Document:

Exhibit
      4.2

     

    This
      Note and the securities issuable on conversion hereof have not been registered
      under the Securities Act of 1933, as amended (the “Securities Act”), or state
      securities law and may not be transferred or sold unless (i) registered under
      the Securities Act and applicable state securities laws or (ii) an exemption
      from registration is available at the time of such transfer or
      sale.

     

    GVI
      SECURITY SOLUTIONS, INC.

     

    6%
      Subordinated Secured Convertible Promissory Note

     

    
      	
              $____,000

            	
              As
                of October 4, 2006

            

    

    

    FOR
      VALUE
      RECEIVED, GVI SECURITY SOLUTIONS, INC., a Delaware corporation (“Borrower”),
      hereby promises to pay to the order of ____________________ (the “Payee”),
      with
      an address at ____________________________________________________, on October
      1, 2009 (the “Maturity Date”), the principal sum of _________________________
      _________________ ($______), together with all interest that has accrued thereon
      from the date hereof in accordance with the terms of this Subordinated Secured
      Promissory Note (this “Note”).

     

    Interest
      on the outstanding principal balance of this Note shall accrue from the date
      hereof until paid in full at the rate of 6% per annum, calculated on the basis
      of a 365 day year, and shall be due and payable quarterly on December 31, March
      30, June 30 and September 30 of each year. Interest shall be payable, at the
      Borrower’s election, either (i) in cash, or (ii) in shares of the Borrower’s
      common stock, par value $.001 per share (“Common
      Stock”)
      valued
      at the Conversion Price (defined below) as from time to time in
      effect.

     

    On
      the
      Maturity Date, the principal amount of this Note shall be repaid in cash, or
      at
      Borrower’s option, provided that the average of the closing sales price of the
      Common Stock for the 10 trading days immediately preceding Maturity Date, as
      reported by the Nasdaq Stock Market, the NASD OTC Bulletin Board, the Pink
      Sheets LLC, or such other principal market on which the Common Stock is then
      traded or quoted, equals or exceeds 150% of the Conversion Price at such time,
      in shares of Common Stock valued at such Conversion Price.

     

    This
      Note
      has been issued together with other identical promissory notes in the aggregate
      principal amount of up to $5 million (the “Other
      Notes”),
      and
      has been issued to Payee pursuant to a Subscription Agreement between Borrower
      and Payee (the “Subscription
      Agreement”).
      This
      Note is subject to the terms, conditions, covenants and agreements set forth
      in
      the Subscription Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    The
      payment of principal of and interest on this Note is subordinate to the payment
      of the indebtedness of Borrower to Laurus Master Fund Ltd. in the manner and
      to
      the extent provided for in that certain Subordination Agreement between Laurus
      Master Fund Ltd., Payee and the payees under the Other Notes (such payees,
      together with the Payee, the “Holders”).

     

    This
      Note
      is secured by a Security Agreement of even date herewith of the Borrower in
      favor of W-net, Inc., as collateral agent for the Holders covering certain
      collateral, all as more particularly described and provided therein, and is
      entitled to the benefits thereof. 

     

    Upon
      the
      occurrence of any of the following (each, an “Event
      of Default”),
      other
      than the Events of Default referred to in clause (b) or (c) below, Payee may
      declare by notice to Borrower any and all obligations of Borrower hereunder
      to
      be immediately due and payable, and upon the occurrence of any Event of Default
      referred to in clause (b) or (c) below, any and all obligations of Borrower
      hereunder shall automatically become due and payable immediately without notice
      or demand:

     

    (a) Borrower
      shall default in the payment of any amount due under this Note and shall not
      cure such default within 15 business days after Borrower receives written notice
      of such default from Payee;

     

    (b) Borrower
      shall (i) voluntarily commence any proceeding or file any petition seeking
      relief under Title 11 of the United States Code or any other Federal or state
      bankruptcy, insolvency or similar law, (ii) consent to the institution of,
      or
      fail to controvert in a timely and appropriate manner, any such proceeding
      or
      the filing of any such petition, (iii) apply for or consent to the employment
      of
      a receiver, trustee, custodian or similar official for Borrower or for a
      substantial part of its property, (iv) file an answer admitting the material
      allegations of a petition filed against it in any such proceeding, (v) make
      a
      general assignment for the benefit of its creditors, (vi) admit in writing
      its
      inability to pay its debts as they come due or (vii) take corporate action
      for
      the purpose of effecting any of the foregoing; or

