaction or
      breach of representation or warranty by any Grantor, (C) provide that there
      shall be no recourse against the Collateral Agent for payment of premiums or
      other amounts with respect thereto, and (D) provide that at least 30 days'
      prior
      written notice of cancellation, lapse, expiration or other adverse change shall
      be given to the Collateral Agent by the insurer. Any
      Grantor will, if so requested by the Collateral Agent, deliver to the Collateral
      Agent original or duplicate policies of such insurance and, as often as the
      Collateral Agent may reasonably request, a report of a reputable insurance
      broker with respect to such insurance.  Any Grantor will also, at the
      reasonable request of the Collateral Agent, execute and deliver instruments
      of
      assignment of such insurance policies and cause the respective insurers to
      acknowledge notice of such assignment.

    

    (ii) Reimbursement
      under any liability insurance maintained by any Grantor pursuant to this
Section
      5(e)
      may be
      paid directly to the Person who shall have incurred liability covered by such
      insurance.  Following the occurrence of an Event of Default and until such
      Event of Default has been cured and no amounts payable under the Notes are
      due
      but not paid, in the case of any loss involving damage to Equipment or
      Inventory, any proceeds of insurance maintained by any Grantor pursuant to
      this
Section
      5(e)
      shall be
      paid to the Collateral Agent (except as to which paragraph (iii) of
      this
      Section 5(e)
      is not
      applicable), any Grantor will make or cause to be made the necessary repairs
      to
      or replacements of such Equipment or Inventory, and any proceeds of insurance
      maintained by any Grantor pursuant to this Section
      5(e)
      shall be
      paid by the Collateral
      Agent
      to such
      Grantor as reimbursement for the costs of such repairs or
      replacements.

    

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    (iii) All
      insurance payments in respect of such Equipment or Inventory shall be paid
      to
      the Collateral Agent and applied as specified in Section
      7(b)
      hereof.

    

    (f) Provisions
      Concerning the Accounts and the Licenses.

    

    (i) Each
      Grantor will (A) give the Collateral Agent at least 30 days' prior written
      notice of any change in such Grantor's name, identity or organizational
      structure, (B) maintain its jurisdiction of incorporation as set forth in
Section
      4(b)
      hereto,
      (C) immediately notify the Collateral Agent upon obtaining an organizational
      identification number, if on the date hereof such Grantor did not have such
      identification number, and (D) keep adequate records concerning the Accounts
      and
      Chattel Paper and permit representatives of the Collateral Agent during normal
      business hours on reasonable notice to such Grantor, to inspect and make
      abstracts from such Records and Chattel Paper.

    

    (ii) Each
      Grantor will, except as otherwise provided in this subsection (f), use
      commercially reasonable efforts to continue to collect, at its own expense,
      all
      amounts due or to become due under the Accounts.  In connection with such
      collections, any Grantor may (and, at the Collateral Agent's direction, will)
      take such action as any Grantor or the Collateral Agent may deem necessary
      or
      advisable to enforce collection or performance of the Accounts; provided,
      however
      , that
      the Collateral Agent shall have the right at any time, upon the occurrence
      and
      during the continuance of an Event of Default, to notify the account debtors
      or
      obligors under any Accounts of the assignment of such Accounts to the Collateral
      Agent and to direct such account debtors or obligors to make payment of all
      amounts due or to become due to any Grantor thereunder directly to the
      Collateral Agent or its designated agent and, upon such notification and at
      the
      expense of any Grantor and to the extent permitted by law, to enforce collection
      of any such Accounts and to adjust, settle or compromise the amount or payment
      thereof, in the same manner
      and to
      the same extent as may Grantor might have done.  After receipt by any
      Grantor of a notice from the Collateral Agent that the Collateral Agent has
      notified, intends to notify, or has enforced or intends to enforce any Grantor's
      rights against the account debtors or obligors under any Accounts as referred
      to
      in the proviso to the immediately preceding sentence, upon the occurrence of
      an
      Event of Default and for so long as an Event of Default shall be continuing,
      (A) all amounts and proceeds (including Instruments) received by any
      Grantor in respect of the Accounts shall be received in trust for the benefit
      of
      the Collateral Agent hereunder, shall be segregated from other funds of any
      Grantor and shall be forthwith paid over to the Collateral Agent in the same
      form as so received (with any necessary endorsement) to be held as cash
      collateral and either (i) credited to the outstanding obligations so long
      as no Event of Default shall have occurred and be continuing or (ii) if an
      Event
      of Default shall have occurred and be continuing, applied as specified in
Section
      7(b)
      hereof,
      and (B) no Grantor will adjust, settle or compromise the amount or payment
      of
      any Account or release wholly or partly any account debtor or obligor thereof
      or
      allow any credit or discount thereon.  In addition, upon the occurrence and
      during the continuance of an Event of Default, the Collateral Agent may (in
      its
      sole and absolute discretion) direct any or all of the banks and financial
      institutions with which any Grantor either maintains a Deposit Account or a
      lockbox or deposits the proceeds of any Accounts to send immediately to the
      Collateral Agent by wire transfer (to such account as the Collateral Agent
      shall
      specify, or in such other manner as the Collateral Agent shall direct) all
      or a
      portion of such securities, cash, investments and other items held by such
      institution; provided, that if Collateral Agent shall give such a notice it
      shall, upon notification and verification of the discontinuance of the
      applicable Event of Default, promptly give a notice to each such bank and
      financial institution that it should no longer send any such securities, cash,
      investments or other items to the Collateral, and the Collateral Agent shall
      return all such items theretofore received (except to the extent properly
      applied against the Obligations) to the applicable Grantor.  Subject to the
      preceding sentence, any such securities, cash, investments and other items
      so
      received by the Collateral Agent shall be applied as specified in accordance
      with Section
      7
      hereof.

