Document:

Exhibit
      10.7

     

    AMENDED
      AND RESTATED SECURED TERM NOTE

     

    FOR
      VALUE
      RECEIVED, GVI SECURITY SOLUTIONS, INC., a Delaware corporation (the
“Borrower”),
      hereby promises to pay to LAURUS MASTER FUND, LTD., c/o Ironshore Corporate
      Services Ltd., P.O. Box 1234 G.T., Queensgate House, South Church Street, Grand
      Cayman, Cayman Islands, Fax: 345-949-9877 (the “Holder”)
      or its
      registered assigns or successors in interest, on order, the sum of Two Million
      One Hundred Twenty Five Thousand Dollars ($2,125,000), together with any accrued
      and unpaid interest hereon, on December 31, 2007 (the “Maturity
      Date”)
      if not
      sooner paid. This Secured Term Note amends and restates in its entirety (and
      is
      given in substitution for and not in satisfaction of) that certain $5,000,000
      Secured Convertible Term Note made by the Company in favor of Holder on May
      27,
      2004.

     

    Capitalized
      terms used herein without definition shall have the meanings ascribed to such
      terms in that certain Securities Purchase Agreement dated as of May 27, 2004,
      as
      amended and restated as of October 4, 2006, between the Borrower and the Holder
      (as further amended and restated, amended, modified and supplemented from time
      to time, the “Purchase
      Agreement”). This
      is
      the Note referred to in the Purchase Agreement, and all forms, terms and
      provisions thereof are expressly incorporated herein by reference.

     

    The
      following terms shall apply to this Amended and Restated Secured Term Note
      (this
“Note”):

     

    ARTICLE
      I

    INTEREST
      & AMORTIZATION

     

    1.1
      (a) Interest
      Rate.
      Subject
      to Sections 4.11 and 5.6 hereof, interest payable on this Note shall accrue
      at a
      rate per annum (the “Interest
      Rate”)
      equal
      to the “prime rate” published in The
      Wall Street Journal
      from
      time to time, plus two percent (2.0%). The Interest Rate shall be increased
      or
      decreased as the case may be for each increase or decrease in the prime rate
      in
      an amount equal to such increase or decrease in the prime rate; each change
      to
      be effective as of the day of the change in such rate. Subject to Section 1.1(b)
      hereof, the Interest Rate shall not be less than six percent (6.0%). Interest
      shall be (i) calculated on the basis of a 360 day year, (ii) payable monthly,
      in
      arrears, commencing on October 1, 2006 and on the first business day of each
      consecutive calendar month thereafter until the Maturity Date (and on the
      Maturity Date), whether by acceleration or otherwise (each, a “Repayment
      Date”).

     

    1.1
      (b)
Interest
      Rate Adjustment.
      The
      Interest Rate shall be calculated on the last business day of each month
      hereafter until the Maturity Date (each a “Determination
      Date”)
      and be
      subject to adjustment as set forth herein. 

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    
       

      1.2 Minimum
        Monthly Principal Payments. Amortizing
        payments of the aggregate principal amount outstanding under this Note at
        any
        time (the “Principal
        Amount”)
        shall
        begin on the first business day in October 2006 and shall recur and be due
        and
        payable on the first business day of each succeeding month thereafter until
        the
        Maturity Date (each, an “Amortization
        Date”)
        as set
        forth in the table below:

       

    

    
      
        	
                Month

              	 	
                Principal
                  Amount

              	
                 

              	
                Month

              	 	
                Principal
                  Amount

              
	
                10/06

              	 	
                $100,000

              	 	
                06/07

              	 	
                $152,083

              
	
                11/06

              	 	
                $100,000

              	 	
                07/07

              	 	
                $152,083

              
	
                12/06

              	 	
                $100,000

              	 	
                08/07

              	 	
                $152,083

              
	
                01/07

              	 	
                $152,083

              	 	
                09/07

              	 	
                $152,083

              
	
                02/07

              	 	
                $152,083

              	 	
                10/07

              	 	
                $152,083

              
	
                03/07

              	 	
                $152,083

              	 	
                11/07

              	 	
                $152,083

              
	
                04/07

              	 	
                $152,083

              	 	
                12/07

              	 	
                $152,083

              
	
                05/07

              	 	
                $152,083

              	 	 	 	 

      

    

     

    Beginning
      on the first Amortization Date, the Borrower shall make monthly payments to
      the
      Holder on each Repayment Date, each in the amount set forth above, together
      with
      any accrued and unpaid interest to date on such portion of the Principal Amount
      plus any and all other amounts which are then due and owing under this Note
      but
      have not been paid (collectively, the “Monthly
      Amount”).
      Any
      Principal Amount that remains outstanding on the Maturity Date shall be due
      and
      payable on the Maturity Date.

