Document:

Unassociated Document

    
      

    

    Exhibit
10.44

     

    PURCHASE
AGREEMENT

    

    THIS PURCHASE AGREEMENT, dated
as of October 31, 2007, is entered into by and among D. L. Claire Capital, Inc.,
a Delaware corporation with headquarters located at 60 East 42nd Street, Suite 3405, New York,
New York 10165 (the “Company”), Marshall Holdings International, Inc., a Nevada
corporation with headquarters located at 2555 East Washburn Road, North Las
Vegas, Nevada 89081 (“MHII”), and CAMOFI Master LDC and any additional
purchasers whose signatures appear at the conclusion of this agreement
(collectively, the “Purchaser”).

    

    W I T N E S S E T
H:

    

    WHEREAS, the Company and the
Purchaser are executing and delivering this Agreement in accordance with and in
reliance upon the exemption from securities registration for offers and sales to
accredited investors afforded, inter alia, by Rule 506 under Regulation D
(“Regulation D”) as promulgated by the United States Securities and Exchange
Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933
Act”), and/or Section 4(2) of the 1933 Act; and

    

    WHEREAS, the Purchaser wishes
to purchase a 12% Secured Promissory Notes of the Company (the “Notes”), subject
to and upon the terms and conditions of this Agreement and acceptance of this
Agreement by the Company, on the terms and conditions referred to herein;
and

    

    WHEREAS, the Company’s
obligations to repay the Notes will be secured by all of the assets of MHII
pursuant to a Security Agreement (the “Security Agreement”), certain real estate
and by certain stock (the “Pledged Shares”) pledged by the Company and the
shareholders of MHII (each a “Pledgor” and together, the “Pledgors”) pursuant to
separate Security Interest and Pledge Agreements (the “Pledge
Agreements”).

    

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

    

    1.       
AGREEMENT TO PURCHASE; PURCHASE PRICE.

    

    a.       
Purchase.

    

    

    (i)        Subject
to the terms and conditions of this Agreement and the other Transaction
Agreements, the Purchaser hereby agrees to purchase the Notes for the sum of
$650,000 (the “Purchase Amount”).

    

    (ii)       The Notes referred to herein shall be
in the original principal amount of $650,000 and in the form of Annex I annexed hereto. The Notes will be
secured by a pledge of all of MHII’s assets pursuant to a Security Agreement in
the form of Annex III
and secured by the pledge
of the Pledged Shares under the terms of the Pledge Agreements, which Pledge
Agreements shall be substantially in the form of Annex VI
hereto, which the Company
will acknowledge.

    
      
         

      

      
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    (iii)     
In consideration for the Purchaser agreeing to purchase the Notes, MHII agrees
to issue to the Purchaser the Warrant at the closing of such purchase.
Additional provisions relating to the Warrant are provided below.

    

    (iv)    
The purchase of the Notes and the issuance of the Warrant to the Purchaser and
the other transactions contemplated hereby are sometimes referred to herein and
in the other Transaction Agreements as the purchase and sale of the Securities
(as defined below), and are referred to collectively as the
“Transactions”.

    

    b.        
Certain Definitions. As used herein, each of the following terms has the
meaning set forth below, unless the context otherwise requires:

    

    “Affiliate”
means, with respect to a specific Person referred to in the relevant provision,
another Person who or which controls or is controlled by or is under common
control with such specified Person.

    

    “Business
Day” means any day other than a Saturday, a Sunday or a day on which banks in
the City of New York are required or authorized by law to be
closed.

    

    “Certificate”
means each of (i) the original ink-signed Notes duly executed by the
Company
and (ii) the original Warrant.

    

    “Closing
Date” means the date of the closing of the Transactions, as provided
herein.

    

    “Common
Stock” means the common stock, par value $.001 per share, of MHII.

    

    “Common
Stock Equivalents” means any securities of MHII which would entitle the holder
thereof to acquire at any time Common Stock, including without limitation, any
debt, preferred stock, rights, options, warrants or other instrument that is at
any time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.

    

    “Company
Control Person” means each director, executive officer, promoter, and such other
Persons as may be deemed in control of the Company pursuant to Rule 405 under
the 1933 Act or Section 20 of the 1934 Act (as defined below).

    

    “Disclosure
Annex” means Annex V to
this Agreement; provided, however, that the Disclosure Annex shall be arranged
in sections corresponding to the identified Sections of this Agreement, but the
disclosure in any such section of the Disclosure Annex shall qualify other
provisions in this Agreement to the extent that it would be readily apparent to
an informed reader from a reading of such section of the Disclosure Annex that
it is also relevant to other provisions of this Agreement.

    

    “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

    

    “Holder”
means the Person holding the relevant Securities at the relevant
time.

    
      
         

      

      
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    “Last
Audited Date” means December 31, 2006.

    

    “Purchaser
Control Person” means each director, executive officer, promoter, and such other
Persons as may be deemed in control of the Purchaser pursuant to Rule 405 under
the 1933 Act or Section 20 of the 1934 Act.

    

    “Liens”
means a lien, charge, security interest, encumbrance, right of first refusal,
preemptive right or other restriction.

    

    “Material
Adverse Effect” means an event or combination of events, which individually or
in the aggregate, would reasonably be expected to (w) adversely affect the
legality, validity or enforceability of the Securities or any of the Transaction
Agreements, (x) have or result in a material adverse effect on the results of
operations, assets, prospects, or condition (financial or otherwise) of the
Company, taken as a whole, (y) adversely impair the Company's ability to perform
fully on a timely basis its obligations under any of the Transaction Agreements
or the transactions contemplated thereby, or (z) materially and adversely affect
the value of the rights granted to the Purchaser in the Transaction
Agreements.

    

    “MHII
Guarantee” means the Guarantee dated as of October 26, 2007 between MHII and the
Purchaser.

    

    “Person”
means any living person or any entity, such as, but not necessarily limited to,
a corporation, partnership or trust.

    

    “Purchaser
Control Person” means each director, executive officer, promoter, and such other
Persons as may be deemed in control of the Purchaser pursuant to Rule 405 under
the 1933 Act or Section 20 of the 1934 Act.

    

    “Principal
Trading Market” means the Pink Sheet Electronic Quotation Service markets or
such other market on which the Common Stock is principally traded at the
relevant time.

    

    “Registrable
Securities” means all of the following: (i) the Warrant Shares, and (ii) any
shares of MHII’s common stock that is issued to the Purchaser in connection with
any other agreements between the parties hereto, except to the extent such
shares can then be sold by the Holder without volume or other restrictions or
limits.

    

    “Registration
Rights Provisions” means the piggy-back registration rights contemplated by the
terms of this Agreement, if any, including, but not necessarily limited to,
Section 4(g) hereof, and of the other Transaction Agreements.

    

    “Registration
Statement” means an effective registration statement covering the Registrable
Securities.

    

    “Securities” means the Notes, the
Warrant, the shares underlying the Warrant, and any shares of common stock of
MHII that may be issued to the Purchaser in connection with any other agreements
between the parties.

    
      
         

      

      
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    “Security
Agreement” means the Security Agreement dated as of October 26, 2007 between the
Company, MHII and the Purchaser.

     

    “Shares”
means the shares of representing any or all of the Warrant Shares and, where
relevant, the Pledged Shares.

    

    “Subsidiary”
means any subsidiary of MHII as set forth on the Disclosure Annex.

    

    “Trading
Day” means any day during which the Principal Trading Market shall be open for
business.

    

    “Transfer
Agent” means, at any time, the transfer agent for MHII’s Common
Stock.

     

    “Transaction
Agreements” means this Purchase Agreement, the Notes, the Security Agreement,
the MHII Guarantee, the Pledge Agreements, the Warrant and includes all
ancillary documents referred to in those agreements.

    

    “Transaction
Fees” means the reasonable legal and due diligence fees incurred by the
Purchaser.

    

    “VWAP”
means, for any date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a Principal
Trading Market, the daily volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the primary Trading Market on which
the Common Stock is then listed or quoted as reported by Bloomberg Financial
L.P. (based on a Trading Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using
the VAP function; (b) if the Common Stock is not then listed or quoted on the
Principal Trading Market and if prices for the Common Stock are then reported in
the “Pink Sheets” published by the Pink Sheets, LLC (or a similar organization
or agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported; or (c) in all other cases, the
fair market value of a share of Common Stock as determined by a nationally
recognized-independent appraiser selected in good faith by Holders holding a
majority of the principal amount of Notes then outstanding.

    

    “Warrant
Shares” means shares of Common Stock underlying the Warrant.

    

    c.       
Form of Payment; Delivery of Certificates.

    

    

    (i)       
The Purchaser shall pay the Purchase Amount by delivering immediately available
good funds in United States Dollars to the Company on the Closing
Date.

    

    (ii)      
On the Closing Date, the Company shall deliver the Certificates, each duly
executed on behalf of the Company to the Purchaser.

    
      
         

      

      
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    (iii)     
 By signing this Agreement, each of the Purchaser and the Company agrees to
all of the terms and conditions of the Transaction Agreements, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.

    

    d.         Method of Payment. Payment of
the Purchase Amount shall be made by wire transfer of funds to:

    

    2.
PURCHASER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION; INDEPENDENT
INVESTIGATION.

    

    The
Purchaser represents and warrants to, and covenants and agrees with, the Company
as follows:

    

    a.       
Without limiting Purchaser's right to sell the Securities pursuant to an
effective registration statement or otherwise in compliance with the 1933 Act,
the Purchaser is purchasing the Securities for its own account for investment
only and not with a view towards the public sale or distribution thereof and not
with a view to or for sale in connection with any distribution
thereof.

    

    b.        The
Purchaser is (i) an “accredited investor” as that term is defined in Rule 501 of
the General Rules and Regulations under the 1933 Act by reason of Rule
501(a)(3), (ii) experienced in making investments of the kind described in this
Agreement and the related documents, (iii) able, by reason of the business and
financial experience of its officers (if an entity) and professional advisors
(who are not affiliated with or compensated in any way by the Company or any of
its Affiliates or selling agents), to protect its own interests in connection
with the transactions described in this Agreement, and the related documents,
and to evaluate the merits and risks of an investment in the Securities, and
(iv) able to afford the entire loss of its investment in the
Securities.

    

    c.       
All subsequent offers and sales of the Securities by the Purchaser shall be made
pursuant to registration of the relevant Securities under the 1933 Act or
pursuant to an exemption from registration.

    

    d.        The
Purchaser understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of the 1933
Act and state securities laws and that MHII is relying upon the truth and
accuracy of, and the Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Purchaser set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Securities.

    

    e.      
The Purchaser and its advisors,
if any, have been furnished with or have been given access to all materials
relating to the business, finances and operations of MHII and materials relating
to the offer and sale of the Securities which have been requested by the
Purchaser, including those set forth on in any annex attached hereto. The
Purchaser and its advisors, if any, have been afforded the opportunity to ask
questions of MHII and its management and have received complete and satisfactory
answers to any such inquiries. Without limiting the generality of the foregoing,
the  Purchaser
has also had the opportunity to obtain and to review MHII’s filings on EDGAR
listed on Annex IV
hereto (the documents
listed on such Annex IV, to the extent available on EDGAR or otherwise provided
to the Purchaser as indicated on said Annex IV, collectively, the “Company's SEC
Documents”).

    
      
         

      

      
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    g.       
The Purchaser hereby represents that, in connection with its purchase of the
Securities, it has not relied on any statement or representation by the Company,
MHII or any of their respective officers, directors and employees or any of
their respective attorneys or agents, except as specifically set forth
herein.

    

    h.        The
Purchaser understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Securities.

    

    i.       
This Agreement and the other Transaction Agreements to which the Purchaser is a
party, and the transactions contemplated thereby, have been duly and validly
authorized, executed and delivered on behalf of the Purchaser and are valid and
binding agreements of the Purchaser enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally.

    

    3.      
COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants, to the extent said representations
and warranties relate to the Company, and MHII represents and warrants, to the
extent said representations and warranties relate to MHII, to the Purchaser as
of the date hereof and as of the Closing Date that, except as otherwise provided
in the Disclosure Annex:

    

    a.       
Rights of Others Affecting the
Transactions. There are no preemptive rights of any shareholder of the
Company, as such, to acquire the Notes. No party other than the Purchaser has a
currently exercisable right of first refusal which would be applicable to any or
all of the transactions contemplated by the Transaction Agreements.