    

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    (iii) Upon
      the
      occurrence and during the continuance of any breach or default under any
      material License referred to in Schedule
      II
      hereto
      by any party thereto other than any Grantor, each Grantor party thereto will,
      promptly after obtaining knowledge thereof, give the Collateral Agent written
      notice of the nature and duration thereof, specifying what action, if any,
      it
      has taken and proposes to take with respect thereto and thereafter will take
      reasonable steps to protect and preserve its rights and remedies in respect
      of
      such breach or default, or will obtain or acquire an appropriate substitute
      License if reasonably necessary in the continued conduct of such Grantor’s
      business as theretofore conducted .

    

    (iv) Each
      Grantor will, at its expense, promptly deliver to the Collateral Agent a copy
      of
      each notice or other communication received by it by which any other party
      to
      any material License referred to in Schedule
      II
      hereto
      purports to exercise any of its rights or affect any of its obligations
      thereunder, together with a copy of any reply by such Grantor
      thereto.

    

    (v) Each
      Grantor will exercise promptly and diligently each and every right which it
      may
      have under each material License (other than any right of termination) and
      will
      duly perform and observe in all respects all of its obligations under each
      material License and will take all action reasonably necessary to maintain
      such
      Licenses in full force and effect.  No Grantor will, without the prior
      written consent of the Collateral Agent, cancel, terminate, amend or otherwise
      modify in any respect, or waive any provision of, any material License referred
      to in Schedule
      II
      hereto,
      except to the extent that such material License is no longer necessary for
      the
      conduct of such Grantor’s business as theretofore conducted.

    

    (g) Transfers
      and Other Liens.

    

    (i) No
      Grantor will sell, assign (by operation of law or otherwise), lease, license,
      exchange or otherwise transfer or dispose of any of the Collateral, except
      (A)
      Inventory in the ordinary course of business, (B) damaged, worn-out or obsolete
      assets not necessary to the business and (C) other assets not exceeding,
      individually or in the aggregate, $25,000.

    

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    (ii) No
      Grantor will create, suffer to exist or grant any Lien upon or with respect
      to
      any Collateral other than Permitted Liens.

    

    (h) Intellectual
      Property.

    

    (i) If
      applicable, any Grantor shall, upon the Collateral Agent's written request,
      duly
      execute and deliver the applicable Assignment for Security in the form attached
      hereto as
      Exhibit A.
       Each Grantor (either itself or through licensees) will, and will cause
      each licensee thereof to, take all commercially reasonable action necessary
      to
      maintain all of the Intellectual Property in full force and effect, including,
      without limitation, using the proper statutory notices and markings and using
      the Trademarks on each applicable trademark class of goods in order to so
      maintain the Trademarks in full force and free from any claim of abandonment
      for
      non-use, and each Grantor will not (nor permit any licensee thereof to) do
      any
      act or knowingly omit to do any act whereby any Intellectual Property may become
      invalidated; provided,
      however,
      that so
      long as no Event of Default has occurred and is continuing, no Grantor shall
      have an obligation to use or to maintain any Intellectual Property (A) that
      relates solely to any product or work, that has been, or is in the process
      of
      being, discontinued, abandoned or terminated, (B) that is being replaced with
      Intellectual Property substantially similar to the Intellectual Property that
      may be abandoned or otherwise become invalid, so long as the failure to use
      or
      maintain such Intellectual Property does not materially adversely affect the
      validity of such replacement Intellectual Property and so long as such
      replacement Intellectual Property is subject to the Lien created by this
      Agreement or (C) that is substantially the same as another Intellectual Property
      that is in full force, so long the failure to use or maintain such Intellectual
      Property does not materially adversely affect the validity of such replacement
      Intellectual Property and so long as such other Intellectual Property is subject
      to the Lien and security interest created by this Agreement.  Each Grantor
      will cause to be taken all necessary steps in any proceeding before the United
      States Patent and Trademark Office and the United States Copyright Office or
      any
      similar office or agency in any other country or political subdivision thereof
      to maintain each registration of the Intellectual Property (other than the
      Intellectual Property described in the proviso to the immediately preceding
      sentence), including, without limitation, filing of renewals, affidavits of
      use,
      affidavits of incontestability and opposition, interference and cancellation
      proceedings and payment of maintenance fees, filing fees, taxes or other
      governmental fees.  If any Intellectual Property (other than Intellectual
      Property described in the proviso to the first sentence of subsection (i) of
      this clause (h)) is infringed, misappropriated, diluted or otherwise violated
      in
      any material respect by a third party, each Grantor shall (x) upon learning
      of
      such infringement, misappropriation, dilution or other violation, promptly
      notify the Collateral Agent and (y) to the extent any Grantor shall deem
      appropriate under the circumstances, promptly sue for infringement,
      misappropriation, dilution or other violation, seek injunctive relief where
      appropriate and recover any and all damages for such infringement,
      misappropriation, dilution or other violation, or take such other actions as
      such Grantor shall deem appropriate under the circumstances to protect such
      Intellectual Property.  Each Grantor shall furnish to the Collateral Agent,
      from time to time upon its request, statements and schedules further identifying
      and describing the Intellectual Property and Licenses and such other reports
      in connection with the Intellectual Property and Licenses as the Collateral
      Agent may reasonably request, all in reasonable detail and promptly upon request
      of the Collateral Agent, following receipt by the Collateral Agent of any such
      statements, schedules or reports, each Grantor shall modify this Agreement
      by
      amending Schedule
      II
      hereto,
      as the case may be, to include any Intellectual Property and License, as the
      case may be, which becomes part of the Collateral under this Agreement and
      shall
      execute and authenticate such documents and do such commercially reasonable
      acts
      as shall be necessary or, in the judgment of the Collateral Agent, desirable
      to
      subject such Intellectual Property and Licenses to the Lien and security
      interest created by this Agreement.  Notwithstanding anything herein to the
      contrary, upon the occurrence and during the continuance of an Event of Default,
      no Grantor may abandon or otherwise permit any Intellectual Property to become
      invalid without the prior written consent of the Collateral Agent, which consent
      shall not be unreasonably withheld or delayed, and if any Intellectual Property
      is infringed, misappropriated, diluted or otherwise violated in any material
      respect by a third party, each Grantor will take such action as the Collateral
      Agent shall deem appropriate under the circumstances to protect such
      Intellectual Property.