     

    (c) an
      involuntary proceeding shall be commenced or an involuntary petition shall
      be
      filed in a court of competent jurisdiction seeking (i) relief in respect of
      Borrower or of a substantial part of its property, under Title 11 of the United
      States Code or any other Federal or state bankruptcy, insolvency or similar
      law,
      (ii) the appointment of a receiver, trustee, custodian or similar official
      for
      Borrower or for a substantial part of its property or (iii) the winding-up
      or
      liquidation of Borrower; and such proceeding or petition shall continue
      undismissed for 60 days or an order or decree approving or ordering any of
      the
      foregoing shall continue unstayed and in effect for 60 days. 

     

    This
      Note
      incorporates the following additional terms:

     

    1.
       Payee
      by
      acceptance of this Note covenants and represents to Borrower that this Note
      and
      any securities issued on exercise of the conversion privilege contained herein
      are being acquired by the Payee without a view to distribution and that the
      Payee will at no time transfer, assign or dispose of this Note or such
      securities except in compliance with the requirements of the Securities Act
      of
      1933, as amended, and applicable state securities laws.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    2. Borrower
      may prepay this Note at any time following the Conversion Date (defined below)
      without any penalty or premium, in whole or from time to time in part, upon
      written notice given at least five business days prior to the date fixed for
      such prepayment, subject to the right of Payee to exercise its conversion rights
      hereunder with respect to the unpaid principal of and interest accrued on this
      Note, at any time after the giving of such notice until the time of such
      prepayment. All payments received by Payee shall be applied first to the payment
      of all accrued interest payable hereunder.

     

    3.      
       (a) Subject
      to and upon compliance with the provisions of Sections 3 and 4 hereof, following
      the Conversion Date, the Payee may, at its option, at any time thereafter,
      convert all or any portion of the principal amount of this Note, together with
      all accrued interest on the principal portion hereof being so converted, into
      fully paid and non-assessable shares of Common Stock at a price equal to $0.004
      per share (the “Conversion
      Price”)
      subject to adjustment as provided below. “Conversion Date” means the close of
      business on the date that the Borrower files with the Secretary of State of
      the
      State of Delaware an amendment to its Certificate of Incorporation increasing
      the authorized number of shares of Common Stock and/or effecting a reverse
      stock
      split of the Common Stock so that the Borrower has a sufficient number of
      authorized and unissued shares of Common Stock so as to permit the conversion
      of
      this Note and all of the Other Notes.

     

    (b) If
      the
      Borrower shall at any time after the date hereof (i) issue Common Stock as
      a
      dividend or distribution on all shares of Common Stock of the Borrower, (ii)
      split or otherwise subdivide its outstanding Common Stock, or (iii) combine
      the
      outstanding Common Stock into a smaller number of shares, then the Conversion
      Price in effect immediately prior to such event shall, concurrently with the
      effectiveness of such event, be proportionately decreased or increased, as
      appropriate.

       
      (c) In
      case
      of any reclassification, change or exchange of outstanding shares of Common
      Stock (except for a change as a result of a subdivision or combination of such
      shares), or in case of any consolidation of the Borrower with, or merger of
      the
      Borrower into, another corporation (except for a merger or a consolidation
      in
      which the Borrower is the continuing corporation and which does not result
      in
      any reclassification, change or exchange of outstanding shares of Common Stock
      other than a change as a result of a subdivision or combination of such shares),
      or in case of any transfer to another corporation of the assets of the Borrower
      as an entirety or substantially as an entirety, or if the Borrower shall declare
      a dividend or distribution (except in shares of Common Stock or in securities
      directly or indirectly convertible into or exchangeable for shares of Common
      Stock) upon the shares of Common Stock payable otherwise than in cash out of
      earned surplus, this Note shall thereafter be convertible pursuant to this
      Section 3 (to the extent this Note is then convertible) into the kind and amount
      of shares and other securities and property that the Payee would have earned
      or
      would have been entitled to receive immediately after such reclassification,
      change, exchange, consolidation, merger, transfer, dividend or distribution,
      had
      this Note been converted immediately prior to the effective date of such
      reclassification, change, exchange, consolidation, merger or transfer or
      immediately prior to the date for the determination of security holders of
      record entitled to receive such dividend or distribution.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    (d) At
      the
      option of the Payee, to avoid the issuance of any fractional shares upon any
      conversion (to the extent this Note is then convertible), adjustment therefor
      may be made in cash in an amount equal to the same fraction of the Conversion
      Price in effect on the date of such conversion.