    

    b.        Status. The Company and MHII are corporations
duly organized, validly existing and in good standing under the laws of their
respective States of Incorporation and have the requisite corporate power to own
their properties and to carry on their business as now being conducted. The
Company and MHII are duly qualified as a foreign corporations to do business and
are in good standing in each jurisdiction where the nature of the business
conducted or property owned by them makes such qualification necessary, other
than those jurisdictions in which the failure to so qualify would not have or
result in a Material Adverse Effect. MHII has registered its stock and is
obligated to file reports pursuant to Section 12 or Section 15(d) of the
Securities and Exchange Act of 1934, as amended (the “1934 Act”). The Common
Stock is, or immediately following the Closing Date will be, quoted on the
Principal Trading Market. The Company has received no notice, either oral or
written, with respect to the continued eligibility of the
Common

    
      
         

      

      
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    c.       
Authorized Shares.

    

    

    (i)     The
authorized capital stock of MHII consists of 25 billion shares of Common Stock,
$0.001 par value, all of are outstanding as of the date hereof.

    

    (ii)    All
issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable. MHII has sufficient
authorized and unissued shares of Common Stock as may be necessary to affect the
issuance of the Pledged Shares on the Closing Date.

    

    (iii)   As
of the Closing Date, the Shares shall have been duly authorized by all necessary
corporate action on the part of the Company, and, when issued on the Closing
Date or pursuant to other relevant provisions of the Transaction Agreements, in
each case in accordance with their respective terms, will be duly and validly
issued, fully paid and non-assessable and will not subject the Holder thereof to
personal liability by reason of being such Holder.

    

    d.        Transaction Agreements and Stock.
This Agreement and each of the other Transaction Agreements, and the
transactions contemplated thereby, have been duly and validly authorized by the
Company and/or MHII, this Agreement has been duly executed and delivered by the
Company and MHII and this Agreement is, and the Notes and each of the other
Transaction Agreements, when executed and delivered by the Company and/or MHII,
will be, valid and binding agreements of the Company enforceable in accordance
with their respective terms, subject as to enforceability to general principles
of equity and to bankruptcy, insolvency, moratorium, and other similar laws
affecting the enforcement of creditors' rights generally.

    

    e.       
Non-contravention. The
execution and delivery of this Agreement and each of the other Transaction
Agreements by the Company and MHII, the issuance of the Securities by MHII, and
the consummation by the Company of the other transactions contemplated by this
Agreement, each of the Notes and the other Transaction Agreements do not and
will not conflict with or result in a breach by the Company or MHII of any of
the terms or provisions of, or constitute a default under (i) the certificate of
incorporation or by-laws of the Company or MHII , each as currently in effect,
(ii) any indenture, mortgage, deed of trust, or other material agreement or
instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the Common
Stock except as herein set forth, or (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or order
of any court, United States federal or state regulatory body, administrative
agency, or other governmental body having jurisdiction over the Company or any
of its properties or assets, except such conflict, breach or default which would
not have or result in a Material Adverse Effect.

    

    f.        
Approvals. No
authorization, approval or consent of any court, governmental body, regulatory
agency, self-regulatory organization, or stock exchange or market or the
shareholders of the Company is required to be obtained by the Company and/or
MHII for the issuance
and sale of the Securities to the Purchaser as contemplated by this Agreement,
except such authorizations, approvals and consents that have been
obtained.

    
      
         

      

      
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    g.      Filings. None of MHII’s SEC
Documents contained, at the time they were filed, any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements made therein in light of the
circumstances under which they were made, not misleading. Since December 31,
2006, MHII has timely filed all requisite forms, reports and exhibits thereto,
if any, required to be filed by the Company with the SEC.

    

    h.        Absence of Certain Changes.
Since the Last Audited Date, there has been no material adverse change
and no Material Adverse Effect, except as disclosed in MHII’s SEC Documents and
Financial Statements. Since the Last Audited Date, except as provided in the
Company’s SEC Documents, MHII and the Company have not (i) incurred or become
subject to any material liabilities (absolute or contingent) except liabilities
incurred in the ordinary course of business consistent with past practices; (ii)
discharged or satisfied any material lien or encumbrance or paid any material
obligation or liability (absolute or contingent), other than current liabilities
paid in the ordinary course of business consistent with past practices; (iii)
declared or made any payment or distribution of cash or other property to
shareholders with respect to its capital stock, or purchased or redeemed, or
made any agreements to purchase or redeem, any shares of its capital stock; (iv)
sold, assigned or transferred any other tangible assets, or canceled any debts
owed to the Company by any third party or claims of the Company against any
third party, except in the ordinary course of business consistent with past
practices; (v) waived any rights of material value, whether or not in the
ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any increases in employee compensation, except in
the ordinary course of business consistent with past practices; or (vii)
experienced any material problems with labor or management in connection with
the terms and conditions of their employment.

    

    i.       
Full Disclosure. To the
best of the Company’s and MHII’s knowledge, there is no fact known to the
Company and/or MHII (other than general economic conditions known to the public
generally or as disclosed in MHII’s SEC Documents) that has not been disclosed
in writing to the Purchaser that would reasonably be expected to have or result
in a Material Adverse Effect.

    

    j.       
Absence of
Litigation. There is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board or body pending or, to the knowledge of the Company and/or MHII,
threatened against or affecting the Company and/or MHII before or by any
governmental authority or nongovernmental department, commission, board, bureau,
agency or instrumentality or any other person, wherein an unfavorable decision,
ruling or finding would have a Material Adverse Effect or which would adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, any of the Transaction Agreements. The
Company and MHII are not aware of any valid basis for any such claim that
(either individually or in the aggregate with all other such events and
circumstances) could reasonably be expected to have a Material Adverse Effect.
There are no outstanding or unsatisfied judgments, orders, decrees, writs,
injunctions or stipulations to which the Company is a party or by which it or
any of its properties is bound, that involve the transaction contemplated herein
or that, alone or in the aggregate, could reasonably be expect to have a
Material Adverse Effect.

    
      
         

      

      
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    k.        Absence of Events of Default.
Except as set forth in Section 3(e) and 3(g) hereof, (i) neither the
Company nor MHII is in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any material
indenture, mortgage, deed of trust or other material agreement to which it is a
party or by which its property is bound, and (ii) no Event of Default (or its
equivalent term), as defined in the respective agreement to which the Company or
MHII is a party, and no event which, with the giving of notice or the passage of
time or both, would become an Event of Default (or its equivalent term) (as so
defined in such agreement), has occurred and is continuing, which would have a
Material Adverse Effect.

    

    l.        
Absence of Certain Company
Control Person Actions or Events. To the Company’s knowledge, none of the
following has occurred during the past five (5) years with respect to a Company
Control Person:

    

    (1) A
petition under the federal bankruptcy laws or any state insolvency law was filed
by or against, or a receiver, fiscal agent or similar officer was appointed by a
court for the business or property of such Company Control Person, or any
partnership in which he was a general partner at or within two years before the
time of such filing, or any corporation or business association of which he was
an executive officer at or within two years before the time of such
filing;

    

    (2) Such
Company Control Person was convicted in a criminal proceeding or is a named
subject of a pending criminal proceeding (excluding traffic violations and other
minor offenses); or

    

    (3) Such
Company Control Person was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from engaging in any type
of business practice or otherwise limiting, the following
activities:

    

    (i)
acting, as an investment advisor, underwriter, broker or dealer in securities,
or as an affiliated person, director or employee of any investment company,
bank, savings and loan association or insurance company, as a futures commission
merchant, introducing broker, commodity trading advisor, commodity pool
operator, floor broker, any other Person regulated by the Commodity Futures
Trading Commission ("CFTC") or engaging in or continuing any conduct or practice
in connection with such activity;

    

    (ii)
engaging in any type of business practice; or

    

    (iii)
engaging in any activity in connection with the purchase or sale of any security
or commodity or in connection with any violation of federal or state securities
laws or federal commodities laws;

    

    (4) Such Company Control Person was the
subject of any order, judgment or decree, not subsequently reversed, suspended
or vacated, of any federal or state authority barring, suspending or otherwise limiting for
more than 60 days the right of such Company Control Person to engage in any
activity described in paragraph (3) of this item, or to be associated with
Persons engaged in any such activity; or

    
      
         

      

      
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    (5) Such
Company Control Person was found by a court of competent jurisdiction in a civil
action or by the CFTC or SEC to have violated any federal or state securities
law, and the judgment in such civil action or finding by the CFTC or SEC has not
been subsequently reversed, suspended, or vacated.

    

    m.        No Undisclosed Liabilities or Events.
To the best of the Company’s and MHII’s knowledge, the Company and MHII
have no liabilities or obligations other than those disclosed in the Transaction
Agreements or MHII’s SEC Documents or those incurred in the ordinary course of
the Company's business since the Last Audited Date, or which individually or in
the aggregate, do not or would not have a Material Adverse Effect. No event or
circumstances has occurred or exists with respect to the Company and/or MHII or
their properties, business, operations, condition (financial or otherwise), or
results of operations, which, under applicable law, rule or regulation, requires
public disclosure or announcement prior to the date hereof by the Company and/or
MHII but which has not been so publicly announced or disclosed. Except as
previously disclosed to Purchaser in connection with (i) a proposed purchase and
sale agreement between Optimira Energy, Inc., a subsidiary of the Company
(“Optimira”), and MHII and (ii) a proposed reverse merger or similar transaction
between Optimira and a public shell, there are no proposals currently under
consideration or currently anticipated to be under consideration by the Board of
Directors or the executive officers of the Company and/or MHII which proposal
would (x) change the articles or certificate of incorporation or other charter
document or by-laws of the Company and/or MHII, each as currently in effect,
with or without shareholder approval, which change would reduce or otherwise
adversely affect the rights and powers of the shareholders of the Common Stock
or (y) materially or substantially change the business, assets or capital of the
Company and/or MHII, including its interests in subsidiaries.

    

    n.         No Integrated Offering.
Neither MHII nor any of its Affiliates nor any Person acting on its or
their behalf has, directly or indirectly, at any time since September, 2006,
made any offer or sales of any security or solicited any offers to buy any
security under circumstances that would eliminate the availability of the
exemption from registration under Regulation D in connection with the offer and
sale of the Securities as contemplated hereby.

    

    o.          Dilution. Any shares of the
Company’s and/or MHII’s common stock that are issued to the Purchaser in
connection with this Transaction may have a dilutive effect on the ownership
interests of the other shareholders (and Persons having the right to become
shareholders) of the Company and/or MHII. The Company's and MHII’s executive
officers and directors have studied and fully understand the nature of the
Securities being sold hereby and recognize that they have such a potential
dilutive effect. The board of directors of the Company and MHIII have concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company.

    

    p.          Recognition of
Pledge Agreements and Pledged Shares. The Company and MHII acknowledge that
the execution and delivery of the Pledge Agreements, and the fulfillment o f the
terms thereof, is a condition to the closing of the Transactions. The Company
and MHII will recognize
the terms of the Pledge Agreements and, as provided therein, the transfer of the
Pledged Shares to the Purchasers and will take no position or give the Transfer
Agent any instructions which would be inconsistent with the rights of the
Purchasers to have the Pledged Shares transferred to the Purchasers in
accordance with the terms of the Pledge Agreements.

    
      
         

      

      
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    q.         Fees to Brokers, Finders and Others.
Except for payment of the fees to Avi Warba, payment of which is the sole
responsibility of the Company, the Company has taken no action which would give
rise to any claim by any Person for brokerage commission, finder's fees or
similar payments by Purchaser relating to this Agreement or the transactions
contemplated hereby. Purchaser shall have no obligation with respect to such
fees or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this paragraph that may be due in connection with
the transactions contemplated hereby. The Company shall indemnify and hold
harmless each of Purchaser, its employees, officers, directors, agents, and
partners, and their respective Affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees, as and when
incurred.

    

    r.          Confirmation. The Company
confirms that all statements of the Company contained herein shall survive
acceptance of this Agreement by the Purchaser. The Company agrees that, if any
events occur or circumstances exist prior to the Closing Date or the release of
the Purchase Amount to the Company which would make any of the Company’s
representations, warranties, agreements or other information set forth herein
materially untrue or materially inaccurate as of such date, the Company shall
immediately notify the Purchaser (directly or through its counsel, if any) in
writing prior to such date of such fact, specifying which representation,
warranty or covenant is affected and the reasons therefor.

    

    s.          Authorization; Enforcement.
The Company and MHII have the requisite corporate power and authority to
enter into and to consummate the transactions contemplated by each of the
Transaction Agreements and otherwise to carry out their obligations thereunder.
The execution and delivery of each of the Transaction Agreements by the Company
and MHII and the consummation by it of the transactions contemplated thereby
have been duly authorized by all necessary action on the part of the Company and
MHII and no further action is required by the Company and/or MHII in connection
therewith other than in connection with the Required Approvals. Each Transaction
Agreement has been (or upon delivery will have been) duly executed by the
Company and/or MHII and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company and/or MHII
enforceable against the Company and/or MHII in accordance with its terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.