     

    ARTICLE
      II

    OPTIONAL
      REDEMPTION 

     

    2.1  Optional
      Redemption in Cash.
      The
      Borrower will have the option of prepaying this Note (“Optional
      Redemption”)
      by
      paying to the Holder a sum of money equal to the principal amount then
      outstanding under this Note together with accrued but unpaid interest thereon
      and any and all other sums due, accrued or payable to the Holder arising under
      this Note, the Purchase Agreement, or any Related Agreement (the “Redemption
      Amount”)
      outstanding on the Redemption Payment Date (defined below) specified in the
      written notice of redemption (the “Notice
      of Redemption”).
      The
      Notice of Redemption shall specify the date for such Optional Redemption (the
      “Redemption
      Payment Date”)
      which
      date shall be within seven (7) business days after the date of the Notice of
      Redemption (the “Redemption
      Period”).
      On
      the Redemption Payment Date, the Redemption Amount must be paid in good funds
      to
      the Holder. In the event the Borrower fails to pay the Redemption Amount on
      the
      Redemption Payment Date as set forth herein, then such Redemption Notice will
      be
      null and void.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      III

    [INTENTIONALLY
      OMITTED]

     

    ARTICLE
      IV

    EVENTS
      OF DEFAULT

     

    Upon
      the
      occurrence and continuance of an Event of Default beyond any applicable grace
      period, the Holder may make all sums of principal, interest and other fees
      then
      remaining unpaid hereon and all other amounts payable hereunder immediately
      due
      and payable. In the event of such an acceleration, within five (5) days after
      written notice from Holder to Borrower (each occurrence being a “Default
      Notice Period”)
      the
      amount due and owing to the Holder shall be 100% of the outstanding principal
      amount of the Note (plus accrued and unpaid interest and fees, if any) (the
      “Default
      Payment”).
      If,
      with respect to any Event of Default, the Borrower cures the Event of Default,
      the Event of Default will be deemed to no longer exist and any rights and
      remedies of Holder pertaining to such Event of Default will be of no further
      force or effect. The Default Payment shall be applied first to any fees due
      and
      payable to Holder pursuant to the Note or the Related Agreements, then to
      accrued and unpaid interest due on the Note and then to outstanding principal
      balance of the Note. The occurrence of any of the following events set forth
      in
      Sections 4.1 through 4.10, inclusive, is an “Event
      of Default”:

     

    4.1 Failure
      to Pay Principal, Interest or other Fees.
      The
      Borrower fails to pay when due any installment of principal, interest or other
      fees hereon in accordance herewith, or the Borrower fails to pay when due any
      amount due under any other promissory note issued by Borrower to Holder, and
      in
      any such case, such failure shall continue for a period of three (3) days
      following the date upon which any such payment was due.

     

    4.2 Breach
      of Covenant.
      The
      Borrower breaches any material covenant or any other material term or condition
      of this Note or the Purchase Agreement in any material respect, or the Borrower
      or any of its Subsidiaries breaches any material covenant or any other material
      term or condition of any Related Agreement in any material respect and, any
      such
      case, such breach, if subject to cure, continues for a period of fifteen (15)
      days after notice from Holder of the occurrence thereof.

     

    4.3 Breach
      of Representations and Warranties.
      Any
      material representation or warranty made by the Borrower in this Note or the
      Purchase Agreement, or by the Borrower or any of its Subsidiaries in any Related
      Agreement, shall, in any such case, be false or misleading in any material
      respect on the date that such representation or warranty was made or deemed
      made.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    4.4 Receiver
      or Trustee.
      The
      Borrower or any of its Subsidiaries shall make an assignment for the benefit
      of
      creditors, or apply for or consent to the appointment of a receiver or trustee
      for it or for a substantial part of its property or business; or such a receiver
      or trustee shall otherwise be appointed.

     

    4.5 Judgments.
      Any
      money judgment, writ or similar final process shall be entered or filed against
      the Borrower or any of its Subsidiaries or any of their respective property
      or
      other assets for more than $250,000, and shall remain unvacated, unbonded or
      unstayed for a period of thirty (30) days.

     

    4.6 Bankruptcy.
      Bankruptcy, insolvency, reorganization or liquidation proceedings or other
      proceedings or relief under any bankruptcy law or any law for the relief of
      debtors shall be instituted by or against the Borrower or any of its
      Subsidiaries.