    

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

    (ii) In
      no
      event shall any Grantor, either itself or through any agent, employee, licensee
      or designee, file an application for the registration of any Trademark or
      Copyright or the issuance of any Patent with the United States Patent and
      Trademark Office or the United States Copyright Office, as applicable, or in
      any
      similar office or agency of the United States or any country or any political
      subdivision thereof unless it gives the Collateral Agent prior written notice
      thereof.  Upon request of the Collateral Agent, any Grantor shall execute,
      authenticate and deliver any and all assignments, agreements, instruments,
      documents and papers as the Collateral Agent may reasonably request to evidence
      the Collateral Agent's security interest hereunder in such Intellectual Property
      and the General Intangibles of any Grantor relating thereto or represented
      thereby, and each Grantor hereby appoints the Collateral Agent its
      attorney-in-fact to execute and/or authenticate and file all such writings
      for
      the foregoing purposes, all acts of such attorney being hereby ratified and
      confirmed, and such power (being coupled with an interest) shall be irrevocable
      until the indefeasible payment in full in cash of all of the Obligations in
      full
      and the termination of each of the Transaction Documents.

    

    (i) Deposit,
      Commodities and Securities Accounts.
       Upon the Collateral Agent's written request, each Grantor shall use its
      best efforts to cause each bank and other financial institution with an account
      referred to in Schedule
      IV
      hereto
      to execute and deliver to the Collateral Agent a control agreement, in form
      and
      substance reasonably satisfactory to the Collateral Agent, duly executed by
      each
      Grantor and such bank or financial institution, or enter into other arrangements
      in form and substance satisfactory to the Collateral Agent, pursuant to which
      such institution shall irrevocably agree, inter
      alia,
      that
      (i) upon the occurrence and during the continuation of an Event of Default,
      it will comply at any time with the instructions originated by the Collateral
      Agent to such bank or financial institution directing the disposition of cash,
      Commodity Contracts, securities, Investment Property and other items from time
      to time credited to such account, without further consent of each Grantor,
      which
      instructions the Collateral Agent will not give to such bank or other financial
      institution in the absence of a continuing Event of Default, (ii) all cash,
      Commodity Contracts, securities, Investment Property and other items of each
      Grantor deposited with such institution shall be subject to a perfected, first
      priority security interest in favor of the Collateral Agent, (iii) any
      right of set off (other than recoupment of standard fees), banker's Lien or
      other similar Lien, security interest or encumbrance shall be fully waived
      as
      against the Collateral Agent, and (iv) upon receipt of written notice from
      the Collateral Agent during the continuance of an Event of Default, such bank
      or
      financial institution shall
      immediately send to the Collateral Agent by wire transfer (to such account
      as
      the Collateral Agent shall specify, or in such other manner as the Collateral
      Agent shall direct) all such cash, the value of any Commodity Contracts,
      securities, Investment Property and other items held by it.  Without the
      prior written consent of the Collateral Agent, each Grantor shall not make
      or
      maintain any Deposit Account, Commodity Account or Securities Account except
      for
      the accounts set forth in Schedule
      IV
      hereto;
      provided that as long as there is no Event of Default then continuing, any
      Grantor may make, open or maintain new Deposit Accounts without the Collateral
      Agent’s prior written consent provided that any such Deposit Accounts shall
      constitute Collateral under this Agreement and such Grantor shall comply with
      the provisions of this Agreement with respect thereto.
       The provisions of this paragraph 5(i) shall not apply to (i) Deposit
      Accounts for which the Collateral Agent is the depositary and (ii) Deposit
      Accounts specially and exclusively used for payroll, payroll taxes and other
      employee wage and benefit payments to or for the benefit of each Grantor's
      salaried or hourly employees.

    

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

    (j) Motor
      Vehicles.

    

    (i) Upon
      the
      Collateral Agent's written request, each Grantor shall deliver to the Collateral
      Agent originals of the certificates of title or ownership for all motor vehicles
      with a value in excess of $50,000, owned by such Grantor with the Collateral
      Agent listed as lienholder, for the benefit of the Buyers.

    

    (ii) Each
      Grantor hereby appoints the Collateral Agent as its attorney-in-fact, effective
      the date hereof and terminating upon the termination of this Agreement, for
      the
      purpose of (A) executing on behalf of each Grantor title or ownership
      applications for filing with appropriate state agencies to enable motor vehicles
      now owned or hereafter acquired by each Grantor to be retitled and the
      Collateral Agent listed as lienholder thereof, (B) filing such applications
      with
      such state agencies, and (C) executing such other documents and instruments
      on
      behalf of, and taking such other action in the name of, each Grantor as the
      Collateral Agent may deem necessary or advisable to accomplish the purposes
      hereof (including, without limitation, for the purpose of creating in favor
      of
      the Collateral Agent a perfected Lien on the motor vehicles and exercising
      the
      rights and remedies of the Collateral Agent hereunder).  This appointment
      as attorney-in-fact is coupled with an interest and is irrevocable until all
      of
      the Obligations are indefeasibly paid in full in cash and after all Transaction
      Documents have been terminated.

    

    (iii)  Any
      certificates of title or ownership delivered pursuant to the terms hereof shall
      be accompanied by odometer statements for each motor vehicle covered
      thereby.