     

    4. To
      exercise the conversion privilege at any time when such privilege is exercisable
      in accordance with the terms of this Note, the Payee shall surrender this Note,
      with the attached form of Conversion Notice duly completed, to the Borrower
      at
      the principal office of the Borrower or at such other place as the Borrower
      may
      designate. As promptly as practicable after surrender of this Note as aforesaid
      but in no event later than three business days thereafter, the Borrower shall
      issue and deliver to the Payee a certificate or certificates for the number
      of
      shares of Common Stock and/or other securities issuable or deliverable upon
      the
      conversion of this Note or such designated portion hereof in accordance herewith
      and cash in respect of any fraction of a share of Common Stock for which the
      Payee has elected to receive cash. Such conversion shall be deemed to have
      been
      effected at the time when such notice shall have been received by the Borrower
      and this Note shall have been surrendered as aforesaid, and the person in whose
      name any certificate for shares of Common Stock or other securities shall be
      issuable upon such conversion shall be deemed to have become on such date the
      holder of record of the shares or other securities represented
      thereby.

     

    5. The
      Borrower covenants and agrees that it will at all times following the Conversion
      Date, to the extent this Note is outstanding, reserve and keep available such
      number of its duly authorized and unissued shares of Common Stock as shall
      from
      time to time be sufficient to effect the conversion of this Note and the
      exercise or conversion of all other outstanding securities exercisable or
      convertible with respect to shares of Common Stock and that, if at any time
      the
      number of authorized but unissued shares of Common Stock shall not be sufficient
      to effect the conversion of this Note and the exercise or conversion of all
      other outstanding securities exercisable or convertible with respect to shares
      of Common Stock at the Conversion Price then in effect, the Borrower will take
      such corporate action as may, in the opinion of its counsel, be necessary to
      increase its authorized but unissued shares of Common Stock to such number
      as
      shall be sufficient for such purpose.

     

    6. In
      any
      case where any payment of interest on, or principal of, this Note shall be
      required to be made on a Sunday or a legal holiday in the State of New York
      or a
      day on which banking institutions doing business in the State of New York are
      authorized by law to close, then such payment shall be made on the next
      succeeding business day and such additional time shall be included in the
      computation of interest.

     

    7. The
      agreements, undertakings, representations and warranties contained in this
      Note
      shall remain operative and in full force and effect and, subject to payment
      in
      full of all principal and interest due hereon, and shall survive the surrender
      and/or delivery of this Note to the Borrower for cancellation or otherwise
      in
      connection with the transfer hereof.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    8. Except
      as
      herein otherwise expressly provided, all notices, requests, demands, consents
      and other communications required or permitted under this Note shall be in
      writing and shall be considered to have been duly given when (i) delivered
      by
      hand, (ii) sent by telecopier (with receipt confirmed), provided that a copy
      is
      mailed (on the same date) by certified or registered mail, return receipt
      requested, postage prepaid, or (iii) received by the addressee, if sent by
      Express Mail, Federal Express or other reputable express delivery service
      (receipt requested), or by first class certified or registered mail, return
      receipt requested, postage prepaid, in each case to the appropriate addresses
      and telecopier numbers set forth below (or to such other addresses and
      telecopier numbers as a person whose address is herein specified may from time
      to time designate as to itself by notice similarly given to the other such
      designees in accordance herewith). A notice of change of address shall not
      be
      deemed given until received by the addressee. Notices shall be addressed (i)
      if
      to the Payee, at its address set forth above, and (ii) if to the Borrower or
      Borrower, at 2801 Trade Center Drive, Suite 120, Carollton, Texas 75007, Attn:
      Joseph Restivo.

