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Exhibit 10.40
 
COMPANY LETTERHEAD

October 31, 2007
 
 
CAMOFI Master LDC
 
CAMHZN Master LDC
350 Madison Avenue
 
350 Madison Avenue
New York, New York 10017
 
 New York, New York 10017

Gentlemen:

Simultaneously with the execution and delivery of this letter, the undersigned,
Marshall Holdings International, Inc. (the “Company”) and D.L. Claire Capital,
Inc. (“D.L. Claire”), is executing and delivering to you, or causing to be
executed and delivered to you, the following:

 
1.
Secured Promissory Notes (the “Notes”) in the combined principal amount of
$650,000;

 
2.
Purchase Agreement between the Company, D.L. Claire and you;

 
3.
Security Agreement between the Company, D.L. Claire and you;

 
4.
Security Interest Pledge Agreement among the Company, the pledgors to the
Security Interest Pledge Agreement and you; and

 
5.
Guaranty between the Company and you.

The documents identified in items 1 through 5 above, along with this Letter, are
referred to herein as the “Transaction Documents”).

As additional consideration for your agreement to execute and deliver the
Transaction Documents, the Company agrees to issue (the “Repayment Issuance”) to
you and/or your designee (i) $250,000 worth of shares of common stock of the
Company that is free-trading and $100,000 worth of restricted stock (“Block I”)
both with a represented minimum value of $0.001 per share, (ii) in the event the
loan is not repaid in full within 180 days, additional shares of common stock of
the Company that is free-trading that is equal to 100% of the then-outstanding
balance on the Note (“Block II”), and (iii) in the event the loan is not repaid
in full within 270 days, additional shares of common stock of the Company that
is free-trading that is equal to 100% of the then-outstanding balance on the
Note (“Block III”). The Block II and III shares shall be valued at the lower of
(a) the closing price of the stock on the day immediately following the
Company’s reverse merger, or (b) the closing price of the Company’s stock on the
180th or 270th day (as applicable) following the Closing date. The following
chart sets forth the schedule for issuing the Blocks I, II and III shares:
 

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CAMOFI Master LDC
CAMHZN Master LDC
October 31, 2007
Page 2 of 4

   
Upon Execution of this Agreement (Block I)
 
Repayment on or after 90 days but before 180 days after issuance (Block II)1
 
Repayment on or after 180 days but before 270 days after issuance (Block III)2
Number of Shares to be Issued
 
$250,000 worth of free-trading/piggyback, $100,000 worth of restricted
 
Amount equal to 100% of outstanding balance on the Note
 
Amount equal to 100% of outstanding balance on the Note

Certificates representing Block I shares are attached hereto. Certificates
representing Blocks II and III shares shall be issued immediately and delivered
to your counsel who shall hold said certificates for your benefit and release
them to you as they become due, without further notice to the Company. In the
event that repayment is completed prior to 180 days, all certificates held by
your counsel in connection with Blocks II and III shall be returned to us
immediately.

In the event that we are unable to provide free-trading shares on the Closing
Date, you are hereby authorized to withhold $125,000 (the “Holdback”) from the
loan proceeds as security for delivery of the free-trading shares. The Holdback
shall be released to us under the following conditions: (i) in the event that we
are able to provide you with free-trading shares prior to December 17, 2007, or
(ii)(a) in the event that we file a registration statement for the Block I
shares prior to December 17, 2007, $62,500 of the Holdback shall be released to
us, and (b) in the event that said registration statement is declared effective
prior to May 17, 2008 , then the remainder of the Holdback shall be released to
us. If the foregoing conditions have not been met, then the Holdback will be
released to you without any further notice to us. We acknowledge that the
holdback is considered part of the principle amount of the loan and that in the
event we forfeit the Holdback, we shall have no claim for a credit or offset for
the full principle amount of the loan.

We hereby agree that in the event that (i) the Company’s stock is trading below
$0.001 at the conclusion of the first one hundred eighty (180) day period
following the Closing Date, or (ii) the Company fails to comply with the terms
of any of the Transaction Documents, the Company shall be irrevocably obligated
to immediately repurchase the Block I Shares, for a price equal to $0.001 per
share. We hereby further agree that that in the event that (i) the Company’s
stock is trading below $0.001 at the conclusion of the first one hundred eighty
(180) day period following the Closing Date, or (ii) the Company fails to comply
with the terms of any of the Transaction Documents, the Company shall be
irrevocably obligated to immediately repurchase the Block I Shares, for a price
equal to $0.001 per share.
 