     

    4.7 Stop
      Trade.
      An SEC
      stop trade order or Principal Market trading suspension of the Common Stock
      shall be in effect for five (5) consecutive days or five (5) days during a
      period of ten (10) consecutive days, excluding in all cases a suspension of
      all
      trading on a Principal Market, provided
      that the
      Borrower shall not have been able to cure such trading suspension within thirty
      (30) days of the notice thereof or list the Common Stock on another Principal
      Market within sixty (60) days of such notice. The “Principal Market” for the
      Common Stock shall include the over-the-counter market, the NASD OTC Bulletin
      Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock
      Exchange, or New York Stock Exchange (whichever of the foregoing is at the
      time
      the principal trading exchange or market for the Common Stock), or any
      securities exchange)or other securities market on which the Common Stock is
      then
      being listed or traded.

     

    4.8
       Failure
      to Deliver Transfer Agent Instructions.
      The
      Borrower shall fail to instruct the transfer agent to deliver the Common Stock
      to the Holder as required Section 9 of the Securities Purchase Agreement, and
      as
      a result thereof, certificates representing such shares of Common Stock are
      not
      delivered to the Holder within ten business days after the date Borrower was
      required to so instruct the transfer agent.

     

    4.9 Default
      Under Related Agreements or Other Agreements.
      The
      occurrence and continuance of any Event of Default (as defined in any Related
      Agreement) or any event of default (or similar term) under any other
      indebtedness which results in the acceleration of obligations of the Borrower
      in
      the amount of $250,000.

     

    4.10 Change
      in Control. The
      occurrence of a change in the controlling ownership of the Borrower;
provided,
      however,
      that a
      change in the controlling ownership of the Borrower shall be deemed not to
      occur
      if the person obtaining such control possessed beneficial ownership, directly
      or
      indirectly, as of the date hereof, of 35% or more of Borrower’s outstanding
      shares of Common Stock, provided
      further, that a change in
      the
      controlling ownership of Borrower
      shall be
      deemed not to occur as a result of the issuance of Common Stock and Subordinated
      Notes on the Restatement Date in accordance with that certain Terms Sheet
      provided to Holder by the Borrower
      on or
      prior to the Restatement Date.

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    DEFAULT
      RELATED PROVISIONS

     

    4.11 Payment
      Grace Period.
      Following the occurrence and continuance of an Event of Default beyond any
      applicable cure period hereunder, the Borrower shall pay the Holder a default
      interest rate equal to three percent (3%) per annum above the Interest Rate
      from
      time to time in effect on all amounts due and owing under the Note, which
      default interest shall be payable upon demand. 

     

    4.12 Cumulative
      Remedies.
      The
      remedies under this Note shall be cumulative.

     

    ARTICLE
      V

    MISCELLANEOUS

     

    5.1 Failure
      or Indulgence Not Waiver.
      No
      failure or delay on the part of the Holder hereof in the exercise of any power,
      right or privilege hereunder shall operate as a waiver thereof, nor shall any
      single or partial exercise of any such power, right or privilege preclude other
      or further exercise thereof or of any other right, power or privilege. All
      rights and remedies existing hereunder are cumulative to, and not exclusive
      of,
      any rights or remedies otherwise available.

     

    5.2 Notices.
      Any
      notice herein required or permitted to be given shall be in writing and shall
      be
      deemed effectively given: (a) upon personal delivery to the party notified,
      (b)
      when sent by confirmed telex or facsimile if sent during normal business hours
      of the recipient, if not, then on the next business day, (c) five days after
      having been sent by registered or certified mail, return receipt requested,
      postage prepaid, or (d) one day after deposit with a nationally recognized
      overnight courier, specifying next day delivery, with written verification
      of
      receipt. All communications shall be sent to the Borrower at the address
      provided in the Purchase Agreement executed in connection herewith, and to
      the
      Holder at the address provided in the Purchase Agreement for such Holder, with
      a
      copy to John E. Tucker, Esq., 825 Third Avenue, 14th
      Floor,
      New York, New York 10022, facsimile number (212) 541-4434, or at such other
      address as the Borrower or the Holder may designate by ten days advance written
      notice to the other parties hereto. 

     

    5.3 Amendment
      Provision.
      The
      term “Note” and all reference thereto, as used throughout this instrument, shall
      mean this instrument as originally executed, or if later amended or
      supplemented, then as so amended or supplemented.