     

    9. Borrower
      hereby waives presentment, demand for payment, notice of dishonor, protest
      and
      notice of protest of this Note. No waiver of any provision of this Note, or
      any
      agreement or instrument evidencing or providing security for this Note, made
      by
      agreement of Payee and any other person or party, shall constitute a waiver
      of
      any other terms hereof, or otherwise release or discharge the liability of
      Borrower under this Note. No failure to exercise and no delay in exercising,
      on
      the part of Payee, any right, power or privilege under this Note shall operate
      as a waiver thereof nor shall simple or partial exercise of any right, power
      or
      privilege preclude any other or further exercise thereof, or the exercise of
      any
      other power, right or privilege. The rights and remedies herein provided are
      cumulative and are not exclusive of any rights or remedies provided by
      law.

     

    10. Any
      provision of this Note 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 provisions hereof, and
      any such prohibition or unenforceability in any jurisdiction shall not
      invalidate or render unenforceable such provision in any other
      jurisdiction.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    11. This
      Note
      is governed by and to be construed in accordance with the laws of the State
      of
      New York without regard to its doctrine of conflict of laws. Borrower, by its
      execution hereof
      (i) agrees
      that any legal suit, action or proceeding arising from or related to this Note
      may be instituted in a state or federal court located in the State of New
      York;
      (ii) waives
      any objection which it may now or hereafter have to the laying of venue of
      any
      such suit, action or proceeding; and
      (iii) irrevocably
      submits to the jurisdiction of any such court in any such suit, action or
      proceeding.

     

    
      	 	 	 
	 	GVI
              SECURITY
              SOLUTIONS, INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:
              Steven Walin
	 	Title:
              Chief Executive Officer

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    NOTICE
      OF CONVERSION

     

    To
      be
      executed by the owner of the attached Note if such owner desires to convert
      the
      attached Note:

     

    The
      undersigned owner of the attached Note hereby

     

    
      	
            	o	
              irrevocably
                exercises the option to convert such Note into shares of Common Stock
                of
                GVI Security Solutions, Inc. (“GVI
                Shares”)
                in accordance with the terms of such
                Note,

            

    

     

    
      	
            	o	
              elects
                to receive payment in cash for any fractional share issuable upon
                such
                conversion,

            

    

     

    and
      directs that the GVI Shares issuable and deliverable upon such conversion,
      together with any check in payment for any fractional share as to which an
      election to receive cash is made above, be delivered to the undersigned.

     

    Dated:
      ________________________

     

    
      
        
        

      

      
        7Exhibit
      4.3

     

    SECURITY
      AGREEMENT

    

    SECURITY
      AGREEMENT (this “Agreement”), dated as of October 4, 2006 (this “Agreement”)
      between GVI SECURITY SOLUTIONS, INC.,
      a
      Delaware corporation (the “Parent”), GVI SECURITY, INC.,
      a
      Delaware corporation (“GVI” and together with Parent, collectively, the
“Company”), and W-net, Inc., a California corporation (in such capacity, the
“Collateral Agent”) for the holders of the Notes (as defined below) listed on
      Schedule A hereto (collectively, the “Holders”).

    

    WHEREAS,
      the Holders have agreed to purchase up to $5,000,000 in the aggregate principal
      amount of 6% Subordinated Secured Convertible Promissory Notes of Parent dated
      as of the date hereof (the “Notes”);

    

    WHEREAS,
      GVI is a wholly-owned subsidiary of the Parent;

    

    WHEREAS,
      in order to induce the Holders to purchase the Notes, the Company has agreed
      to
      grant the Collateral Agent, for the benefit of the Holders, a security interest
      in the Company’s assets to secure the obligations of the Parent under the Notes;

    

    WHEREAS,
      the security interest to be granted hereunder to the Collateral Agent, for
      the
      benefit of the Holders, shall be subject and subordinate to the security
      interest in the Company’s assets previously granted to Laurus Master Fund Ltd.
      (“Laurus”), including, without limitation, pursuant to the terms of a
      Subordination Agreement among Laurus and the Holders of even date herewith;
      and

    

    WHEREAS,
      the Company wishes to grant security interests in favor of the Collateral Agent,
      for the benefit of the Holders as herein provided;

    

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

    