    

    t.          SEC Reports;
Financial Statements. Other than as previously disclosed to
the Purchaser, MHII has filed all reports required to be filed by it under the
Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as MHII was required by law to file such material) (the foregoing
materials, including the exhibits thereto, being collectively referred to herein
as the “SEC Reports”) on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension. As of
their respective dates, the SEC Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of MHII comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
during the periods involved (“GAAP”), except as may be otherwise specified in
such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of MHII and its
consolidated subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit
adjustments.

    
      
         

      

      
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    u.         Labor Relations. No material
labor dispute exists or, to the knowledge of the Company, is imminent with
respect to any of the employees of the Company which could reasonably be
expected to result in a Material Adverse Effect.

    

    v.          Compliance. The Company (i) is
not in default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company, nor has the Company received notice of a claim that it
is in default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is not in violation of any order of any court,
arbitrator or governmental body, or (iii) is not nor has been in violation of
any statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
except in each case as could not have a Material Adverse Effect.

    

    w.         Regulatory Permits. The
Company possesses all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities necessary to
conduct its businesses, except where the failure to possess such permits could
not have or reasonably be expected to result in a Material Adverse Effect
(“Material Permits”), and the Company has not received any notice of proceedings
relating to the revocation or modification of any Material Permit.

    

    x.          Title to Assets.
The Company and MHII have
good and marketable title in fee simple to all real property owned by them that
is material to the business of the Company and MHII and good and marketable
title in all personal property owned by them that is material to the business of
the Company and MHII, in each case free and clear of all Liens, except for Liens
as do not materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the
Company and MHII and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by the Company is held by it under
valid, subsisting and enforceable leases of which the Company is in
compliance.

    
      
         

      

      
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    y.         Patents and Trademarks. The
Company and MHII have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses and other similar rights necessary or material for use in connection
with their respective businesses and which the failure to so have could have a
Material Adverse Effect (collectively, the “Intellectual Property Rights”).
Neither the Company nor MHII has received a written notice that the Intellectual
Property Rights used by the Company or MHII violates or infringes upon the
rights of any Person. To the knowledge of the Company and MHII, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights of
others.

    

    z.          Insurance. MHII is insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which MHII
is engaged, at least equal to the Purchase Amount. To the best of MHII’s
knowledge, such insurance contracts and policies are accurate and complete. MHII
does not have any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost.

    

    aa.        Transactions with Affiliates and
Employees. Except as disclosed in MHII’s SEC Reports, none of the
officers or directors of MHII, the Company and, to the knowledge of the Company
and MHII, none of the employees of the Company or MHII is presently a party to
any transaction with the MHII, Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $50,000 other than (i) for payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) for other employee benefits,
including stock option agreements under any stock option plan of the
Company.

    

    bb.        Sarbanes-Oxley;
Internal Accounting Controls. MHII is in material compliance with all
provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of
the Closing Date. MHII maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. MHII has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for MHII and designed such disclosure controls and procedures to
ensure that material information relating to MHII, including its Subsidiaries,
is made known to the certifying officers by others within those entities,
particularly during the period in which MHII’s most recently filed periodic
report under the Exchange Act, as the case may be, is being prepared. MHII’s
certifying officers have evaluated the effectiveness of MHII’s controls and
procedures as of the date prior to the filing date of the most recently filed
periodic report under the Exchange Act (such date, the “Evaluation Date”).
MHII presented in its most
recently filed periodic report under the Exchange Act the conclusions of the
certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no significant changes in MHII’s internal
controls (as such term is defined in Item 307(b) of Regulation S-K under the
Exchange Act) or, to MHII’s knowledge, in other factors that could significantly
affect MHII’s internal controls.

    
      
         

      

      
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    cc.        Solvency. Based on the
financial condition of the Company as of the Closing Date after giving effect to
the receipt by the Company of the proceeds from the sale of the Securities
hereunder, (i) the Company's fair saleable value of its assets exceeds the
amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities) as
they mature; (ii) the Company's assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and (iii)
the current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its debt when such amounts are required to be paid. The Company
does not intend to incur debts beyond its ability to pay such debts as they
mature (taking into account the timing and amounts of cash to be payable on or
in respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization or
liquidation under the bankruptcy or reorganization laws of any jurisdiction
within one year from the Closing Date. The financial statements of the Company
and MHII set forth as of the dates thereof all outstanding secured and unsecured
Indebtedness of the Company, any Subsidiary and MHII, or for which the Company,
any Subsidiary or MHII has commitments. For the purposes of this Agreement,
“Indebtedness” shall mean (a) any liabilities for borrowed money or amounts owed
in excess of $50,000 (other than trade accounts payable incurred in the ordinary
course of business), (b) all guaranties, endorsements and other contingent
obligations in respect of Indebtedness of others, whether or not the same are or
should be reflected in the Company's and/or MHII’s balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $50,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company
nor MHII is in default with respect to any Indebtedness.

    

    dd.        Tax Status. Except for matters
that would not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect, the Company has filed all necessary
federal, state and foreign income and franchise tax returns and has paid or
accrued all taxes shown as due thereon, and the Company has no knowledge of a
tax deficiency which has been asserted or threatened against the
Company.

    

    ee.        No Disagreements
with Accountants and Lawyers. There are no disagreements of any kind
presently existing, or reasonably anticipated by the Company and/or MHII to
arise, between the accountants and lawyers formerly or presently employed by the
Company and/or MHIII and the Company and MHII are current with respect to any
fees owed to its accountants and lawyers. By making this representation the
Company and MHII do not, in any manner, waive the attorney/client privilege or the
confidentiality of the communications between the Company and its
lawyers.

    
      
         

      

      
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    ff.         Accountants. MHII’s
accountants are Madsen Bros. & Associates LLC. To MHII’s knowledge, such
accountants, who MHIIS expects will express their opinion with respect to the
financial statements for the year ended December 31, 2006, are a registered
public accounting firm as required by the Securities Act.

    

    4.           CERTAIN
COVENANTS AND ACKNOWLEDGMENTS.

    

    a.           Transfer Restrictions. The
Purchaser acknowledges that (1) the Securities have not been and are not being
registered under the provisions of the 1933 Act and, except as provided in the
Registration Rights Provisions or otherwise included in an effective
registration statement, the Shares have not been and are not being registered
under the 1933 Act, and may not be transferred unless (A) subsequently
registered thereunder or (B) the Purchaser shall have delivered to MHII an
opinion of counsel, reasonably satisfactory in form, scope and substance to
MHII, to the effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; (2) any sale of the
Securities made in reliance on Rule 144 promulgated under the 1933 Act (“Rule
144") may be made only in accordance with the terms of said Rule and further, if
said Rule is not applicable, any resale of such Securities under circumstances
in which the seller, or the Person through whom the sale is made, may be deemed
to be an underwriter, as that term is used in the 1933 Act, may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (3) neither MHII nor any other Person is
under any obligation to register the Securities (other than pursuant to the
Registration Rights Provisions) under the 1933 Act or to comply with the terms
and conditions of any exemption thereunder.

    

    b.           Restrictive Legend. The
Purchaser acknowledges and agrees that, until such time as the relevant Shares
have been registered under the 1933 Act, as contemplated by the Registration
Rights Provisions and sold in accordance with an effective Registration
Statement or otherwise in accordance with another effective registration
statement, the certificates and other instruments representing any of the
Securities shall bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of any such
Securities):

    

    THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.

    

    c.           Filings. MHII undertakes and agrees to make
all necessary filings in connection with the sale of the Securities to the
Purchaser under any United States laws and regulations applicable to the
Company, or by any domestic securities exchange or trading market, and to
provide a copy thereof to the Purchaser promptly after such
filing.

    
      
         

      

      
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    d.           Reporting Status. So long as
the Purchaser beneficially owns any of the Shares or has a security interest in
the Pledged Shares, MHII shall file all reports required to be filed with the
SEC pursuant to Section 13 or 15(d) of the 1934 Act, shall take all reasonable
action under its control to ensure that adequate current public information with
respect to MHII, as required in accordance with Rule 144(c)(2) of the 1933 Act,
is publicly available, and shall not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination. MHII will take all
reasonable action under its control to maintain the continued listing and
quotation and trading of its Common Stock (including, without limitation, all
Registrable Securities) on the Principal Trading Market or a listing on the
NASDAQ/Small Cap or National Markets and, to the extent applicable to it, will
comply in all material respects with MHII’s reporting, filing and other
obligations under the by-laws or rules of the Principal Trading Market and/or
the National Association of Securities Dealers, Inc., as the case may be,
applicable to it for so long as the Purchaser beneficially owns any of the
Shares or has a security interest in the Pledged Shares.

    

    e.           Use of Proceeds. The Company
will use all proceeds received hereunder for the following purposes: pay down of
payroll tax liability, outstanding legal fees, payment of current vendors,
improvements to Las Vegas property for resale.

    

    f.           Senior Debt. The debt incurred
by the Company pursuant to the Transactions Documents shall be senior to any
Company debt presently outstanding or any debt incurred in the
future.

    

    g.           Warrant. MHII agrees to issue
a warrant (the “Warrant”) to the Purchaser on the Closing Date. The terms
relating to the Warrant are provided in Annex VII annexed hereto, the
terms of which are incorporated herein by reference. All of the Warrant Shares
shall have Registration Rights Provisions.

    

    h.           Piggy-Back Rights; Rule
144.

    

    (i)           The Purchaser shall have piggy-back
registration rights with respect to the Registrable Securities subject to the
conditions set forth below. If MHII participates (whether voluntarily or by
reason of an obligation to a third party) in the registration of any shares of
MHII’s stock, MHII shall give written notice thereof to the Holder and the
Holder shall have the right, exercisable within ten (10) Trading Days after
receipt of such notice, to demand inclusion of all or a portion of the Holder’s
Registrable Securities in such registration statement (a “Subsequent
Registration Statement”), without any cutbacks. If the Holder exercises such
election, the Registrable Securities so designated shall be included in the
registration statement (without any holdbacks) at no cost or expense to the
Holder (other than any commissions, if any, relating to the sale of Holder’s
shares). Each Holder’s rights under this Section 4(g)(i) shall expire at such
time as such Holder can sell all of such Holder’s remaining Registrable
Securities under Rule 144 (as defined below) without volume or other
restrictions or limit. Anything to the contrary notwithstanding, a registration
statement covering the Registrable Securities shall be filed no later than
January 31, 2008.

    
      
         

      

      
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    (ii)           The
parties acknowledge that the damages which may be incurred by the Holder if MHII
does not fulfill its obligations under subparagraph (i) above, which will affect
the Holder’s ability to sell the shares, may be difficult to ascertain. If
either (A) MHII fails to give the Purchaser the notice referred to in the
immediately preceding subparagraph (i) which results in any of the Holder’s
shares not being included in the Subsequent Registration Statement or (B) after
giving such notice, MHII fails to include all of the Holder’s shares (to the
extent requested by the Holder) in the Subsequent Registration Statement or (C)
MHII fails to file a registration statement covering the Registrable Securities
on or before January 31, 2008, then the Company will make payment to the
Purchaser, for each Computation Period (as defined below) an amount equal to 2%
of the aggregate principal amount of the Notes then outstanding (the “Periodic
Amount”) provided however, that no event shall the aggregate liquidated damages
exceed 18% of the principal amount. The term “Computation Period” means each
thirty (30) day period commencing on the effective date of the Subsequent
Registration Statement and ending on the date on which there are one or more
effective registration statements covering the Purchaser’s sale of all of the
Holder’s shares. The Periodic Amount shall be due without further demand or
notice from the Purchaser. The parties agree that the amounts payable pursuant
to the foregoing provisions of this Section 4(g) represent a reasonable estimate
on the part of the parties, as of the date of this Agreement, of the amount of
such damages.