    

    (iv) So
      long
      as no Event of Default shall have occurred and be continuing, upon the request
      of any Grantor, the Collateral Agent shall execute and deliver to any Grantor
      such instruments as any Grantor shall reasonably request to remove the notation
      of the Collateral Agent as lienholder on any certificate of title for any motor
      vehicle; provided,
      however,
      that
      any such instruments shall be delivered, and the release effective, only upon
      receipt by the Collateral Agent of a certificate from any Grantor stating that
      such motor vehicle is to be sold or has suffered a casualty loss (with title
      thereto passing to the casualty insurance company therefor in settlement of
      the
      claim for such loss) and the amount that any Grantor will receive as sale
      proceeds or insurance proceeds.  Any proceeds of such sale or casualty loss
      shall be paid to the Collateral Agent hereunder immediately upon receipt, to
      be
      applied to the Obligations then outstanding. 

    

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

    (k) Control.
       Each Grantor hereby agrees to take any or all action that may be necessary
      or desirable or that the Collateral Agent may request in order for the
      Collateral Agent to obtain control in accordance with Sections 9-105 - 9-107
      of
      the Code with respect to the following Collateral:  (i) Electronic
      Chattel Paper, (ii) Investment Property, and (iii) Letter-of-Credit
      Rights.

    

    (l) Inspection
      and Reporting.
       Each Grantor shall permit the Collateral Agent, or any agent or
      representatives thereof or such professionals or other Persons as the Collateral
      Agent may designate, not more frequently than once a year in the absence of
      an
      Event of Default, during normal business hours, upon reasonable advance notice
      to the Grantor, and without unreasonably disrupting the business of such
      grantor, (i) to examine and make copies of and abstracts from any Grantor's
      records and books of account, (ii) to visit and inspect its properties,
      (iii) to verify materials, leases, Instruments, Accounts, Inventory and
      other assets of any Grantor from time to time, (iii) to conduct audits,
      physical counts, appraisals and/or valuations, examinations at the locations
      of
      any Grantor.  Each Grantor shall also, upon reasonable advance notice from
      the Collateral Agent, permit the Collateral Agent, or any agent or
      representatives thereof or such professionals or other Persons as the Collateral
      Agent may designate, to discuss such Grantor's affairs, finances and accounts
      with any of its directors, officers, managerial employees, independent
      accountants or any of its other representatives during normal business hours
      at
      a time and place to be mutually agreed upon by the Collateral Agent or its
      designee and such Grantor.

    

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

    

    SECTION
      6. ADDITIONAL
      PROVISIONS CONCERNING THE COLLATERAL.

    

    (a) Each
      Grantor hereby (i) authorizes the Collateral Agent to file one or more
      Uniform Commercial Code financing or continuation statements, and amendments
      thereto, relating to the Collateral and (ii) ratifies such authorization to
      the extent that the Collateral Agent has filed any such financing or
      continuation statements, or amendments thereto, prior to the date hereof.
 A photocopy or other reproduction of this Agreement or any financing
      statement covering the Collateral or any part thereof shall be sufficient as
      a
      financing statement where permitted by law.

    

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    (b) Each
      Grantor hereby irrevocably appoints the Collateral Agent as its attorney-in-fact
      and proxy, with full authority in the place and stead of each Grantor and in
      the
      name of each Grantor or otherwise, from time to time in the Collateral Agent's
      discretion, so long as an Event of Default shall have occurred and is
      continuing, to take any action and to execute any instrument which the
      Collateral Agent may deem necessary or advisable to accomplish the purposes
      of
      this Agreement (subject to the rights of each Grantor under Section
      5
      hereof),
      including, without limitation, after the occurrence and during the continuance
      of an Event of Default, (i) to obtain and adjust insurance required to be paid
      to the Collateral Agent pursuant to Section
      5(e)
      hereof,
      (ii) to ask, demand, collect, sue for, recover, compound, receive and give
      acquittance and receipts for moneys due and to become due under or in respect
      of
      any Collateral, (iii) to receive, endorse, and collect any drafts or other
      instruments, documents
      and chattel paper in connection with clause (i) or (ii) above, (iv) to file
      any
      claims or take any action or institute any proceedings which the Collateral
      Agent may deem necessary or desirable for the collection of any Collateral
      or
      otherwise to enforce the rights of the Collateral Agent and the Buyers with
      respect to any Collateral, and (v) to execute assignments, licenses and other
      documents to enforce the rights of the Collateral Agent and the Buyers with
      respect to any Collateral.  This power is coupled with an interest and is
      irrevocable until all of the Obligations are indefeasibly paid in full in
      cash.