    1. Definitions.
      The
      term
“State”, as used herein, means the State of New York. All terms defined in the
      Uniform Commercial Code of the State and used herein shall have the same
      definitions herein as specified therein. However, if a term is defined in
      Article 9 of the Uniform Commercial Code of the State differently than in
      another Article of the Uniform Commercial Code of the State, the term has the
      meaning specified in Article 9. The term “Obligations”, as used herein, means
      all of the indebtedness, obligations and liabilities of the Company to the
      Holders, individually or collectively, whether direct or indirect, joint or
      several, absolute or contingent, due or to become due, now existing or hereafter
      arising under or in respect of the Notes, or other instruments or agreements
      executed and delivered pursuant thereto or in connection therewith or this
      Agreement. The term “Event of Default,” as used in this Agreement, shall mean an
      Event of Default under any of the Notes, the failure of the company to pay
      any
      of the Obligations when due, or such other default or breach by the Company
      of
      any of the Obligations.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    2. Grant
      of Security Interest.
      The
      Company hereby grants to the Collateral Agent, for the benefit of the Holders,
      to secure the payment and performance in full of all of the Obligations, a
      security interest in and so pledges and assigns to the Collateral Agent, for
      the
      benefit of the Holders, the following properties, assets and rights of the
      Company, wherever located, whether now owned or hereafter acquired or arising,
      and all proceeds and products thereof (all of the same being hereinafter called
      the “Collateral”): all personal and fixture property of every kind and nature
      including without limitation all goods (including inventory, equipment and
      any
      accessions thereto), instruments (including promissory notes), documents,
      accounts (including health-care-insurance receivables), chattel paper (whether
      tangible or electronic), deposit accounts, letter-of-credit rights (whether
      or
      not the letter of credit is evidenced by a writing), commercial tort claims,
      securities and all other investment property, supporting obligations, any other
      contract rights or rights to the payment of money, insurance claims and
      proceeds, and all general intangibles (including all payment intangibles).
      The
      Holders and Collateral Agent acknowledge that the attachment of its security
      interest in any commercial tort claim as original collateral is subject to
      the
      Company’s compliance with Section 4.1.

    

    3. Authorization
      to File Financing Statements.
      The
      Company hereby irrevocably authorizes the Collateral Agent at any time and
      from
      time to time to file in any Uniform Commercial Code jurisdiction any initial
      financing statements and amendments thereto that (a) indicate the Collateral
      (i)
      as all assets of the Company or words of similar effect, regardless of whether
      any particular asset comprised in the Collateral falls within the scope of
      Article 9 of the Uniform Commercial Code of the State or such jurisdiction,
      or
      (ii) as being of an equal or lesser scope or with greater detail, and (b)
      contain any other information required by part 5 of Article 9 of the Uniform
      Commercial Code of the State for the sufficiency or filing office acceptance
      of
      any financing statement or amendment, including whether the Company is an
      organization, the type of organization and any organization identification
      number issued to the Company. The Company agrees to furnish any such information
      to the Collateral Agent promptly upon request. 

    

    4. Other
      Actions.
      Further
      to insure the attachment, perfection and priority of, and the ability of the
      Collateral Agent to enforce, its security interest in the Collateral, the
      Company agrees, in each case at the Company’s own expense, to take the following
      actions with respect to the following Collateral:

    

    4.1. Commercial
      Tort Claims.
      If
      the
      Company shall at any time hold or acquire a commercial tort claim, the Company
      shall immediately notify the Collateral Agent in a writing signed by the Company
      of the brief details thereof and grant to the Collateral Agent, for the benefit
      of the Holders, in such writing a security interest therein and in the proceeds
      thereof, all upon the terms of this Agreement, with such writing to be in form
      and substance satisfactory to the Collateral Agent.

    

    4.2. Other
      Actions as to any and all Collateral.
      The
      Company further agrees, subject to the rights of Laurus, to take any other
      action reasonably requested by the Collateral Agent to insure the attachment,
      and perfection of, and the ability of the Collateral Agent to enforce, the
      Collateral Agent’s security interest in any and all of the
      Collateral.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    5. Representations
      and Warranties Concerning Company’s Legal Status.
      The
      Company represents and warrants to the Collateral Agent and Holders as follows:
      (a) the Company’s exact legal name is that indicated on the signature page
      hereof, (b) the Company is a corporation incorporated in the jurisdiction of
      the
      State of Delaware, (c) the organizational identification number of (i) the
      Parent is 2651712, and (ii) GVI is 3196283, and (d) the Company’s chief
      executive office as well as the Company’s mailing address is located at 2801
      Trade Center Drive, Suite 120, Carollton, Texas 75007.