    

    (iii)           With
a view to making available to the Holder the benefits of Rule 144 promulgated
under the 1933 Act or any other similar rule or regulation of the SEC that may
at any time permit Holder to sell securities of MHII to the public without
registration (collectively, “Rule 144”), MHII agrees to:

    
 

    (a)           make
and keep public information available, as those terms are understood and defined
in Rule 144;

    
 

    (b)           file
with the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act; and

    
 

    (c)           furnish
to the Holder so long as such party owns Registrable Securities, promptly upon
request, (i) a written statement by MHII that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) if not available
on the SEC’s EDGAR system, a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by MHII and (iii)
such other information as may be reasonably requested to permit the Holder to
sell such securities pursuant to Rule 144 without registration; and

    
 

    (d)           at
the request of any Holder then holding Registrable Securities, give the Transfer
Agent instructions (supported by an opinion of MHII counsel, if required or
requested by the Transfer Agent) to the effect that, upon the Transfer Agent’s
receipt from such Holder of

    
 

    (i) a certificate (a “Rule 144
Certificate”) certifying (A) that the Holder’s holding period (as determined in
accordance with the provisions of Rule 144) for the Shares which the Holder
proposes to sell (the “Securities Being Sold”) is not less than (1) year and (B)
as to such other matters as may be appropriate in accordance with Rule 144 under
the Securities Act, and (ii) an opinion of counsel acceptable
to the MHII that, based on the Rule 144 Certificate, Securities being sold may
be sold pursuant to the provisions of Rule 144, even in the absence of an
effective registration statement,

    
      
         

      

      
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    the
Transfer Agent is to effect the transfer of the Securities Being Sold and issue
to the Purchaser(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent’s books and records (except to the extent any such
legend or restriction results from facts other than the identity of the relevant
Holder, as the seller or transferor thereof, or the status, including any
relevant legends or restrictions, of the shares of the Securities Being Sold
while held by the Purchaser). If the Transfer Agent reasonably requires any
additional documentation at the time of the transfer, MHII shall deliver or
cause to be delivered all such reasonable additional documentation as may be
necessary to effectuate the issuance of an unlegended certificate.

    

    (iv)           Notwithstanding
the foregoing, if at any time or from time to time after the date of
effectiveness of the registration statement, MHII notifies the Holder in writing
of the existence of a Potential Material Event (as defined below), the Holder
shall not offer or sell any Registrable Securities, or engage in any other
transaction involving or relating to the Registrable Securities, from the time
of the giving of notice with respect to a Potential Material Event until the
Holder receives written notice from MHII that such Potential Material Event
either has been disclosed to the public or no longer constitutes a Potential
Material Event; provided, however, that MHII may not so suspend such right other
than during a Permitted Suspension Period. The term “Potential Material Event”
means any of the following: (i) the possession by MHII of material information
not ripe for disclosure in a registration statement, which shall be evidenced by
determinations in good faith by the Board of Directors of MHII that disclosure
of such information in the registration statement would be detrimental to the
business and affairs of MHII; or (ii) any material engagement or activity by
MHII which would, in the good faith determination of the Board of Directors of
MHII, be adversely affected by disclosure in a registration statement at such
time, which determination shall be accompanied by a good faith determination by
the Board of Directors of MHII that the registration statement would be
materially misleading absent the inclusion of such information.

    

    i.           Publicity, Filings,
Releases, Etc. Each of the
parties agrees that it will not disseminate any information relating to the
Transaction Agreements or the transactions contemplated thereby, including
issuing any press releases, holding any press conferences or other forums, or
filing any reports (collectively, “Publicity”), without giving the other party
reasonable advance notice and an opportunity to comment on the contents thereof.
Neither party will include in any such Publicity any statement or statements or
other material to which the other party reasonably objects, unless in the
reasonable opinion of counsel to the party proposing such statement, such
statement is legally required to be included. In furtherance of the foregoing,
MHII will provide to the Purchaser drafts of the applicable text of the first
filing of a Current Report on Form 8-K or a Quarterly or Annual Report on Form
10-Q or 10-K intended to be made with the SEC which refers to the Transaction
Agreements or the transactions contemplated thereby as soon as practicable (but
at least two (2) Trading Days before such filing will be made) will not include
in such filing any statement or statements or other
material to which the other party reasonably objects, unless in the reasonable
opinion of counsel to the party proposing such statement, such statement is
legally required to be included. Notwithstanding the foregoing, each of the
parties hereby consents to the inclusion of the text of the Transaction
Agreements in filings made with the SEC as well as any descriptive text
accompanying or part of such filing which is accurate and reasonably determined
by MHII’s counsel to be legally required. Notwithstanding, but subject to, the
foregoing provisions of this Section 4(i), the Company will, after the Closing
Date, promptly file a Current Report on Form 8-K or, if appropriate, a quarterly
or annual report on the appropriate form, referring to the transactions
contemplated by the Transaction Agreements.

    
      
         

      

      
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    5.           TRANSFER
AGENT INSTRUCTIONS.

    

    a.           MHII
warrants that, with respect to the Securities, other than the stop transfer
instructions to give effect to Section 4(a) hereof, it will give its transfer
agent no instructions inconsistent with instructions to issue Common Stock to
the Holder as contemplated in the Transaction Agreements. Except as so provided,
the Shares shall otherwise be freely transferable on the books and records of
MHII as and to the extent provided in this Agreement and the other Transaction
Agreements. Nothing in this Section shall affect in any way the Purchaser's
obligations and agreement to comply with all applicable securities laws upon
resale of the Securities. If the Purchaser provides MHII with an opinion of
counsel reasonably satisfactory to MHII that registration of a resale by the
Purchaser of any of the Securities in accordance with clause (1)(B) of Section
4(a) of this Agreement is not required under the 1933 Act, MHII shall (except as
provided in clause (2) of Section 4(a) of this Agreement) permit the transfer or
reissue of the Shares represented by one or more certificates for Common Stock
without legend (or where applicable, by electronic registration) in such name
and in such denominations as specified by the Purchaser.

    

    b.           MHII
will authorize the Transfer Agent to give information relating to MHII directly
to the Holder or the Holder’s representatives upon the request of the Holder or
any such representative, to the extent such information relates to (i) the
status of shares of Common Stock issued or claimed to be issued to the Holder in
connection with a Notice of Exercise or transfer of Pledged Shares to the
Holder, or (ii) the aggregate number of outstanding shares of Common Stock of
all shareholders (as a group, and not individually) as of a current or other
specified date. At the request of the Holder, MHII will provide the Holder with
a copy of the authorization so given to the Transfer Agent.

    

    6.           CLOSING
DATE.

    

    a.           The
Closing Date shall occur on the date which is the first Business Day after each
of the conditions contemplated by Section 7 and 8 hereof shall have either been
satisfied or been waived by the party in whose favor such conditions
run.

    

    b.           The closing of the Transactions shall
occur on the Closing Date at the offices of the Purchaser and shall take place
no later than 3:00 P.M., New York time, on such day or such other time as is
mutually agreed upon by the Company and the Purchaser.

    
      
         

      

      
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    7.           CONDITIONS TO THE COMPANY'S
OBLIGATION TO SELL. The Purchaser understands that the Company's
obligation to sell the Notes on the Closing Date and MHII’s obligation to issue
and sell the Warrant are conditioned upon:

    

    a.           The
execution and delivery of this Agreement by the Purchaser;

    

    b.           Delivery
by the Purchaser to the Company of good funds as payment in full of an amount
equal to the Purchase Amount in accordance with this Agreement;

    

    c.           The
accuracy on such Closing Date of the representations and warranties of the
Purchaser contained in this Agreement, each as if made on such date, and the
performance by the Purchaser on or before such date of all covenants and
agreements of the Purchaser required to be performed on or before such date;
and

    

    d.           There
shall not be in effect any law, rule or regulation prohibiting or restricting
the transactions contemplated hereby, or requiring any consent or approval which
shall not have been obtained.

    

    8.           CONDITIONS TO THE PURCHASER'S
OBLIGATION TO PURCHASE. The Company understands that the Purchaser's
obligation to purchase the Notes and the Warrant on the Closing Date is
conditioned upon:

    

    a.           The
execution and delivery of this Agreement and the other Transaction Agreements by
the Company and, to the extent applicable, MHII;

    

    b.           Delivery
by the Company and MHII to the Purchaser of the Certificates in accordance with
this Agreement or any other agreements between the parties; c. The execution and delivery
of the Pledge Agreements by the Pledgors, together with an opinion of Pledgors’
counsel (which may be incorporated in the opinion referred to in subparagraph
(e) below);

    

    d.           The
execution and delivery of the Security Agreement, the Guarantee and UCC-1
Financing Statement on all of the Company’s assets;

    

    e.           The
execution and delivery of the Warrant;

    

    f.           The
reimbursement of the Transaction Fees and Management Fees.

    

     g.           The loan contemplated by this Agreement
shall be senior to all other debt of the Company.

    
      
         

      

      
        Page
20

        
          

        

      

      
         

      

    

    h.           The
accuracy in all material respects on the Closing Date of the representations and
warranties of the Company contained in this Agreement, each as if made on such
date, and the performance by the Company on or before such date of all covenants
and agreements of the Company required to be performed on or before such
date;

    

    i.           On
the Closing Date, the Purchaser shall have received an opinion of counsel for
the Company, dated the Closing Date, in form, scope and substance reasonably
satisfactory to the Purchaser;

    

    j.           The
Purchaser’s determination, to its satisfaction, as to the Company’s use of the
proceeds of the purchase of the Notes.

    

    k.           The
Company providing a detailed list of all assets, their value and
location.

    

    l.           The
Company’s and MHII’s financial statements and public filings must be
up-to-date.

    

    m.           A
complete list of shareholders of the Company.

    

    n.           There
shall not be in effect any law, rule or regulation prohibiting or restricting
the transactions contemplated hereby, or requiring any consent or approval which
shall not have been obtained; and

    

    o.           From
and after the date hereof to and including the Closing Date, each of the
following conditions will remain in effect: (i) the trading of the Common Stock
shall not have been suspended by the SEC or on the Principal Trading Market;
(ii) trading in securities generally on the Principal Trading Market shall not
have been suspended or limited; (iii) no minimum prices shall been established
for securities traded on the Principal Trading Market; and (iv) there shall not
have been any material adverse change in any financial market.

     

    p.           Appraisal
issued by a licensed appraiser in connection with any real estate that is being
pledged as collateral.

    

    q.           Delivery
of executed mortgages in connection with any pledged real estate.

    

    r.           Delivery
of current financials for Optimira

    

    s.           Delivery
of historical financial statements of acquisitions.

    

    t.           Detail
of post-reverse merger capitalization table.

    

    u.           Detail
of planned restructuring of MHII including spin-off of
subsidiaries.

    

    v.           Appraisal
of sort system located in Utah.

    
      
         

      

      
        Page
21

        
          

        

      

      
         

      

    

    w.           Delivery
of organizational chart showing ownership of Adamas, Optimira, the Company and
MHII.

    

    x.           Names,
home addresses and social security numbers of the Company principal
officers.

    

    y.           Detail
of Cal-Bay International equity.

    

    9.
INDEMNIFICATION AND REIMBURSEMENT.

    

    a.           (i)
The Company agrees to indemnify and hold harmless the Purchaser and its
officers, directors, employees, and agents, and each Purchaser Control Person
from and against any losses, claims, damages, liabilities or expenses incurred
(collectively, “Damages”), joint or several, and any action in respect thereof
to which the Purchaser, its partners, Affiliates, officers, directors,
employees, and duly authorized agents, and any such Purchaser Control Person
becomes subject to, resulting from, arising out of or relating to any
misrepresentation, breach of warranty or nonfulfillment of or failure to perform
any covenant or agreement on the part of Company contained in this Agreement, as
such Damages are incurred, except to the extent such Damages result primarily
from Purchaser's failure to perform any covenant or agreement contained in this
Agreement or the Purchaser's or its officer’s, director’s, employee’s, agent’s
or Purchaser Control Person’s gross negligence, recklessness or bad faith in
performing its obligations under this Agreement.

    

    (ii)           MHII hereby agrees that, if the
Purchaser, other than by reason of its gross negligence, illegal or willful
misconduct (in each case, as determined by a non-appealable judgment to such
effect), (x) becomes involved in any capacity in any action, proceeding or
investigation brought by any shareholder of MHII, in connection with or as a
result of the consummation of the transactions contemplated by this Agreement or
the other Transaction Agreements, or if the Purchaser is impleaded in any such
action, proceeding or investigation by any Person, or (y) becomes involved in
any capacity in any action, proceeding or investigation brought by the SEC, any
self-regulatory organization or other body having jurisdiction, against or
involving the Company or in connection with or as a result of the consummation
of the transactions contemplated by this Agreement or the other Transaction
Agreements, or (z) is impleaded in any such action, proceeding or investigation
by any Person, then in any such case, MHII shall indemnify, defend and hold
harmless the Purchaser from and against and in respect of all losses, claims,
liabilities, damages or expenses resulting from, imposed upon or incurred by the
Purchaser, directly or indirectly, and reimburse such Purchaser for its
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith, as such expenses are incurred.
The indemnification and reimbursement obligations of MHII under this paragraph
shall be in addition to any liability which MHII may otherwise have, shall
extend upon the same terms and conditions to any Affiliates of the Purchaser who
are actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and Purchaser Control Persons (if any), as the case
may be, of the Purchaser and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of MHII, the Purchaser, any such Affiliate and any such Person.
MHII also agrees that neither the Purchaser nor any such Affiliate, partner,
director, agent, employee or Purchaser Control Person shall have any liability
to MHII or any Person asserting claims on behalf of or in right of MHII in
connection with or as a result of the consummation of this
Agreement or the other Transaction Agreements, except as may be expressly and
specifically provided in or contemplated by this
Agreement.