    (c) For
      the
      purpose of enabling the Collateral Agent to exercise rights and remedies
      hereunder, at such time as the Collateral Agent shall be lawfully entitled
      to
      exercise such rights and remedies, and for no other purpose, each Grantor hereby
      grants to the Collateral Agent, to the extent assignable, an irrevocable,
      non-exclusive license (exercisable without payment of royalty or other
      compensation to any Grantor) to use, assign, license or sublicense any
      Intellectual Property now owned or hereafter acquired by any Grantor, wherever
      the same may be located, including in such license reasonable access to all
      media in which any of the licensed items may be recorded or stored and to all
      computer programs used for the compilation or printout thereof.
 Notwithstanding anything contained herein to the contrary, but subject to
      the provisions of the Securities Purchase Agreement that limit the right of
      any
      Grantor to dispose of its property and Section
      5(h)
      hereof,
      so long as no Event of Default shall have occurred and be continuing, any
      Grantor may exploit, use, enjoy, protect, license, sublicense, assign, sell,
      dispose of or take other actions with respect to the Intellectual Property
      in
      the ordinary course of its business.  In furtherance of the foregoing,
      unless an Event of Default shall have occurred and be continuing, the Collateral
      Agent shall from time to time, upon the request of any Grantor, execute and
      deliver any instruments, certificates or other documents, in the form so
      requested, which such Grantor shall have certified are appropriate (in any
      Grantor's judgment) to allow it to take any action permitted above (including
      relinquishment of the license provided pursuant to this clause (c) as to any
      Intellectual Property).  Further, upon the indefeasible payment in full in
      cash of all of the Obligations, the Collateral Agent (subject to Section
      10(e)
      hereof)
      shall release and reassign to any Grantor all of the Collateral Agent's right,
      title and interest in and to the Intellectual Property, and the Licenses, all
      without recourse, representation or warranty whatsoever.  The exercise of
      rights and remedies hereunder by the Collateral Agent shall not terminate the
      rights of the holders of any licenses or sublicenses theretofore granted by
      any
      Grantor in accordance with the second sentence of this clause (c). Each Grantor
      hereby releases the Collateral Agent from any claims, causes of action and
      demands at any time arising out of or with respect to any actions taken or
      omitted to be taken by the Collateral Agent under the powers of attorney granted
      herein other than actions taken or omitted to be taken through the Collateral
      Agent's gross negligence or willful misconduct, as determined by a final
      determination of a court of competent jurisdiction.  

    

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

    (d) If
      any
      Grantor fails to perform any agreement contained herein, the Collateral Agent
      may itself perform, or cause performance of, such agreement or obligation,
      in
      the name of any Grantor or the Collateral Agent, and the expenses of the
      Collateral Agent incurred in connection therewith shall be payable by any
      Grantor pursuant to Section
      8
      hereof
      and shall be secured by the Collateral.

    

    (e) The
      powers conferred on the Collateral Agent hereunder are solely to protect its
      interest in the Collateral and shall not impose any duty upon it to exercise
      any
      such powers.  Except
      for the safe custody of any Collateral in its possession and the accounting
      for
      moneys actually received by it hereunder, the Collateral Agent shall have no
      duty as to any Collateral or as to the taking of any necessary steps to preserve
      rights against prior parties or any other rights pertaining to any
      Collateral.

    

    (f) Anything
      herein to the contrary notwithstanding (i) each Grantor shall remain liable
      under the Licenses and otherwise with respect to any of the Collateral to the
      extent set forth therein to perform all of its obligations thereunder to the
      same extent as if this Agreement had not been executed, (ii) the exercise
      by the Collateral Agent of any of its rights hereunder shall not release any
      Grantor from any of its obligations under the Licenses or otherwise in respect
      of the Collateral, and (iii) the Collateral Agent shall not have any
      obligation or liability by reason of this Agreement under the Licenses or with
      respect to any of the other Collateral, nor shall the Collateral Agent be
      obligated to perform any of the obligations or duties of any Grantor thereunder
      or to take any action to collect or enforce any claim for payment assigned
      hereunder.

    

    SECTION
      7. REMEDIES
      UPON EVENT OF DEFAULT.
       If any Event of Default shall have occurred and be
      continuing:

    
       

      
        
          
          

        

        
          -18-

          
            

          

        

        
          
          

      

    

    (a) The
      Collateral Agent may exercise in respect of the Collateral, in addition to
      any
      other rights and remedies provided for herein or otherwise available to it,
      all
      of the rights and remedies of a secured party upon default under the Code
      (whether or not the Code applies to the affected Collateral), and also may
      (i) take absolute control of the Collateral, including, without limitation,
      transfer into the Collateral Agent's name or into the name of its nominee or
      nominees (to the extent the Collateral Agent has not theretofore done so) and
      thereafter receive, for the benefit of the Collateral Agent, all payments made
      thereon, give all consents, waivers and ratifications in respect thereof and
      otherwise act with respect thereto as though it were the outright owner thereof,
      (ii) require each Grantor to, and each Grantor hereby agrees that it will
      at its expense and upon request of the Collateral Agent forthwith, assemble
      all
      or part of its respective Collateral as directed by the Collateral Agent and
      make it available to the Collateral Agent
      at
      a place or places to be designated by the Collateral Agent that is reasonably
      convenient to both parties, and the Collateral Agent may enter into and occupy
      any premises owned or leased by any Grantor where the Collateral or any part
      thereof is located or assembled for a reasonable period in order to effectuate
      the Collateral Agent's rights and remedies hereunder or under law, without
      obligation to any Grantor in respect of such occupation, and (iii) without
      notice except as specified below and without any obligation to prepare or
      process the Collateral for sale, (A) sell the Collateral or any part
      thereof in one or more parcels at public or private sale, at any of the
      Collateral Agent's offices or elsewhere, for cash, on credit or for future
      delivery, and at such price or prices and upon such other terms as the
      Collateral Agent may deem commercially reasonable and/or (B) lease, license
      or dispose of the Collateral or any part thereof upon such terms as the
      Collateral Agent may deem commercially reasonable.  Each Grantor agrees
      that, to the extent notice of sale or any other disposition of its respective
      Collateral shall be required by law, at least ten (10) days' notice to any
      Grantor of the time and place of any public sale or the time after which any
      private sale or other disposition of its respective Collateral is to be made
      shall constitute reasonable notification.  The Collateral Agent shall not
      be obligated to make any sale or other disposition of any Collateral regardless
      of notice of sale having been given.  The Collateral Agent may adjourn any
      public or private sale from time to time by announcement at the time and place
      fixed therefor, and such sale may, without further notice, be
      made at
      the time and place to which it was so adjourned.  Each Grantor hereby
      waives any claims against the Collateral Agent and the Buyers arising by reason
      of the fact that the price at which its respective Collateral may have been
      sold
      at a private sale was less than the price which might have been obtained at
      a
      public sale or was less than the aggregate amount of the Obligations, even
      if
      the Collateral Agent accepts the first offer received and does not offer such
      Collateral to more than one offeree, and waives all rights that any Grantor
      may
      have to require that all or any part of such Collateral be marshalled upon
      any
      sale (public or private) thereof.  Each Grantor hereby acknowledges that
      (i) any such sale of its respective Collateral by the Collateral Agent
      shall be made without warranty, (ii) the Collateral Agent may specifically
      disclaim any warranties of title, possession, quiet enjoyment or the like,
      and
      (iii) such actions set forth in clauses (i) and (ii) above shall not
      adversely effect the commercial reasonableness of any such sale of Collateral.
       In addition to the foregoing, (1) upon written notice to any Grantor
      from the Collateral Agent after and during the continuance of an Event of
      Default, such Grantor shall cease any use of the Intellectual Property or any
      trademark, patent or copyright similar thereto for any purpose described in
      such
      notice; (2) the Collateral Agent may, at any time and from time to time, upon
      10
      days' prior notice to such Grantor, license, whether general, special or
      otherwise, and whether on an exclusive or non-exclusive basis, any of the
      Intellectual Property, throughout the universe for such term or terms, on such
      conditions, and in such manner, as the Collateral Agent shall in its sole
      discretion determine; and (3) the Collateral Agent may, at any time, pursuant
      to
      the authority granted in Section
      6
      hereof
      (such authority being effective upon the occurrence and during the continuance
      of an Event of Default), execute and deliver on behalf of such Grantor, one
      or
      more instruments of assignment of the Intellectual Property (or any application
      or registration thereof), in form suitable for filing, recording or registration
      in any country.