    

    6. Covenants
      Concerning Company’s Legal Status. 
      The
      Company covenants with the Collateral Agent and Holders as follows: (a) without
      providing at least 30 days prior written notice to the Collateral Agent, the
      Company will not change its name, its place of business or, if more than one,
      chief executive office, or its mailing address or organizational identification
      number if it has one, (b) if the Company does not have an organizational
      identification number and later obtains one, the Company shall forthwith notify
      the Collateral Agent of such organizational identification number, and (c)
      the
      Company will not change its type of organization, jurisdiction of organization
      or other legal structure.

    

    7. Representations
      and Warranties Concerning Collateral, Etc. 
      The
      Company further represents and warrants to the Collateral Agent and Holders
      as
      follows: (a) the Company is the owner of the
      Collateral, free from any adverse lien, security interest or other encumbrance,
      except for the security interest created by this Agreement, liens in favor
      of
      Laurus, and liens incurred in the ordinary course of business which arise by
      operation of law and which liens secure amounts not yet due (collectively,
      “Permitted Liens”),
      (b) none
      of
      the Collateral constitutes, or is the proceeds of, “farm products” as defined in
      Section 9-102(a)(34) of the Uniform Commercial Code of the State, and (c) the
      Company has at all times operated its business in compliance with all applicable
      provisions of the federal Fair Labor Standards Act, as amended, and with all
      applicable provisions of federal, state and local statutes and ordinances
      dealing with the control, shipment, storage or disposal of hazardous materials
      or substances.

    

    8. Insurance.
      The
      Company will maintain with financially sound and reputable insurers insurance
      with respect to its properties and business against such casualties and
      contingencies as shall be in accordance with general practices of businesses
      engaged in similar activities in similar geographic areas. Such insurance shall
      be in such minimum amounts that the Company will not be deemed a co-insurer
      under applicable insurance laws, regulations and policies and otherwise shall
      be
      in such amounts, contain such terms, be in such forms and be for such periods
      as
      may be reasonably satisfactory to the Collateral Agent. 

    

    9. Collateral
      Protection Expenses; Preservation of Collateral.

    

    9.1. Expenses
      incurred by Collateral Agent.
      In
      its
      discretion, the Collateral Agent may discharge taxes and other encumbrances
      at
      any time levied or placed on any of the Collateral, make repairs thereto and
      pay
      any necessary filing fees or, if the Company fails to do so, insurance premiums.
      The Company agrees to reimburse the Collateral Agent on demand for any and
      all
      expenditures so made. The Collateral Agent shall have no obligation to the
      Company to make any such expenditures, nor shall the making thereof relieve
      the
      Company of any default.

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    9.2. Collateral
      Agent’s Obligations and Duties.
      Anything
      herein to the contrary notwithstanding, the Company shall remain liable under
      each contract or agreement comprised in the Collateral to be observed or
      performed by the Company thereunder. The Collateral Agent shall not have any
      obligation or liability under any such contract or agreement by reason of or
      arising out of this Agreement or the receipt by the Collateral Agent of any
      payment relating to any of the Collateral, nor shall the Collateral Agent be
      obligated in any manner to perform any of the obligations of the Company under
      or pursuant to any such contract or agreement, to make inquiry as to the nature
      or sufficiency of any payment received by the Collateral Agent in respect of
      the
      Collateral or as to the sufficiency of any performance by any party under any
      such contract or agreement, to present or file any claim, to take any action
      to
      enforce any performance or to collect the payment of any amounts which may
      have
      been assigned to the Collateral Agent or to which the Collateral Agent may
      be
      entitled at any time or times. The Collateral Agent’s sole duty with respect to
      the custody, safe keeping and physical preservation of the Collateral in its
      possession, under Section 9-207 of the Uniform Commercial Code of the State
      or
      otherwise, shall be to deal with such Collateral in the same manner as the
      Collateral Agent deals with similar property for its own account.

    

    10. Remedies.
      If
      an
      Event of Default shall have occurred and be continuing, the Collateral Agent
      may, without notice to or demand upon the Company, declare this Agreement to
      be
      in default, and the Collateral Agent shall thereafter have in any jurisdiction
      in which enforcement hereof is sought, in addition to all other rights and
      remedies, the rights and remedies of a secured party under the Uniform
      Commercial Code of the State or of any jurisdiction in which Collateral is
      located.