______________________________
1 Subject to an upward adjustment, in the event that the price of the Company’s
stock declines in value during the ninety-day period after issuance.
2 Subject to an upward adjustment, in the event that the price of the Company’s
stock declines in value during the one hundred eighty-day period after issuance.
 

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CAMOFI Master LDC
CAMHZN Master LDC
October 31, 2007
Page 3 of 4

We hereby further agree that within 90 days from the execution of this Letter,
the Company shall begin to take all steps necessary to bring the Company’s
corporate structure and status as a reporting public entity in conformity with
the description set forth in the memorandum attached hereto as Exhibit A. In the
event that the Company fails to adhere to the schedule referred to in this
paragraph, such failure shall constitute an Event of Default under the
Transaction Documents and you shall be entitled to pursue any and all available
remedies available to you as set forth in the Transaction Documents.

All such shares (referred to herein as the “Shares”) shall be duly authorized,
fully paid and nonassessable, free and clear of any liens and in proper
certificated form in the name of CAMOFI Master LDC, or other holder (s) or
endorsed for transfer to you, with a medallion signature guarantee.

We acknowledge that the Shares are additional consideration for your execution,
delivery and performance of the Transaction Documents and are not deemed to be
interest.

This Letter shall be governed by the laws of the State of New York without
regard to the principles of conflict of laws. THE COMPANY AND D.L. CLAIRE WAIVE
ITS RIGHT TO CLAIM A TRIAL BY JURY IN ANY ACTION ARISING OUT OF THIS LETTER.

The Company acknowledges and agrees that its actual or threatened breach of this
letter would result in irreparable damage to you and that money damages would
not provide and adequate remedy to you. Accordingly, the Company agrees that in
the event of any such breach you shall have, in addition to any and all remedies
of law, the right to have the provisions of this Letter specifically enforced
and to obtain injunctive and other equitable relief to enforce the provisions of
this Letter.
 
This confirms that you, D.L. Claire and the Company intend to contract in strict
compliance with applicable usury laws from time-to-time in effect. Accordingly,
you, D.L. Claire and the Company stipulate and agree that none of the terms and
provisions contained in the Transaction Documents shall ever be construed to
create a contract to pay, for the use or forbearance of money, interest in
excess of the maximum provisions contained in the Transaction Documents shall
ever be construed to create a contract to pay, for the use or forbearance of
money, interest in excess of the maximum amount of interest permitted to be
charged by applicable law from time-to-time in effect. Neither the Company, D.L.
Claire, nor any guarantor shall be liable for interest in excess of the maximum
amount permitted under applicable law. Any sums collected by you and determined
to be in excess of that which is permitted under applicable law shall be applied
to principal owing by the Company or any guarantor. The Company and D.L. Claire
agree that in determining whether or not, interest has been paid in excess of
any lawful rate, you may, in light of the risk and consideration evidenced by
the Transaction Documents, to the greatest extent permitted under applicable
law, characterize any non-principal payment under the Transaction Documents as
an expense, fee or premium rather than as interest.
 

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CAMOFI Master LDC
CAMHZN Master LDC
October 31, 2007
Page 4 of 4.

This Letter may be amended or modified only by a written instrument signed by
you, D.L. Claire and the Company. Your failure at any time to require the
performance of any provision of this Letter shall in no manner affect your right
at a later time to enforce any provision.

The Company and D.L. Claire irrevocably (A) consent that any legal action or
proceeding arising from or relating to this Letter shall be commenced
exclusively in the Supreme Court of the State of New York, County of New York,
or the United States District Court for the Southern District of New York, (B)
submit to the jurisdiction of any such Court in any such action or proceeding,
(C) waive any claim or defense in any such action or proceeding based on any
alleged lack of jurisdiction, improper venue or forum non-conveniens, and (D)
consent to service of process by mail at its address set forth below, or such
other address as shall provide to you in writing. ' Service of process may be
effected by notice sent by certified mail, return receipt requested, to the
Company or D.L. Claire at its address set forth below.

This Letter shall be binding upon the Company, D.L. Claire, and their legal
representatives, successors and permitted assigns. In no event may the Company
or D.L. Claire assign any rights or obligations under this Letter without your
prior written consent and any purported assignment or that such consent shall be
null and void.
 
Very truly yours,

Marshall Holdings International, Inc.
 
D.L. Claire Capital, Inc.
           
By:
/s/ Rick Bailey
 
By:
/s/ David Fuselier
Name
Rick Bailey
 
Name:
David Fuselier
Title:
President / CEO
 
Title:
President

 
 

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