    

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

    (b) Any
      cash
      held by the Collateral Agent as Collateral and all Cash Proceeds received by
      the
      Collateral Agent in respect of any sale of or collection from, or other
      realization upon, all or any part of the Collateral may, in the discretion
      of
      the Collateral Agent, be held by the Collateral Agent as collateral for, and/or
      then or at any time thereafter applied (after payment of any amounts payable
      to
      the Collateral Agent pursuant to Section
      8
      hereof)
      in whole or in part by the Collateral Agent against, all or any part of the
      Obligations in such order as the Collateral Agent shall elect, consistent with
      the provisions of the Securities Purchase Agreement.  Any surplus of such
      cash or Cash Proceeds held by the Collateral Agent and remaining after the
      indefeasible payment in full in cash of all of the Obligations shall be paid
      over to whomsoever shall be lawfully entitled to receive the same or as a court
      of competent jurisdiction shall direct.

    

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

    

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

    

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

    

    SECTION
      8. INDEMNITY
      AND EXPENSES.

    

    (a) Each
      Grantor agrees, jointly and severally, to defend, protect, indemnify and hold
      the Collateral Agent and each of the Buyers, jointly and severally, harmless
      from and against any and all claims, damages, losses, liabilities, obligations,
      penalties, fees, costs and expenses (including, without limitation, reasonable
      legal fees, costs, expenses, and disbursements of such Person's counsel) to
      the
      extent that they arise out of or otherwise result from this Agreement
      (including, without limitation, enforcement of this Agreement), except claims,
      losses or liabilities resulting solely and directly from such Person's gross
      negligence or willful misconduct, as determined by a final judgment of a court
      of competent jurisdiction.

    

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

    (b) Each
      Grantor agrees, jointly and severally, to pay to the Collateral Agent upon
      demand the amount of any and all costs and expenses, including the reasonable
      fees, costs, expenses and disbursements of counsel for the Collateral Agent
      and
      of any experts and agents (including, without limitation, any collateral trustee
      which may act as agent of the Collateral Agent), which the Collateral Agent
      may
      properly incur under the terms hereof after the occurrence and during the
      continuance of an Event of Default in connection with (i)  the custody,
      preservation, use or operation of, or the sale of, collection from, or other
      realization upon, any Collateral, (ii) the exercise or enforcement of any
      of the rights of the Collateral Agent hereunder, or (iii) the failure by
      any Grantor to perform or observe any of the provisions hereof.

    

    SECTION
      9. Notices,
      Etc.
      All
      notices and other communications provided for hereunder shall be in writing
      and
      shall be mailed (by certified mail, postage prepaid and return receipt
      requested), telecopied, e-mailed or delivered, if to any Grantor at its address
      specified below and if to the Collateral Agent to it, at its address specified
      on the signature pages below; or as to any such Person, at such other address
      as
      shall be designated by such Person in a written notice to all other parties
      hereto complying as to delivery with the terms of this Section
      9.
      All
      such notices and other communications shall be effective (a) if sent by
      certified mail, return receipt requested, when received or three days after
      deposited in the mails, whichever occurs first, (b) if telecopied or e-mailed,
      when transmitted (during normal business hours) and confirmation is received,
      and otherwise, the day after the notice or communication was transmitted and
      confirmation is received, or (c) if delivered in person, upon
      delivery.

    

    SECTION
      10. MISCELLANEOUS.

    

    (a) No
      amendment of any provision of this Agreement shall be effective unless it is
      in
      writing and signed by each Grantor and the Collateral Agent, and no waiver
      of
      any provision of this Agreement, and no consent to any departure by each Grantor
      therefrom, shall be effective unless it is in writing and signed by each Grantor
      and the Collateral Agent, and then such waiver or consent shall be effective
      only in the specific instance and for the specific purpose for which
      given.

    

    (b) No
      failure on the part of the Collateral Agent to exercise, and no delay in
      exercising, any right hereunder or under any of the other Transaction Documents
      shall operate as a waiver thereof; nor shall any single or partial exercise
      of
      any such right preclude any other or further exercise thereof or the exercise
      of
      any other right.  The rights and remedies of the Buyers and the Collateral
      Agent provided herein and in the other Transaction Documents are cumulative
      and
      are in addition to, and not exclusive of, any rights or remedies provided by
      law.  The rights of the Collateral Agent under any of the other Transaction
      Documents against any party thereto are not conditional or contingent on any
      attempt by such Person to exercise any of its rights under any of the other
      Transaction Documents against such party or against any other Person, including
      but not limited to, any Grantor.