    
      
         

      

      
        Page
22

        
          

        

      

      
         

      

    

    b.           All
claims for indemnification by any Indemnified Party (as defined below) under
this Section shall be asserted and resolved as follows:

    

    (i)           In
the event any claim or demand in respect of which any Person claiming
indemnification under any provision of this Section (an “Indemnified Party”)
might seek indemnity under paragraph (a) of this Section is asserted against or
sought to be collected from such Indemnified Party by a Person other than a
party hereto or an Affiliate thereof (a “Third Party Claim”), the Indemnified
Party shall deliver a written notification, enclosing a copy of all papers
served, if any, and specifying the nature of and basis for such Third Party
Claim and for the Indemnified Party's claim for indemnification that is being
asserted under any provision of this Section against any Person (the
“Indemnifying Party”), together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a “Claim Notice”) with reasonable promptness to the Indemnifying
Party. If the Indemnified Party fails to provide the Claim Notice with
reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party shall not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been prejudiced by such failure of
the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party
as soon as practicable within the period ending thirty (30) calendar days
following receipt by the Indemnifying Party of either a Claim Notice or an
Indemnity Notice (as defined below) (the “Dispute Period”) whether the
Indemnifying Party disputes its liability or the amount of its liability to the
Indemnified Party under this Section and whether the Indemnifying Party desires,
at its sole cost and expense, to defend the Indemnified Party against such Third
Party Claim. The following provisions shall also apply.

    

    (x) If the Indemnifying Party notifies
the Indemnified Party within the Dispute Period that the Indemnifying Party
desires to defend the Indemnified Party with respect to the Third Party Claim
pursuant to this paragraph (b) of this Section, then the Indemnifying Party
shall have the right to defend, with counsel reasonably satisfactory to the
Indemnified Party, at the sole cost and expense of the Indemnifying Party, such
Third Party Claim by all appropriate proceedings, which proceedings shall be
vigorously and diligently prosecuted by the Indemnifying Party to a final
conclusion or will be settled at the discretion of the Indemnifying Party (but
only with the consent of the Indemnified Party in the case of any settlement
that provides for any relief other than the payment of monetary damages or that
provides for the payment of monetary damages as to which the Indemnified Party
shall not be indemnified in full pursuant to paragraph (a) of this Section). The
Indemnifying Party shall have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that the
Indemnified Party may, at the sole cost and expense of the Indemnified Party, at
any time prior to the Indemnifying Party's delivery of the notice referred to in
the first sentence of this subparagraph (x), file any motion, answer or other
pleadings or take any other action that the Indemnified Party reasonably
believes to be necessary or appropriate protect its interests; and provided
further, that if requested by the Indemnifying Party, the Indemnified Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnifying Party in contesting any Third Party Claim that the Indemnifying
Party elects to contest. The Indemnified Party may participate in, but not
control, any defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this subparagraph (x), and except as provided in
the preceding sentence, the Indemnified Party shall bear its own costs and
expenses with respect to such participation. Notwithstanding the foregoing, the
Indemnified Party may take over the control of the defense or settlement of a
Third Party Claim at any time if it irrevocably waives its right to indemnity
under paragraph (a) of this Section with respect to such Third Party
Claim.

    
      
         

      

      
        Page
23

        
          

        

      

      
         

      

    

    (y) If
the Indemnifying Party fails to notify the Indemnified Party within the Dispute
Period that the Indemnifying Party desires to defend the Third Party Claim
pursuant to paragraph (b) of this Section, or if the Indemnifying Party gives
such notice but fails to prosecute vigorously and diligently or settle the Third
Party Claim, or if the Indemnifying Party fails to give any notice whatsoever
within the Dispute Period, then the Indemnified Party shall have the right to
defend, at the sole cost and expense of the Indemnifying Party, the Third Party
Claim by all appropriate proceedings, which proceedings shall be prosecuted by
the Indemnified Party in a reasonable manner and in good faith or will be
settled at the discretion of the Indemnified Party (with the consent of the
Indemnifying Party, which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that if
requested by the Indemnified Party, the Indemnifying Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnified Party and its counsel in contesting any Third Party Claim which
the Indemnified Party is contesting. Notwithstanding the foregoing provisions of
this subparagraph (y), if the Indemnifying Party has notified the Indemnified
Party within the Dispute Period that the Indemnifying Party disputes its
liability or the amount of its liability hereunder to the Indemnified Party with
respect to such Third Party Claim and if such dispute is resolved in favor of
the Indemnifying Party in the manner provided in subparagraph(z) below, the
Indemnifying Party will not be required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this subparagraph (y) or of the
Indemnifying Party's participation therein at the Indemnified Party's request,
and the Indemnified Party shall reimburse the Indemnifying Party in full for all
reasonable costs and expenses incurred by the Indemnifying Party in connection
with such litigation. The Indemnifying Party may participate in, but not
control, any defense or settlement controlled by the Indemnified Party pursuant
to this subparagraph (y), and the Indemnifying Party shall bear its own costs
and expenses with respect to such participation.

    

    (z) If the Indemnifying Party notifies
the Indemnified Party that it does not dispute its liability or the amount of
its liability to the Indemnified Party with respect to the Third Party Claim
under paragraph (a) of this Section or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party disputes its liability
or the amount of its liability to the Indemnified Party with respect to such Third Party Claim, the
amount of Damages specified in the Claim Notice shall be conclusively deemed a
liability of the Indemnifying Party under paragraph (a) of this Section and the
Indemnifying Party shall pay the amount of such Damages to the Indemnified Party
on demand. If the Indemnifying Party has timely disputed its liability or the
amount of its liability with respect to such claim, the Indemnifying Party and
the Indemnified Party shall proceed in good faith to negotiate a resolution of
such dispute; provided, however, that if the dispute is not resolved within
thirty (30) days after the Claim Notice, the Indemnifying Party shall be
entitled to institute such legal action as it deems
appropriate.

    
      
         

      

      
        Page
24

        
          

        

      

      
         

      

    

    (ii)           In
the event any Indemnified Party should have a claim under paragraph (a) of this
Section against the Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver a written notification of a claim for
indemnity under paragraph (a) of this Section specifying the nature of and basis
for such claim, together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such claim (an
"Indemnity Notice") with reasonable promptness to the Indemnifying Party. The
failure by any Indemnified Party to give the Indemnity Notice shall not impair
such party's rights hereunder except to the extent that the Indemnifying Party
demonstrates that it has been irreparably prejudiced thereby. If the
Indemnifying Party notifies the Indemnified Party that it does not dispute the
claim or the amount of the claim described in such Indemnity Notice or fails to
notify the Indemnified Party within the Dispute Period whether the Indemnifying
Party disputes the claim or the amount of the claim described in such Indemnity
Notice, the amount of Damages specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under paragraph (a) of
this Section and the Indemnifying Party shall pay the amount of such Damages to
the Indemnified Party on demand. If the Indemnifying Party has timely disputed
its liability or the amount of its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party shall proceed in good faith to
negotiate a resolution of such dispute; provided, however, that it the dispute
is not resolved within thirty (30) days after the Claim Notice, the Indemnifying
Party shall be entitled to institute such legal action as it deems
appropriate.

    

    c.           The
indemnity agreements contained herein shall be in addition to (i) any cause of
action or similar rights of the indemnified party against the indemnifying party
or others, and (ii) any liabilities the indemnifying party may be subject
to.

    

    10.           JURY TRIAL WAIVER. The
Company, MHII and the Purchaser hereby waive a trial by jury in any action,
proceeding or counterclaim brought by either of the Parties hereto against the
other in respect of any matter arising out or in connection with the Transaction
Agreements.

    

    11.           GOVERNING
LAW: MISCELLANEOUS.

    

    a.           (i) This Agreement shall be governed by
and interpreted in accordance with the laws of the State of New York for
contracts to be wholly performed in such state and without giving effect to the
principles thereof regarding the conflict of laws. Each of the parties consents
to the exclusive jurisdiction of the federal courts whose districts encompass
any part of the County of New York or the state courts of the State of New York
sitting in the County of New York in connection with any dispute arising
under this Agreement or any of the other Transaction Agreements and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non
conveniens, to the
bringing of any such proceeding in such jurisdictions or to any claim that such
venue of the suit, action or proceeding is improper. To the extent determined by
such court, the Company and MHII shall reimburse the Purchaser for any
reasonable legal fees and disbursements incurred by the Purchaser in enforcement
of or protection of any of its rights under any of the Transaction Agreements.
Nothing in this Section shall affect or limit any right to serve process in any
other manner permitted by law.

    
      
         

      

      
        Page
25

        
          

        

      

      
         

      

    

    (ii) The
Company and the Purchaser acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement or the other
Transaction Agreements were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent or cure breaches of
the provisions of this Agreement and the other Transaction Agreements and to
enforce specifically the terms and provisions hereof and thereof, this being in
addition to any other remedy to which any of them may be entitled by law or
equity.

    

    b.           Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as a
waiver thereof.

    

    c.           This
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.

    

    d.           All
pronouns and any variations thereof refer to the masculine, feminine or neuter,
singular or plural, as the context may require.

    

    e.           A
facsimile transmission of this signed Agreement shall be legal and binding on
all parties hereto.

    

    f.           This
Agreement may be signed in one or more counterparts, each of which shall be
deemed an original.

    

    g.           The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.

    

    h.          
If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.

    

    i.           This
Agreement may be amended only by an instrument in writing signed by the party to
be charged with enforcement thereof. 

    

    j.           This
Agreement supersedes all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof.

    
      
         

      

      
        Page
26

        
          

        

      

      
         

      

    

    12.           Agent

    

    (a) Authorization of Action. Each
Purchaser hereby appoints and authorizes CAMOFI Master LDC (the “Agent”) to be
its agent in its name and on its behalf and to exercise such rights or powers
granted to the Agent or the Purchasers (i) under the Transaction Documents to
the extent specifically provided therein and on the terms thereof, together with
such rights, powers and discretions as are reasonably incidental thereto. As to
any matters not expressly provided for by the Transaction Documents, the Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Purchasers, and
any action so taken or not so taken by the Agent shall be binding upon all
Purchasers; provided, however, that the Agent shall not be required to take any
action which exposes the Agent to liability in such capacity, which could result
in the Agent incurring any costs and expenses or which is contrary to this
Agreement or applicable law.

    

    (b) Indemnification. Each
Purchaser hereby agrees to indemnify and hold harmless the Agent from and
against any and all liabilities, obligations, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against the Agent
(in its capacity as agent for the Purchasers) in any way relating to or arising
out of the Transaction Documents or any action taken or admitted by the Agent
under or in respect of the Transaction Documents; provided that no Purchaser
shall be liable for any portion of such liabilities, obligations, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent’s gross negligence or willful misconduct. Without limiting the
generality of the foregoing, each Purchaser agrees to reimburse the Agent
promptly upon demand on a pro rata basis in accordance with the then outstanding
indebtedness, liabilities and obligations owing to such Purchaser by the Company
in respect of any out-of-pocket expenses (including counsel fees) incurred by
the Agent in connection with the preservation of any rights of the Agent or the
Purchasers under, the enforcement of, or legal advice in respect of the rights
or responsibilities under, the Transaction Documents, to the extent that the
Agent is not reimbursed for such expenses by the Company.

    

    (c) Successor Agent. The Agent
may, as hereinafter provided, resign at any time by giving not less than 30
days’ written notice thereof to the Purchasers and the Company. Upon any such
resignation, the Purchasers shall have the right to appoint a successor Agent
(the “Successor Agent”), which shall be a Purchaser and which shall be
acceptable to the Company, acting reasonably. Upon the acceptance of any
appointment as Agent hereunder by a Successor Agent, such Successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent and the retiring Agent shall thereupon be
discharged from its further duties and obligations as Agent under the
Transaction Documents. After any retiring Agent’s resignation hereunder as
Agent, the provisions of this Section 12 shall continue to inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
the Transaction Documents. Absent such a resignation by the Agent, the Agent’s
appointment shall continue until revoked in writing by Purchasers holding 75% of
the outstanding principal amount of the Notes, at which time such Purchasers
shall appoint a new Agent.

    

    (d) Taking and Enforcement of
Remedies.