    

    11. Standards
      for Exercising Remedies.
      To
      the
      extent that applicable law imposes duties on the Collateral Agent to exercise
      remedies in a commercially reasonable manner, the Company acknowledges and
      agrees that it is not commercially unreasonable for the Collateral Agent (a)
      to
      fail to incur expenses reasonably deemed significant by the Collateral Agent
      to
      prepare Collateral for disposition or otherwise to complete raw material or
      work
      in process into finished goods or other finished products for disposition,
      (b)
      to fail to obtain third party consents for access to Collateral to be disposed
      of, or to obtain or, if not required by other law, to fail to obtain
      governmental or third party consents for the collection or disposition of
      Collateral to be collected or disposed of, (c) to fail to exercise collection
      remedies against account debtors or other persons obligated on Collateral or
      to
      remove liens or encumbrances on or any adverse claims against Collateral, (d)
      to
      exercise collection remedies against account debtors and other persons obligated
      on Collateral directly or through the use of collection agencies and other
      collection specialists, (e) to advertise dispositions of Collateral through
      publications or media of general circulation, whether or not the Collateral
      is
      of a specialized nature, (f) to contact other persons, whether or not in the
      same business as the Company, for expressions of interest in acquiring all
      or
      any portion of the Collateral, (g) to hire one or more professional auctioneers
      to assist in the disposition of Collateral, whether or not the collateral is
      of
      a specialized nature, (h) to dispose of Collateral by utilizing Internet sites
      that provide for the auction of assets of the types included in the Collateral
      or that have the reasonable capability of doing so, or that match buyers and
      sellers of assets, (i) to dispose of assets in wholesale rather than retail
      markets, (j) to disclaim disposition warranties, (k) to purchase insurance
      or credit enhancements to insure the Collateral Agent against risks of loss,
      collection or disposition of Collateral or to provide to the Collateral Agent
      a
      guaranteed return from the collection or disposition of Collateral, or (l)
      to
      the extent deemed appropriate by the Collateral Agent, to obtain the services
      of
      other brokers, investment bankers, consultants and other professionals to assist
      the Collateral Agent in the collection or disposition of any of the Collateral.
      The Company acknowledges that the purpose of this Section 11 is to provide
      non-exhaustive indications of what actions or omissions by the Collateral Agent
      would not be commercially unreasonable in the Collateral Agent’s exercise of
      remedies against the Collateral and that other actions or omissions by the
      Collateral Agent shall not be deemed commercially unreasonable solely on account
      of not being indicated in this Section 11. Without limitation upon the
      foregoing, nothing contained in this Section 11 shall be construed to grant
      any
      rights to the Company or to impose any duties on the Collateral Agent that
      would
      not have been granted or imposed by this Agreement or by applicable law in
      the
      absence of this Section 11.

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    12. No
      Waiver. The
      Collateral Agent shall not be deemed to have waived any of its rights upon
      or
      under the Obligations or the Collateral unless such waiver shall be in writing
      and signed by the Collateral Agent. No delay or omission on the part of the
      Collateral Agent in exercising any right shall operate as a waiver of such
      right
      or any other right. A waiver on any one occasion shall not be construed as
      a bar
      to or waiver of any right on any future occasion. All rights and remedies of
      the
      Collateral Agent with respect to the Obligations or the Collateral, whether
      evidenced hereby or by any other instrument or papers, shall be cumulative
      and
      may be exercised singularly, alternatively, successively or concurrently at
      such
      time or at such times as the Collateral Agent deems expedient.

    

    13. Waivers
      by Company.
      The
      Company waives demand, notice, protest, notice of acceptance of this Agreement,
      notice of loans made, credit extended, Collateral received or delivered or
      other
      action taken in reliance hereon and all other demands and notices of any
      description. With respect to both the Obligations and the Collateral, the
      Company assents to any extension or postponement of the time of payment or
      any
      other indulgence, to any substitution, exchange or release of or failure to
      perfect any security interest in any Collateral, to the addition or release
      of
      any party or person primarily or secondarily liable, to the acceptance of
      partial payment thereon and the settlement, compromising or adjusting of any
      thereof, all in such manner and at such time or times as the Collateral Agent
      may deem advisable. The Collateral Agent shall have no duty as to the collection
      or protection of the Collateral or any income thereon, nor as to the
      preservation of rights against prior parties, nor as to the preservation of
      any
      rights pertaining thereto beyond the safe custody thereof as set forth in
      Section 9.2. The Company further waives any and all other suretyship
      defenses.