    

    (c) Any
      provision of this Agreement that 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 portions
      hereof or thereof or affecting the validity or enforceability of such provision
      in any other jurisdiction.

    

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

    (d) This
      Agreement shall create a continuing security interest in the Collateral and
      shall (i) remain in full force and effect until the indefeasible payment in
      full
      in cash of the Obligations, and (ii) be binding on each Grantor and all other
      Persons who become bound as debtor to this Agreement in accordance with Section
      9-203(d) of the Code and shall inure, together with all rights and remedies
      of
      the Collateral Agent and the Buyers hereunder, to the benefit of the Collateral
      Agent and the Buyers and their respective permitted successors, transferees
      and
      assigns.  Without limiting the generality of clause (ii) of the immediately
      preceding sentence, without notice to any Grantor, the Collateral Agent and
      the
      Buyers may assign or otherwise transfer their rights and obligations under
      this
      Agreement and any of the other Transaction Documents, to any other Person and
      such other Person shall thereupon become
      vested
      with all of the benefits in respect thereof granted to the Collateral Agent
      and
      the Buyers herein or otherwise.  Upon any such assignment or transfer, all
      references in this Agreement to the Collateral Agent or any such Buyer shall
      mean the assignee of the Collateral Agent or such Buyer.  None of the
      rights or obligations of any Grantor hereunder may be assigned or otherwise
      transferred without the prior written consent of the Collateral Agent, and
      any
      such assignment or transfer without the consent of the Collateral
      Agent
      shall be null and void.

    

    (e) Upon
      the
      indefeasible payment in full in cash of the Obligations, (i) this Agreement
      and
      the security interests created hereby shall terminate and all rights to the
      Collateral shall revert to the respective Grantor that granted such security
      interests hereunder, and (ii) the Collateral Agent will, upon any Grantor's
      request and at such Grantor's expense, (A) return to such Grantor such of the
      Collateral as shall not have been sold or otherwise disposed of or applied
      pursuant to the terms hereof, and (B) execute and deliver to such Grantor such
      documents as such Grantor shall reasonably request to evidence such termination,
      all without any representation, warranty or recourse whatsoever.

    

    (f) THIS
      AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
      THE
      LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF
      LAW
      AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION
      AND
      THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST CREATED
      HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
      GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW
      YORK.

    

    (g) ANY
      LEGAL
      ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY DOCUMENT
      RELATED THERETO MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE
      COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
      OF
      NEW YORK, AND APPELLATE COURTS THEREOF, AND, BY EXECUTION AND DELIVERY OF THIS
      AGREEMENT, EACH GRANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
      PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
      COURTS.  EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
      EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
      OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
      NON CONVENIENS,
      WHICH
      IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION, SUIT OR
      PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO THE GRANTING OF
      SUCH
      LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.

    

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

    (h) EACH
      GRANTOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) THE COLLATERAL
      AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION
      BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
      OF
      THE OTHER TRANSACTION DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF
      DEALING,
      VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES
      HERETO.

    

    (i) Each
      party irrevocably consents to the service of process of any of the aforesaid
      courts in any such action, suit or proceeding by the mailing of copies thereof
      by registered or certified mail (or any substantially similar form of mail),
      postage prepaid, to such party at the address of such party specified for
      notices hereunder, such service to become effective 10 days after such
      mailing.

    

    (j) Nothing
      contained herein shall affect the right of the Collateral Agent to serve process
      in any other manner permitted by law or commence legal proceedings or otherwise
      proceed against any Grantor or any property of any Grantor in any other
      jurisdiction.

    

    (k) Each
      Grantor irrevocably and unconditionally waives any right it may have to claim
      or
      recover in any legal action, suit or proceeding referred to in this Section
      any
      special, exemplary, punitive or consequential damages.

    

    (l) Section
      headings herein are included for convenience of reference only and shall not
      constitute a part of this Agreement for any other purpose.

    

    (m) This
      Agreement may be executed in any number of counterparts and by different parties
      hereto in separate counterparts, each of which shall be deemed to be an
      original, but all of which taken together constitute one in the same
      Agreement.

    

    

    [REMAINDER
      OF THIS PAGE INTENTIONALLY LEFT BLANK]

    
 

    
 

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, each party has caused this Agreement to be executed and
      delivered by its officer thereunto duly authorized, as of the date first above
      written.

    

    
      	 	 	 
	
               

            	
              NESCO
                INDUSTRIES, INC.

            
	 
 	 
 	 
 
	 	By:  	/s/ Matthew
              Harriton
	 	
              

              Name:      
                Matthew
                Harriton

              Title:        
                President

              Address:  
                305
                Madison Ave., Suite 4510

                                New
                York, NY 10165

            
	 	 

      	 	 	 
	 	HYDROGEL
              DESIGN SYSTEMS, INC.
	 
 	 
 	 
 
	 	By:  	/s/ Matthew
              Harriton
	 	
              
Name:     
 Matthew
              Harriton
              Title:        
                President

              
                Address:  
                  305
                  Madison Ave., Suite 4510

                                  New
                  York, NY 10165

              

            
	 	 

      	 	 	 
	 	FOAM
              MANUFACTURING INC.
	 
 	 
 	 
 
	 	By:  	/s/ Matthew
              Harriton
	 	
              
Name:      
Matthew
              Harriton
              Title:        
                President

              
                Address:  
                  305
                  Madison Ave., Suite 4510

                                  New
                  York, NY 10165

              

            
	 	 

      	 	 	 
	 	CONVERTING
              SCIENCES, INC.
	 