    

    (1) Each of the Purchasers hereby
acknowledges that, to the extent permitted by applicable law, the remedies provided
under the Transaction Documents to the Purchasers are for the benefit of the
Purchasers collectively and acting together and not severally and further
acknowledges that its rights under the Transaction Documents are to be exercised
not severally, but collectively by the Agent upon the decision of the
Purchasers; accordingly, notwithstanding any of the provisions contained in any
of the Transaction Documents, each of the Purchasers hereby covenants and agrees
that it shall not be entitled to take any action with respect to the Transaction
Documents, including, without limitation, any acceleration of the indebtedness,
liabilities or obligations of the Company, but that any such action shall be
taken only by the Agent with the prior written agreement of the Purchasers,
provided that, notwithstanding the foregoing:

    
      
         

      

      
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27

        
          

        

      

      
         

      

    

    (2) in
the absence of instructions from the Purchasers and where in the sole opinion of
the Agent the exigencies of the situation warrant such action, the Agent may
without notice to or consent of the Purchasers take such action on behalf of the
Purchasers as it deems appropriate or desirable in the interest of the
Purchasers; and

    

    (3) the
commencement of litigation before any court shall be made in the name of each
Purchaser individually unless the laws of the jurisdiction of such court permit
such litigation to be commenced in the name of the Agent on behalf of the
Purchasers (whether pursuant to a specific power of attorney in favor of the
Agent or otherwise) and the Agent agrees to commence such litigation in its
name; provided, however, that no litigation shall be commenced in the name of
any Purchaser without the prior written consent of such Purchaser;

    

    (4) each
of the Purchasers hereby further covenants and agrees that upon any such written
consent being given by the Purchasers, they shall co-operate fully with the
Agent to the extent requested by the Agent in the collective realization,
including, without limitation, the appointment of a receiver and manager to act
for their collective benefit; and each Purchaser covenants and agrees to do all
acts and things to make, execute and deliver all agreements and other
instruments, including, without limitation, any instruments necessary to effect
any registrations, so as to fully carry out the intent and purpose of this
Section 12; and each of the Purchasers hereby covenants and agrees that it has
not heretofore and shall not seek, take, accept or receive any security for any
of the obligations and liabilities of the Company under the Transaction
Documents or under any other document, instrument, writing or agreement
ancillary thereto other than such security as is provided hereunder and shall
not enter into any agreement with the Company relating in any manner whatsoever
to the transactions contemplated hereunder, unless all of the Purchasers shall
at the same time obtain the benefit of any such security or agreement, as the
case may be.

    

    (5)
Notwithstanding any other provision contained in the Transaction Documents, no
Purchaser shall be required to be joined as a party to any litigation commenced
against the Company by the Agent under the Transaction Documents (unless
otherwise required by any court of competent jurisdiction) if it elects not to
be so joined in which event any such litigation shall not include claims in
respect of the rights of such Purchaser against the Company under the
Transaction Documents until such time as such Purchaser does elect to be so
joined; provided that if at the time of such subsequent election it is not
possible or practicable for such Purchaser to be so joined, then such Purchaser
may commence proceedings in its own name in respect of its rights against the
Company.

    

    13.           NOTICES.
Any notice required or
permitted hereunder shall be given in writing (unless otherwise specified
herein) and shall be deemed effectively given on the earliest
of

    
      
         

      

      
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    (a) the
date delivered, if delivered by personal delivery as against written
receipt therefor or by confirmed facsimile transmission,

    

    (b) the
fifth Trading Day after deposit, postage prepaid, in the United States
Postal Service by registered or certified mail, or

    

    (c) the
third Trading Day after mailing by domestic or international express
courier, with delivery costs and fees prepaid,

    

     in
each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate
by ten (10) days’ advance written notice similarly given to each of the
other parties hereto):

    

    
      	
              COMPANY:

            	
              D.
      L. Claire Capital Corporation

            
	 
      	
              60
      East 42nd Street,
      Suite 3405

            
	 
      	
              New
      York, New York 10165

            
	 
      	
              Attention:
      David Fuselier

            

    

    

    

    
      	
              MHII:

            	
              Marshall
      Holdings International, Inc.

            
	 
      	
              2555
      East Washburn Road

            
	 
      	
              North
      Las Vegas, Nevada 89081

            

    

    

    

    
      	
              PURCHASER:

            	
              CAMOFI
      MASTER LDC

            
	 
      	
              350
      Madison Avenue

            
	 
      	
              New
      York, NY 10017

            
	 
      	
              Attention:
      Keith Wellner

            

    

    

    

    14.           SURVIVAL OF REPRESENTATIONS
AND WARRANTIES.
The Company’s, MHII’s and the Purchaser’s representations and warranties
herein shall survive the execution and delivery of this Agreement and the
delivery of the Certificates and the payment of the Purchase Amount, and
shall inure to the benefit of the Purchaser, the Company, MHII and
their respective successors and assigns.

    

    IN WITNESS WHEREOF, this
Agreement has been duly executed by the Purchaser, the Company and MHII as
of the date set first above written.

    

    
      	 
      	
              CAMOFI
      MASTER LDC

               

               

            
	 
      	
              By:

            	
               

            

    

    

    
      
         

      

      
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29

        
          

        

      

      
         

      

    

    

    IN WITNESS WHEREOF, this
Agreement has been duly executed by the Purchaser, the Company and MHII as of
the date set first above written.

    

    
      	 
      	CAMOFI
      MASTER LDC	 
	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
	 
      	
              By:

            	 	 
	 
      	
              Name:

            	 
	 
      	
              Title:

            	 
	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
	 
      	CAMHZN
      MASTER LDC	 
	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
	 
      	
              By:

            	 
      	 
	 
      	
              Name:

            	 
	 
      	
              Title:

            	 
	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
	 
      	D.L.
      CLAIRE CAPITAL, INC.	 
	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
	 
      	
              By:

            	
              /s/ David Fuselier

            	 
	 
      	Name:
      David
      Fuselier	 
	 
      	Title:
      President	 
	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
	 
      	MARSHALL
      HOLDINGS INTERNATIONAL	 
	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
	 
      	
              By:

            	
              /s/
      Rick Bailey

            	 
	 
      	Name:
       Rick
      Bailey	 
	 
      	Title:
      President/CEO	 

    

    

      
        
           

        

        
          Page
30

          
            

          

        

        
           

        

      

    

     

    IN WITNESS WHEREOF, this
Agreement has been duly executed by the Purchaser, the Company and MHII as of
the date set first above written.

    

    
      	 
      	CAMOFI
      MASTER LDC	 
	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
	 
      	
              By:

            	 
      	 
	 
      	
              Name:

            	 
	 
      	
              Title:

            	 
	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
	 
      	CAMHZN
      MASTER LDC	 
	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
	 
      	
              By:

            	 
      	 
	 
      	
              Name:

            	 
	 
      	
              Title:

            	 
	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
	 
      	D.L.
      CLAIRE CAPITAL, INC.	 
	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
	 
      	
              By:

            	 
      	 
	 
      	Name:
      David
      Fuselier	 
	 
      	Title:
      President	 
	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
	 
      	MARSHALL
      HOLDINGS INTERNATIONAL	 
	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
	 
      	
              By:

            	
              /s/
      Rick Bailey

            	 
	 
      	Name:
      Rick
      Bailey	 
	 
      	Title:
      President/CEO	 

    

    

      
        
           

        

        
          Page
30

          
            

          

        

        
           

        

      

    

     

    
      	
              ANNEX
      I

            	
              FORM
      OF NOTE

            
	 	 
	
              ANNEX
      II

            	
              INTENTIONALLY
      LEFT BLANK

            
	 	 
	
              ANNEX
      III

            	
              SECURITY
      AGREEMENT

            
	 	 
	
              ANNEX
      IV

            	
              MHII’s
      SEC DOCUMENTS AVAILABLE ON EDGAR

            
	 	 
	
              ANNEX
      V

            	
              COMPANY
      DISCLOSURE MATERIALS

            
	 	 
	
              ANNEX
      VI

            	
              PLEDGE
      AGREEMENTS

            
	 	 
	
              ANNEX
      VII

            	
              WARRANT

            
	 	 
	
              ANNEX
      VIII

            	
              INTENTIONALLY
      LEFT BLANKUnassociated Document

    
      

    

    Exhibit
10.45

     

    SECURITY
AGREEMENT

    

    SECURITY
AGREEMENT, dated as of October 31, 2007 (this “Agreement”), among D.L. Claire
Capital, Inc. (“D.L. Claire”) and Marshall Holdings International, Inc. (the
“Debtor”) and the holder or holders of the 12% Notes due May 1, 2008 in the
original aggregate principal amount of $650,000 (the “Notes”), signatory hereto,
their endorsees, transferees and assigns (collectively referred to as, the
“Secured Parties”).

    

    W
I T N E S S E T H:

    

    WHEREAS,
pursuant to the Notes, the Secured Parties have severally agreed to extend the
loans to D.L. Claire evidenced by the Notes;

    

    WHEREAS,
pursuant to a certain Guarantee dated as of the date hereof (the “Guaranty”),
the Debtor has agreed to guaranty and act as surety for payment of such loans;
and

    

    WHEREAS,
in order to induce the Secured Parties to extend the loans evidenced by the
Notes, the Debtor has agreed to execute and deliver to the Secured Parties this
Agreement and to grant the Secured Parties, a perfected security interest in
certain property of such Debtor to secure the prompt payment, performance and
discharge in full of all of D.L. Claire’s obligations under the Notes and the
Debtor’s obligations under the Guaranty.

    

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

    

    1.          
  Certain
Definitions. As used in this Agreement, the following terms shall have
the meanings set forth in this Section 1.  Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as “account”, “chattel paper”, “commercial tort claim”, “deposit account”,
“document”, “equipment”, “fixtures”, “general intangibles”, “goods”,
“instruments”, “inventory”, “investment property”, “letter-of-credit rights”,
“proceeds” and “supporting obligations”) shall have the respective meanings
given such terms in Article 9 of the UCC.

    

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

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    (i)         
  All goods, including, without limitations, (A) all machinery,
equipment, computers, motor vehicles, trucks, tanks, boats, ships, appliances,
furniture, special and general tools, fixtures, test and quality control devices
and other equipment of every kind and nature and wherever situated, together
with all documents of title and documents representing the same, all additions
and accessions thereto, replacements therefor, all parts therefor, and all
substitutes for any of the foregoing and all other items used and useful in
connection with any Debtor’s businesses and all improvements thereto; and (B)
all inventory;

    

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

    

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

    

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

    

    (v)       
    All commercial tort claims;

    

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

    

    (vii)          All
investment property;

    

    (viii)         All
supporting obligations; and

    

    (ix)           All
files, records, books of account, business papers, and computer programs;
and

    

    (x)       
    the products and proceeds of all of the foregoing
Collateral set forth in clauses (i)-(ix) above.

    

    Without
limiting the generality of the foregoing, the “Collateral” shall include all
investment property and general intangibles respecting ownership and/or other
equity interests in Debtor, including, without limitation, the shares of capital
stock and the other equity interests of the Debtor, and any other shares of
capital stock and/or other equity interests of any other direct or indirect
subsidiary of any Debtor obtained in the future, and, in each case, all
certificates representing such shares and/or equity interests and, in each case,
all rights, options, warrants, stock, other securities and/or equity interests
that may hereafter be received, receivable or distributed in respect of, or
exchanged for, any of the foregoing (all of the foregoing being referred to
herein as the “Pledged Securities”) and all rights arising under or in
connection with the Pledged Securities, including, but not limited to, all
dividends, interest and cash.

    

    
      
        
           

        

        
          Page
2

          
            

          

        

        
           

        

      

    

    

    Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an assignment of any
asset which, in the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise prohibited by applicable
law (in each case to the extent that such applicable law is not overridden by
Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
provided, however, that to the extent permitted by applicable law, this
Agreement shall create a valid security interest in such asset and, to the
extent permitted by applicable law, this Agreement shall create a valid security
interest in the proceeds of such asset.

    

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

    

    (c)      
     “Majority in Interest” shall mean, at any time of
determination, the majority in interest (based on then-outstanding principal
amounts of Notes at the time of such determination) of the Secured
Parties.

    

    
      
        
           

        

        
          Page
3

          
            

          

        

        
           

        

      

    

    

    (d)        
   “Necessary Endorsement” shall mean undated stock powers
endorsed in blank or other proper instruments of assignment duly executed and
such other instruments or documents as the Secured Parties may reasonably
request.