     

    5.4 Assignability.
      This
      Note shall be binding upon the Borrower and its successors and assigns, and
      shall inure to the benefit of the Holder and its successors and assigns, and
      may
      be assigned by the Holder in accordance with the requirements of the Purchase
      Agreement. This Note shall not be assigned by the Borrower without the consent
      of the Holder.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    5.5 Governing
      Law.
      This
      Note shall be governed by and construed in accordance with the laws of the
      State
      of New York, without regard to principles of conflicts of laws. Any action
      brought by either party against the other concerning the transactions
      contemplated by this Agreement shall be brought only in the state courts of
      New
      York or in the federal courts located in the state of New York. Both parties
      and
      the individual signing this Note on behalf of the Borrower agree to submit
      to
      the jurisdiction of such courts. The prevailing party shall be entitled to
      recover from the other party its reasonable attorney’s fees and costs. In the
      event that any provision of this Note is invalid or unenforceable under any
      applicable statute or rule of law, then such provision shall be deemed
      inoperative to the extent that it may conflict therewith and shall be deemed
      modified to conform with such statute or rule of law. Any such provision which
      may prove invalid or unenforceable under any law shall not affect the validity
      or unenforceability of any other provision of this Note. Nothing contained
      herein shall be deemed or operate to preclude the Holder from bringing suit
      or
      taking other legal action against the Borrower in any other jurisdiction to
      collect on the Borrower’s obligations to Holder, to realize on any collateral or
      any other security for such obligations, or to enforce a judgment or other
      court
      in favor of the Holder.

     

    5.6 Maximum
      Payments.
      Nothing
      contained herein shall be deemed to establish or require the payment of a rate
      of interest or other charges in excess of the maximum permitted by applicable
      law. In the event that the rate of interest required to be paid or other charges
      hereunder exceed the maximum permitted by such law, any payments in excess
      of
      such maximum shall be credited against amounts owed by the Borrower to the
      Holder and thus refunded to the Borrower.

     

    5.7 Security
      Interest and Guarantee.
      The
      Holder has been granted a security interest (i) in certain assets of the
      Borrower and its Subsidiaries as more fully described in the Master Security
      Agreement dated as of the date hereof and (ii) pursuant to the Stock Pledge
      Agreement dated as of the date hereof. The obligations of the Borrower under
      this Note are guaranteed by certain Subsidiaries of the Borrower pursuant to
      the
      Subsidiary Guaranty dated as of the date hereof.

     

    5.8 Construction.
      Each
      party acknowledges that its legal counsel participated in the preparation of
      this Note and, therefore, stipulates that the rule of construction that
      ambiguities are to be resolved against the drafting party shall not be applied
      in the interpretation of this Note to favor any party against the other.

     

    5.9 Cost
      of Collection.
      If
      default is made in the payment of this Note, the Borrower shall pay to Holder
      reasonable costs of collection, including reasonable attorney’s fees.

     

    5.10 Registered
      Obligation.
      This
      Note is intended to be a registered obligation within the meaning of Treasury
      Regulation Section 1.871-14(c)(1)(i) and the Note shall be registered as to
      both
      principal and any stated interest with the Borrower. Notwithstanding any
      document, instrument or agreement relating to this Note to the contrary,
      transfer of this Note (or the right to any payments of principal or stated
      interest thereunder) may only be effected by (i) surrender of this Note and
      either the reissuance by the Borrower of this Note to the new holder or the
      issuance by the Borrower of a new instrument to the new holder, or (ii) transfer
      through a book entry system maintained by the Borrower (or its agent), within
      the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).

     

    
      [Balance
        of page intentionally left blank; signature page follows.]

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      Borrower has caused this Convertible Term Note to be signed in its name
      effective as of this 4th
      day of
      October 2006.

    
      	 	 	 
	 	GVI
              SECURITY SOLUTIONS, INC.
	 
 	 
 	 
 
	 	
              By:  

            	   
              
	 	
              Name:

            	   
              
	 	
              Title:

            	   
              
	 	 	 
	WITNESS:	 	 
	 	 	 
	 	
            
	 	 

    

    
    

    
      
        
        

      

      
        7Exhibit
        10.8

       

      AMENDMENT
        TO EMPLOYMENT AGREEMENT

       

      This
        Amendment is made as of October 4, 2006, between GVI Security Solutions,
        Inc., a
        Delaware corporation (the “Company”) and Steven E. Walin (“Walin”).