 	 
 	 
 
	 	By:  	/s/ Matthew
              Harriton
	 	
              
                

              

              Name:        Matthew
                Harriton

              Title:         
                President

              
                Address:   
                  305
                  Madison Ave., Suite 4510

                                   New
                  York, NY 10165

              

            
	 	 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    

    ACCEPTED
      BY:

    

    GOTTBETTER
      CAPITAL MASTER, LTD.

    as
      Collateral Agent

    

    By: /s/
      Adam S. Gottbetter     

    
      	Name:	
              Adam
                S. Gottbetter

            

    

    
      	Title:	
              Director

            

    

    
      	Address:	
              488
                Madison Avenue, 12th
                Floor

            

    

    
      	 	
              New
                York, NY 10022EXHIBIT
      10.3

    

    Nesco
      Industries, Inc.

    305
      Madison Avenue, Suite 4510

    New
      York,
      New York 10165

    

    

    February
      13, 2007 

    

    

    Mr.
      Matthew Harriton 

    200
      East
      5th
      Street

    Apartment
      11N

    New
      York,
      NY 10022

    

     

    
      	
              Re:

            	
              Amended
                and Restated Employment Agreement dated as of November 22, 2004 (the
                “Employment
                Agreement”),
                between by Nesco Industries, Inc. (the “Company”)
                and Matthew Harriton (the “Executive”)
                

            

    

     

    Dear
      Mr.
      Harriton:

     

    This
      letter agreement is to memorialize our settlement of all unpaid salary owed
      to
      Executive under the Employment Agreement (the “Unpaid
      Salary”).
      As of
      January 31, 2007, the total amount of unpaid salary owed to Executive under
      the
      Employment Agreement totaled $270,916.71.

    

    Executive
      acknowledges the Company has a strong need to raise capital that will enable
      it
      to restructure its balance sheet and provide working capital for the Company
      and
      the recent asset acquisitions by the Company’s subsidiary, Foam Manufacturing,
      Inc. Executive further acknowledges that the Company is currently negotiating
      a
      financing arrangement that will provide it with the needed capital (the
“Financing”),
      that
      the Financing will only benefit the Company if it is able to be used to provide
      working capital and that the proposed lender is unwilling to expect the
      substantial time, effort and expense necessary to close the Financing unless
      the
      Company is able to settle the amounts outstanding under the Employment
      Agreement. Therefore, Executive acknowledges that it is in his best interest,
      as
      well as the best interest of the Company, the Company close the Financing.
      In
      consideration of the foregoing and the covenants and agreements of the parties
      contained in this letter agreement, the Company and Executive are hereby
      entering into the following agreements. 

     

    Subject
      to and contingent on the closing of the Financing (the “Closing”),
      the
      parties agree as follows:

     

    1. In
      payment of the Unpaid Salary, the Company shall pay to Executive (a) an amount
      equal to $135,458.36 on the six month anniversary of the Closing and (b) an
      amount equal to $135,458.36 on the one year anniversary of the Closing. All
      such
      payments shall be made by check payable to Executive.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2. Upon
      receipt by Executive of the Unpaid Salary in full, Executive
      shall, automatically and without further action of the parties, release the
      Company and its officers, directors, employees and agents, and each of its
      successors and assigns from all causes of action, debts, contracts, demands
      and
      claims of every kind and nature, whether known or unknown and whether in law
      or
      in equity, that Executive had, now has, or hereafter can, shall or may have
      with
      respect to the Unpaid Salary and the failure by the Company to pay the same
      when
      and as due under the Employment Agreement.

     

    Each
      of
      the foregoing agreements set forth in paragraphs 1 and 2, inclusive, of this
      letter agreement are expressly made subject to the Closing, and none of such
      agreements shall be effective unless and until such time as the Closing occurs.
      If the Closing has not occurred on or prior to March 15, 2007, this letter
      agreement shall automatically terminate and shall be of no further force and
      effect, and neither the Company nor Executive shall have any obligations to
      the
      other hereunder. 

     

    Nothing
      in this letter
      agreement shall be construed as an admission of any liability by any of the
      parties or as a release of any claim or obligation other than as specifically
      set forth above. 

     

    This
      letter agreement is binding upon and shall inure to the benefit of the parties
      hereto and their respective heirs, successors and assigns. No persons other
      than
      the Company and Executive are intended to be benefited by this letter agreement
      or to have rights hereunder as third-party beneficiaries or
      otherwise.

     

    This
      letter agreement shall be deemed to be a contract made under, and to be
      construed in accordance with, the laws of the State of New York, without giving
      effect to conflicts of law.

     

    If
      any
      provision of this letter agreement is held to be invalid, illegal or
      unenforceable, such invalidity, illegality or unenforceability shall not
      invalidate this letter agreement as a whole, but rather this letter agreement
      shall be construed as though it did not contain the particular provision held
      to
      be invalid, illegal or unenforceable and the rights and obligations of the
      parties hereto shall be construed and enforced only to such extent as may be
      permitted by applicable law. 

     

    This
      letter agreement may be executed by the parties in one or more counterparts,
      each of which will be deemed an original but all of which will constitute one
      and the same instrument.

     

    [Signature
      page follows]

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

     

    If
      the
      foregoing accurately memorializes our agreement to settle the matters described
      above, please sign below.

     

    Very
      truly yours,

    

    Nesco
      Industries, Inc.

    

    

    By 
      /s/
      Arlen Reynolds

                                                                                                                          Arlen
      Reynolds

                                                                                                                          Chairman
      

    

     

    

    

    

    AGREED
      AND ACCEPTED:

    

    

    /s/
      Matthew Harriton

    Matthew
      Hsarriton

     

     

    
      
        
        

      

      
        3

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