    

    (e)        
   “Obligations” means all of the Debtor’s obligations under this
Agreement, the Notes, the Guaranty and any other instruments, agreements or
other documents executed and/or delivered in connection herewith or therewith,
in each case, whether now or hereafter existing, voluntary or involuntary,
direct or indirect, absolute or contingent, liquidated or unliquidated, whether
or not jointly owed with others, and whether or not from time to time decreased
or extinguished and later increased, created or incurred, and all or any portion
of such obligations or liabilities that are paid, to the extent all or any part
of such payment is avoided or recovered directly or indirectly from any of the
Secured Parties as a preference, fraudulent transfer or otherwise as such
obligations may be amended, supplemented, converted, extended or modified from
time to time.  Without limiting the generality of the foregoing, the
term “Obligations” shall include, without limitation: (i) principal of, and
interest on the Notes and the loans extended pursuant thereto; (ii) any and all
other fees, indemnities, costs, obligations and liabilities of the Debtor from
time to time under or in connection with this Agreement, the Notes, the Guaranty
and any other instruments, agreements or other documents executed and/or
delivered in connection herewith or therewith; and (iii) all amounts (including
but not limited to post-petition interest) in respect of the foregoing that
would be payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Debtor.

    

    (f)       
    “Organizational Documents” means the documents by which
such Debtor was organized (such as a certificate of incorporation, certificate
of limited partnership or articles of organization, and including, without
limitation, any certificates of designation for preferred stock or other forms
of preferred equity) and which relate to the internal governance of such Debtor
(such as bylaws, a partnership agreement or an operating, limited liability or
members agreement).

    

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

    

    2.        
    Grant
of Perfected Security Interest. As an inducement for the Secured Parties
to extend the loans as evidenced by the Notes and to secure the complete and
timely payment, performance and discharge in full, as the case may be, of all of
the Obligations, the Debtor hereby unconditionally and irrevocably pledges,
grants and hypothecates to the Secured Parties a continuing and perfected
security interest in and to, a lien upon and a right of set-off against all of
their respective right, title and interest of whatsoever kind and nature in and
to, the Collateral (the “Security Interest”).

    

    
      
        
           

        

        
          Page
4

          
            

          

        

        
           

        

      

    

    

    3.         
   Delivery of
Certain Collateral. Contemporaneously or prior to the execution of this
Agreement, the Debtor shall deliver or cause to be delivered to the Secured
Parties (a) any and all certificates and other instruments representing or
evidencing the Pledged Securities, and (b) any and all certificates and other
instruments or documents representing any of the other Collateral, in each case,
together with all Necessary Endorsements requested by the Secured Parties. The
Debtor is, contemporaneously with the execution hereof, delivering to the
Secured Parties, or have previously delivered to the Secured Parties, a true and
correct copy of each Organizational Document governing any of the Pledged
Securities.

    

    4.       
     Representations, Warranties,
Covenants and Agreements of the Debtor. The Debtor represents and
warrants to, and covenants and agrees with, the Secured Parties, except as
otherwise provided in the Disclosure Annex to the Purchase Agreement of even
date herewith, as follows:

    

    (a)        
   The Debtor has the requisite corporate, partnership, limited
liability company or other power and authority to enter into this Agreement and
otherwise to carry out its obligations hereunder. The execution, delivery and
performance by the Debtor of this Agreement and the filings contemplated therein
have been duly authorized by all necessary action on the part of such Debtor and
no further action is required by such Debtor. This Agreement has been duly
executed by the Debtor.  This Agreement constitutes the legal, valid
and binding obligation of the Debtor, enforceable against the Debtor in
accordance with its terms except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization and similar laws of general
application relating to or affecting the rights and remedies of creditors and by
general principles of equity.

    

    (b)       
    The Debtor has no place of business or offices where
their respective books of account and records are kept (other than temporarily
at the offices of its attorneys or accountants) or places where Collateral is
stored or located, except as set forth on Schedule A attached hereto. Except as
specifically set forth on Schedule A, the Debtor is the record owner of the real
property where such Collateral is located, and there exist no mortgages or other
liens on any such real property.  Except as disclosed on Schedule A,
none of such Collateral is in the possession of any consignee, bailee,
warehouseman, agent or processor.

    

    (c)      
     Except as set forth on Schedule B attached hereto,
the Debtor is the sole owner of the Collateral (except for non-exclusive
licenses granted by any Debtor in the ordinary course of business), free and
clear of any liens, security interests, encumbrances, rights or claims and are
fully authorized to grant the Security Interest.  There is not on file
in any governmental or regulatory authority, agency or recording office an
effective financing statement, security agreement, license or transfer or any
notice of any of the foregoing (other than those that will be filed in favor of
the Secured Parties pursuant to this Agreement) covering or affecting any of the
Collateral.  So long as this Agreement shall be in effect, the Debtor
shall not execute and shall not knowingly permit to be on file in any such
office or agency any such financing statement or other document or instrument
(except to the extent filed or recorded in favor of the Secured Parties pursuant
to the terms of this Agreement).

    

    
      
        
           

        

        
          Page
5

          
            

          

        

        
           

        

      

    

    

    (d)      
     Except as set forth on Schedule I attached hereto,
no written claim has been received that any Collateral or Debtor's use of any
Collateral violates the rights of any third party. There has been no adverse
decision to any Debtor's claim of ownership rights in or exclusive rights to use
the Collateral in any jurisdiction or to any Debtor's right to keep and maintain
such Collateral in full force and effect, and there is no proceeding involving
said rights pending or, to the best knowledge of any Debtor, threatened before
any court, judicial body, administrative or regulatory agency, arbitrator or
other governmental authority.

    

    (e)     
      The Debtor shall at all times maintain its
books of account and records relating to the Collateral at its principal place
of business and its Collateral at the locations set forth on Schedule A attached
hereto and may not relocate such books of account and records or tangible
Collateral unless it delivers to the Secured Parties at least 30 days prior to
such relocation (i) written notice of such relocation and the new location
thereof (which must be within the United States) and (ii) evidence that
appropriate financing statements under the UCC and other necessary documents
have been filed and recorded and other steps have been taken to perfect the
Security Interest to create in favor of the Secured Parties a valid, perfected
and continuing perfected second priority lien in the Collateral.

    

    (f)       
     This Agreement creates in favor of the Secured
Parties a valid, security interest in the Collateral, securing the payment and
performance of the Obligations. Upon making the filings described in the
immediately following paragraph, all security interests created hereunder in any
Collateral which may be perfected by filing Uniform Commercial Code financing
statements shall have been duly perfected. Except for the filing of the Uniform
Commercial Code financing statements referred to in the immediately following
paragraph, the recordation of the Intellectual Property Security Agreement (as
defined below) with respect to copyrights and copyright applications in the
United States Copyright Office referred to in paragraph (p), and the delivery of
the certificates and other instruments provided in Section 3, no action is
necessary to create, perfect or protect the security interests created
hereunder.  Without limiting the generality of the foregoing, except
for the filing of said financing statements, the recordation of said
Intellectual Property Security Agreement, no consent of any third parties and no
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for (i) the execution,
delivery and performance of this Agreement, (ii) the creation or perfection of
the Security Interests created hereunder in the Collateral or (iii) the
enforcement of the rights of the Secured Parties hereunder.

    

    
      
        
           

        

        
          Page
6

          
            

          

        

        
           

        

      

    

    

    (g)        
   The Debtor hereby authorizes the Secured Parties, or any of
them, to file one or more financing statements under the UCC, with respect to
the Security Interest with the proper filing and recording agencies in any
jurisdiction deemed proper by them.

    

    (h)      
     The execution, delivery and performance of this
Agreement by the Debtor does not (i) violate any of the provisions of any
Organizational Documents of any Debtor or any judgment, decree, order or award
of any court, governmental body or arbitrator or any applicable law, rule or
regulation applicable to any Debtor or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument (evidencing any
Debtor's debt or otherwise) or other understanding to which any Debtor is a
party or by which any property or asset of any Debtor is bound or affected. No
consent (including, without limitation, from stockholders or creditors of any
Debtor) is required for any Debtor to enter into and perform its obligations
hereunder.

    

    (i)       
     The capital stock and other equity interests
listed on Schedule H hereto represent all of the capital stock and other equity
interests of the Debtor, and represent all capital stock and other equity
interests owned, directly or indirectly, by the Debtor.

    

    (j)      
      The ownership and other equity interests in
partnerships and limited liability companies (if any) included in the Collateral
(the “Pledged Interests”) by their express terms do not provide that they are
securities governed by Article 8 of the UCC and are not held in a securities
account or by any financial intermediary.

    

    (k)      
     The Debtor shall at all times maintain the liens
and Security Interest provided for hereunder as valid and perfected second
priority liens and security interests in the Collateral in favor of the Secured
Parties until this Agreement and the Security Interest hereunder shall be
terminated pursuant to Section 14 hereof.  The Debtor hereby agrees to
defend the same against the claims of any and all persons and entities. The
Debtor shall safeguard and protect all Collateral for the account of the Secured
Parties.   At the request of the Secured Parties, the Debtor will
sign and deliver to the Secured Parties at any time or from time to time one or
more financing statements pursuant to the UCC in form reasonably satisfactory to
the Secured Parties and will pay the cost of filing the same in all public
offices wherever filing is, or is deemed by the Secured Parties to be, necessary
or desirable to effect the rights and obligations provided for herein. Without
limiting the generality of the foregoing, the Debtor shall pay all fees, taxes
and other amounts necessary to maintain the Collateral and the Security Interest
hereunder, and the Debtor shall obtain and furnish to the Secured Parties from
time to time, upon demand, such releases and/or subordinations of claims and
liens which may be required to maintain the priority of the Security Interest
hereunder.

    

    (l)        
    No Debtor will transfer, pledge, hypothecate, encumber,
license, sell or otherwise dispose of any of the Collateral (except for
non-exclusive licenses granted by a Debtor in its ordinary course of business
and sales of inventory by a Debtor in its ordinary course of business) without
the prior written consent of a Majority in Interest.

    

    
      
        
           

        

        
          Page
7

          
            

          

        

        
           

        

      

    

    

    (m)           The
Debtor shall keep and preserve its equipment, inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate
any such Collateral (or cause to be operated or located) in any area excluded
from insurance coverage.

    

    (n)       
    The Debtor shall maintain with financially sound and
reputable insurers, insurance with respect to the Collateral owned by them
against loss or damage of the kinds and in the amounts customarily insured
against by entities of established reputation having similar properties
similarly situated and in such amounts as are customarily carried under similar
circumstances by other such entities and otherwise as is prudent for entities
engaged in similar businesses but in any event sufficient to cover the full
replacement cost thereof.  The Debtor shall cause each insurance
policy issued in connection herewith to provide, and the insurer issuing such
policy to certify to the Secured Parties that (a) the Secured Parties will be
named as lender loss payee and additional insured under each such insurance
policy; (b) if such insurance be proposed to be cancelled or materially changed
for any reason whatsoever, such insurer will promptly notify the Secured Parties
and such cancellation or change shall not be effective as to the Secured Parties
for at least thirty (30) days after receipt by the Secured Parties of such
notice, unless the effect of such change is to extend or increase coverage under
the policy; and (c) the Secured Parties will have the right (but no obligation)
at its election to remedy any default in the payment of premiums within thirty
(30) days of notice from the insurer of such default. If no Event of Default (as
defined in the Debenture) exists and if the proceeds arising out of any claim or
series of related claims do not exceed $50,000, loss payments in each instance
will be applied by the applicable Debtor to the repair and/or replacement of
property with respect to which the loss was incurred to the extent reasonably
feasible, and any loss payments or the balance thereof remaining, to the extent
not so applied, shall be payable to the applicable Debtor, provided, however,
that payments received by any Debtor after an Event of Default occurs and is
continuing or in excess of $50,000 for any occurrence or series of related
occurrences shall be paid to the Secured Parties and, if received by such
Debtor, shall be held in trust for and immediately paid over to the Secured
Parties unless otherwise directed in writing by the Secured Parties. Copies of
such policies or the related certificates, in each case, naming the Secured
Parties as lender loss payee and additional insured shall be delivered to the
Secured Parties at least annually and at the time any new policy of insurance is
issued.

    

    (o)       
    The Debtor shall, within ten (10) days of obtaining
knowledge thereof, advise the Secured Parties promptly, in sufficient detail, of
any substantial change in the Collateral, and of the occurrence of any event
which would have a material adverse effect on the value of the Collateral or on
the Secured Parties’ security interest therein.

    

    (p)       
    The Debtor shall promptly execute and deliver to the
Secured Parties such further deeds, mortgages, assignments, security agreements,
financing statements or other instruments, documents, certificates and
assurances and take such further action as the Secured Parties may from time to
time request and may in its sole discretion deem necessary to perfect, protect
or enforce its security interest in the Collateral including, without
limitation, if applicable, the execution and delivery of a separate security
agreement with respect to the Debtor’s Intellectual Property (“Intellectual
Property Security Agreement”) in which the Secured Parties have been granted a
security interest hereunder, substantially in a form acceptable to the Secured
Parties, which Intellectual Property Security Agreement, other than as stated
therein, shall be subject to all of the terms and conditions
hereof.