      

      RECITALS

       

      WHEREAS,
        Walin and the Company are parties to an Employment Agreement, dated as of
        January 31, 2006 (the “Employment Agreement”), whereby Walin is employed as
        Chief Executive Officer of the Company; and

       

      WHEREAS,
        pursuant to the terms of the Employment Agreement, Walin was entitled to
        receive
        options to purchase shares of common stock, $.001 par value per share, of
        the
        Company; and

       

      WHEREAS,
        the Company is conducting a private placement (the “Offering”) of up to $5
        million of Subordinated Secured Convertible Notes (the “Notes”);
        and

       

      WHEREAS,
        in connection with the Offering, Walin and the Company have agreed to amend
        certain terms of the Employment Agreement and cancel the options agreed to
        be
        granted thereunder, as set forth herein.

       

      NOW,
        THEREFORE, THE PARTIES AGREE AS FOLLOWS:

       

      1.  Surrender
        of Stock Options.

       

      (a)  Walin
        hereby agrees that the option issued to him under Section 6(a) of the Employment
        Agreement to purchase an aggregate of 3,000,000 shares of the Company’s common
        stock, par value $.001 per share, evidenced by the Option Agreement dated
        as of
        March 6, 2006, between Walin and the Company, is hereby cancelled and of
        no
        further force or effect, and Walin shall have no further rights with respect
        to
        such option.

       

      (b)  Walin
        hereby waives any rights he may have pursuant to Section 6(b) of the Employment
        Agreement, and the Employment Agreement is hereby amended by deleting Section
        6(b) thereof in its entirety.

       

      2.  New
        Stock Option Grant.
        The
        Company shall grant to Walin a 10-year option (the “New Option”) to purchase
        94,089,763 shares of the Company’s common stock (the “Option Shares”). The
        exercise price with respect to the Option Shares shall be $.004 per share.
        Twenty-five percent of the Option Shares shall be immediately exercisable
        and
        the remaining 75% of the Option Shares shall become exercisable ratably over
        36
        months on a monthly basis commencing November 1, 2006, provided that Walin
        is
        employed by the Company on each such date. Walin will not exercise New Option
        unless and until the Company has effected the reverse stock split necessary
        to
        permit the conversion of the Notes in accordance with their terms. In addition,
        the New Option shall be governed by the applicable plan and option agreement.
        

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      3.  Amendment
        to Cause.
        The
        definition of “Cause” in Section 1(e) of the Employment Agreement is hereby
        amended by adding a new subclause (iv) as follows:

       

      “(iv) net
        income for the Company for the three months ending June 30, 2007 shall be
        less
        than $0.00. Net income shall be calculated in accordance with GAAP consistent
        with the Company’s financial reporting practices, except that there shall be
        excluded from the calculation of net income for the purposes of this clause
        (iv)
        (A) cash and non-cash transaction expenses incurred as a result of the Company’s
        private placement of 6% Subordinated Secured Convertible Promissory Notes
        (the
“Notes”) and any subsequent capital raising transaction (including, without
        limitation, (x) legal and accounting fees resulting from such transactions,
        (y)
        costs associated with a consulting arrangement with W-Net, and (z) amortization
        expense  associated
        with the convertibility of the Notes), and (B) non-cash compensation expenses
        attributable to new options granted to senior management.”

       

      4.  Governing
        Law. 
        This Amendment shall be governed in all respects by the laws of the State
        of New
        York without reference to its choice of law rules. 

       

      5.  Successors
        and Assigns. 
        Except as otherwise provided herein, the provisions hereof shall inure to
        the
        benefit of, and be binding upon, the successors, assigns, heirs, executors
        and administrators of the parties hereto.

       

      6.  Entire
        Agreement; Amendment. 
        This Amendment constitutes the full and entire understanding and agreement
        between the parties with regard to the subjects hereof and thereof. Neither
        this
        Amendment nor any term hereof may be amended, waived, discharged or terminated
        other than by a written instrument signed by the party to be charged. Except
        as
        specifically amended in this Amendment, the Employment Agreement shall remain
        in
        full force and effect and shall be binding on the parties hereto.

       

      7.  Counterparts. 
        This Amendment may be executed in any number of counterparts, each of which
        shall be enforceable against the parties actually executing such counterparts,
        and all of which together shall constitute one instrument.

       

      8.  Severability. 
        The holding of any provision of this Amendment to be invalid or unenforceable
        by
        a court of competent jurisdiction shall not affect any other provision of
        this
        Amendment, which shall remain in full force and effect.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
        day
        and year first above written.        

      
        	 	 	 
	 	
                GVI
                  SECURITY SOLUTIONS, INC.

              
	 
 	 
 	 
 
	
              	By:  	
              
	 	
                

                Name:

              
	 	Title:
	 	 
	 	 
	 	
                
Steven
                Walin  

      

      

      
        
          
          

        

        
          3

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