    

    14. Marshalling.
      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 its 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
      it
      lawfully may, the Company hereby agrees that it will not invoke any law relating
      to the marshaling 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, the Company hereby irrevocably waives the benefits of all such
      laws.

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    15. Proceeds
      of Dispositions; Expenses.
      The
      Company shall pay to the Collateral Agent on demand any and all expenses,
      including reasonable attorneys’ fees and disbursements, incurred or paid by the
      Collateral Agent in protecting, preserving or enforcing the Collateral Agent’s
      rights under or in respect of any of the Obligations or any of the Collateral.
      After deducting all of said expenses, the residue of any proceeds of collection
      or sale of the Obligations or Collateral shall, to the extent actually received
      in cash, be applied to the payment of the Obligations in such order or
      preference as the Collateral Agent may determine, proper
      allowance and provision being made for any Obligations not then due. Upon the
      final payment and satisfaction in full of all of the Obligations and after
      making any payments required by Sections 9-608(a)(1)(C) or 9-615(a)(3) of the
      Uniform Commercial Code of the State, any excess shall be returned to the
      Company, and the Company shall remain liable for any deficiency in the payment
      of the Obligations.

    

    16. Overdue
      Amounts.
      Until
      paid, all amounts due and payable by the Company hereunder shall be a debt
      secured by the Collateral.

    

    17. Governing
      Law; Consent to Jurisdiction.
      THIS
      AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE
      GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
      YORK. The Company agrees that any suit for the enforcement of this Agreement
      may
      be brought in the courts of the State or any federal court sitting therein
      and
      consents to the non-exclusive jurisdiction of such court and to service of
      process in any such suit being made upon the Company by mail at the address
      specified in Section 5. The
      Company hereby waives any objection that it may now or hereafter have to the
      venue of any such suit or any such court or that such suit is brought in an
      inconvenient court.

    

    18. Waiver
      of Jury Trial.
      THE
      COMPANY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM
      ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS,
      REMEDIES, OBLIGATIONS, OR DUTIES HEREUNDER, OR THE PERFORMANCE OR ENFORCEMENT
      HEREOF OR THEREOF. Except as prohibited by law, the Company waives any right
      which it may have to claim or recover in any litigation referred to in the
      preceding sentence any special, exemplary, punitive or consequential damages
      or
      any damages other than, or in addition to, actual damages. The Company (i)
      certifies that neither the Collateral Agent nor any representative, agent or
      attorney of the Collateral Agent has represented, expressly or otherwise, that
      the Collateral Agent would not, in the event of litigation, seek to enforce
      the
      foregoing waivers or other waivers contained in this Agreement, and (ii)
      acknowledges that, making the loan evidenced by the Notes, the Collateral Agent
      is relying upon, among other things, the waivers and certifications contained
      in
      this Section 18.

    

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    19. Miscellaneous.
      The
      headings of each section of this Agreement are for convenience only and shall
      not define or limit the provisions thereof. This Agreement and all rights and
      obligations hereunder shall be binding upon the Company and its respective
      successors and assigns, and shall inure to the benefit of the Holders, the
      Collateral Agent and their successors and assigns. If any term of this Agreement
      shall be held to be invalid, illegal or unenforceable, the validity of all
      other
      terms hereof shall in no way be affected thereby, and this Agreement shall
      be
      construed and be enforceable as if such invalid, illegal or unenforceable term
      had not been included herein. The Company acknowledges receipt of a copy of
      this
      Agreement.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF,
      intending to be legally bound, the Company has caused this Agreement to be
      duly
      executed as of the date first above written.

    
      	 	 	 
	 	GVI
              SECURITY
              SOLUTIONS, INC.
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:
                Steven Walin

              Title:
                Chief Executive Officer 

            
	 	
            

      	 	 	 
	 	GVI SECURITY, INC.
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:
                Steven Walin

              Title:
                Chief Executive Officer 

            
	 	
            

      	 	 	 
	 	W-NET,
              INC., as
              Collateral Agent for the Holders
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              
Name:
	 	Title:
              

    

    

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    Schedule
      A

    Holders

    

    
      	
              Name

            	 	
               Principal
                Amount

            

    

     

    
      
         

      

      
        9

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