    

    
      
        
           

        

        
          Page
8

          
            

          

        

        
           

        

      

    

    

    (q)      
     The Debtor shall permit the Secured Parties and
their representatives and agents to inspect the Collateral at any time, and to
make copies of records pertaining to the Collateral as may be requested by a
Secured Party from time to time.

    

    (r)         
   The Debtor shall take all steps reasonably necessary to
diligently pursue and seek to preserve, enforce and collect any rights, claims,
causes of action and accounts receivable in respect of the
Collateral.

    

    (s)       
    The Debtor shall promptly notify the Secured Parties in
sufficient detail upon becoming aware of any attachment, garnishment, execution
or other legal process levied against any Collateral and of any other
information received by such Debtor that may materially affect the value of the
Collateral, the Security Interest or the rights and remedies of the Secured
Parties hereunder.

    

    (t)        
    All information heretofore, herein or hereafter supplied
to the Secured Parties by or on behalf of any Debtor with respect to the
Collateral is accurate and complete in all material respects as of the date
furnished.

    

    (u)       
    The Debtor shall at all times preserve and keep in full
force and effect their respective valid existence and good standing and any
rights and franchises material to its business.

    

    (v)     
      No Debtor will change its name, type of
organization, jurisdiction of organization, organizational identification number
(if it has one), legal or corporate structure, or identity, or add any new
fictitious name unless it provides at least 20 days prior written notice to the
Secured Parties of such change and, at the time of such written notification,
such Debtor provides any financing statements or fixture filings necessary to
perfect and continue perfected the perfected security Interest granted and
evidenced by this Agreement.

    

    (w)           No
Debtor may consign any of its Inventory or sell any of its Inventory on bill and
hold, sale or return, sale on approval, or other conditional terms of sale
without the consent of a Majority in Interest which shall not be unreasonably
withheld, except to the extent such consignment or sale does not exceed 15% of
the total value of all of the Debtor’s finished goods in Inventory.

    

    
      
        
           

        

        
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    (x)          
  No Debtor may relocate its chief executive office to a new location
without providing 30 days prior written notification thereof to the Secured
Parties and so long as, at the time of such written notification, such Debtor
provides any financing statements or fixture filings necessary to perfect and
continue perfected the perfected security Interest granted and evidenced by this
Agreement.

    

    (y)        
   The Debtor was organized and remains organized solely under
the laws of the state set forth next to such Debtor’s name in the first
paragraph of this Agreement. Schedule D attached hereto sets forth the Debtor’s
organizational identification number or, if any Debtor does not have one, states
that one does not exist.

    

    (z)       
    (i) The actual name of the Debtor is the name set forth
in the preamble above; (ii) no Debtor has any trade names except as set forth on
Schedule E attached hereto; (iii) no Debtor has used any name other than that
stated in the preamble hereto or as set forth on Schedule E for the preceding
five years; and (iv) no entity has merged into any Debtor or been acquired by
any Debtor within the past five years except as set forth on Schedule
E.

    

    (aa)          At
any time and from time to time that any Collateral consists of instruments,
certificated securities or other items that require or permit possession by the
secured party to perfect the security interest created hereby, the applicable
Debtor shall deliver such Collateral to the Secured Parties.

    

    (bb)         The
Debtor, in its capacity as issuer, hereby agrees to comply with any and all
orders and instructions of the Secured Parties regarding the Pledged Interests
consistent with the terms of this Agreement without the further consent of any
Debtor as contemplated by Section 8-106 (or any successor section) of the
UCC.  Further, the Debtor agrees that it shall not enter into a
similar agreement (or one that would confer “control” within the meaning of
Article 8 of the UCC) with any other person or entity.

    

    (cc)          The
Debtor shall cause all tangible chattel paper constituting Collateral to be
delivered to the Secured Parties, or, if such delivery is not possible, then to
cause such tangible chattel paper to contain a legend noting that it is subject
to the security interest created by this Agreement.  To the extent
that any Collateral consists of electronic chattel paper, the applicable Debtor
shall cause the underlying chattel paper to be “marked” within the meaning of
Section 9-105 of the UCC (or successor section thereto).

    

    (dd)         Reserved.

    

    (ee)          To
the extent that any Collateral consists of letter-of-credit rights, the
applicable Debtor shall cause the issuer of each underlying letter of credit to
consent to an assignment of the proceeds thereof to the Secured
Parties.

    

    (ff)           To
the extent that any Collateral is in the possession of any third party, the
applicable Debtor shall join with the Secured Parties in notifying such third
party of the Secured Parties’ security interest in such Collateral and shall use
its best efforts to obtain an acknowledgement and agreement from such third
party with respect to the Collateral, in form and substance satisfactory to the
Secured Parties.

    

    
      
        
           

        

        
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    (gg)         If
any Debtor shall at any time hold or acquire a commercial tort claim, such
Debtor shall promptly notify the Secured Parties in a writing signed by such
Debtor of the particulars thereof and grant to the Secured Parties 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 Secured Parties.

    

    (hh)         The
Debtor shall immediately provide written notice to the Secured Parties of any
and all accounts which arise out of contracts with any governmental authority
and, to the extent necessary to perfect or continue the perfected status of the
Security Interest in such accounts and proceeds thereof, shall execute and
deliver to the Secured Parties an assignment of claims for such accounts and
cooperate with the Secured Parties in taking any other steps required, in their
judgment, under the Federal Assignment of Claims Act or any similar federal,
state or local statute or rule to perfect or continue the perfected status of
the Security Interest in such accounts and proceeds thereof.

    

    (ii)       
    The Debtor shall cause each subsidiary of such Debtor to
immediately become a party hereto (an “Additional Debtor”), by executing and
delivering an Additional Debtor Joinder in substantially the form of Annex A
attached hereto and comply with the provisions hereof applicable to the
Debtor.  Concurrent therewith, the Additional Debtor shall deliver
replacement schedules for, or supplements to all other Schedules to (or referred
to in) this Agreement, as applicable, which replacement schedules shall
supersede, or supplements shall modify, the Schedules then in
effect.  The Additional Debtor shall also deliver such opinions of
counsel, authorizing resolutions, good standing certificates, incumbency
certificates, organizational documents, financing statements and other
information and documentation as the Secured Parties may reasonably request.
Upon delivery of the foregoing to the Secured Parties, the Additional Debtor
shall be and become a party to this Agreement with the same rights and
obligations as the Debtor, for all purposes hereof as fully and to the same
extent as if it were an original signatory hereto and shall be deemed to have
made the representations, warranties and covenants set forth herein as of the
date of execution and delivery of such Additional Debtor Joinder, and all
references herein to the “Debtor” shall be deemed to include each Additional
Debtor.

    

    (jj)         
  The Debtor shall vote the Pledged Securities to comply with the
covenants and agreements set forth herein and in the Notes.

    

    (kk)          The
Debtor shall register the pledge of the applicable Pledged Securities on the
books of such Debtor. Further, except with respect to certificated securities
delivered to the Secured Parties, the applicable Debtor shall deliver to the
Secured Parties an acknowledgement of pledge (which, where appropriate, shall
comply with the requirements of the relevant UCC with respect to perfection by
registration) signed by the issuer of the applicable Pledged Securities, which
acknowledgement shall confirm that: (a) it has registered the pledge on its
books and records; and (b) at any time directed by the Secured Parties during
the continuation of an Event of Default, such issuer will transfer the record
ownership of such Pledged Securities into the name of any designee of the
Secured Parties and will take such steps as may be necessary to effect the
transfer, and will comply with all other instructions of the Secured Parties
regarding such Pledged Securities without the further consent of the applicable
Debtor.

    

    
      
        
           

        

        
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    (ll)        
   In the event that, upon an occurrence of an Event of Default,
the Secured Parties shall sell all or any of the Pledged Securities to another
party or parties (herein called the “Transferee”) or shall purchase or retain
all or any of the Pledged Securities, the Debtor shall, to the extent
applicable: (i) deliver to the Secured Parties or the Transferee, as the case
may be, the articles of incorporation, bylaws, minute books, stock certificate
books, corporate seals, deeds, leases, indentures, agreements, evidences of
indebtedness, books of account, financial records and all other Organizational
Documents and records of the Debtor and its direct and indirect subsidiaries;
(ii) use its best efforts to obtain resignations of the persons then serving as
officers and directors of the Debtor and their direct and indirect subsidiaries,
if so requested; and (iii) use its best efforts to obtain any approvals that are
required by any governmental or regulatory body in order to permit the sale of
the Pledged Securities to the Transferee or the purchase or retention of the
Pledged Securities by the Secured Parties and allow the Transferee or the
Secured Parties to continue the business of the Debtor and its direct and
indirect subsidiaries.

    

    (mm)        Without
limiting the generality of the other obligations of the Debtor hereunder, the
Debtor shall, upon request, promptly (i) cause to be registered at the United
States Copyright Office all of its material copyrights, (ii) cause the security
interest contemplated hereby with respect to all Intellectual Property
registered at the United States Copyright Office or United States Patent and
Trademark Office to be duly recorded at the applicable office, and (iii) give
the Secured Parties notice whenever it acquires (whether absolutely or by
license) or creates any additional material Intellectual Property.

    

    (nn)         The
Debtor will from time to time, at the joint and several expense of the Debtors,
promptly execute and deliver all such further instruments and documents, and
take all such further action as may be necessary or desirable, or as the Secured
Parties may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Secured
Parties to exercise and enforce their rights and remedies hereunder and with
respect to any Collateral or to otherwise carry out the purposes of this
Agreement.

    

    (oo)         Schedule
F attached hereto lists all of the patents, patent applications, trademarks,
trademark applications, registered copyrights, and domain names owned by any of
the Debtors as of the date hereof. Schedule F lists all material licenses in
favor of any Debtor for the use of any patents, trademarks, copyrights and
domain names as of the date hereof. All material patents and trademarks of the
Debtors, if any, have been duly recorded at the United States Patent and
Trademark Office and all material copyrights of the Debtors have been duly
recorded at the United States Copyright Office.

    

    
      
        
           

        

        
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    (pp)         Except
as set forth on Schedule G attached hereto, none of the account debtors or other
persons or entities obligated on any of the Collateral is a governmental
authority covered by the Federal Assignment of Claims Act or any similar
federal, state or local statute or rule in respect of such
Collateral.

    

    5.         
    Effect
of Pledge on Certain Rights. If any of the Collateral subject to this
Agreement consists of nonvoting equity or ownership interests (regardless of
class, designation, preference or rights) that may be converted into voting
equity or ownership interests upon the occurrence of certain events (including,
without limitation, upon the transfer of all or any of the other stock or assets
of the issuer), it is agreed that the pledge of such equity or ownership
interests pursuant to this Agreement or the enforcement of any of the Secured
Parties’ rights hereunder shall not be deemed to be the type of event which
would trigger such conversion rights notwithstanding any provisions in the
Organizational Documents or agreements to which any Debtor is subject or to
which any Debtor is party.

    

    6.      
       Defaults. The following events
shall be “Events of Default”:

    

    (a)           
The occurrence of an Event of Default (as defined in the Notes) under the
Notes;

    

    (b)      
     Any representation or warranty of any Debtor in this
Agreement shall prove to have been incorrect in any material respect when
made;

    

    (c)           
The failure by any Debtor to observe or perform any of its obligations hereunder
for five (5) days after delivery to such Debtor of notice of such failure by or
on behalf of a Secured Party unless such default is capable of cure but cannot
be cured within such time frame and such Debtor is using best efforts to cure
same in a timely fashion; or

    

    (d)         
  If any provision of this Agreement shall at any time for any reason
be declared to be null and void, or the validity or enforceability thereof shall
be contested by any Debtor, or a proceeding shall be commenced by any Debtor, or
by any governmental authority having jurisdiction over any Debtor, seeking to
establish the invalidity or unenforceability thereof, or any Debtor shall deny
that any Debtor has any liability or obligation purported to be created under
this Agreement.

    

    7.        
     Duty To Hold In
Trust.

    

    (a)       
    Upon the occurrence of any Event of Default and at any
time thereafter, the Debtor shall, upon receipt of any revenue, income,
dividend, interest or other sums subject to the Security Interest, whether
payable pursuant to the Notes or otherwise, or of any check, draft, note, trade
acceptance or other instrument evidencing an obligation to pay any such sum,
hold the same in trust for the Secured Parties and shall forthwith endorse and
transfer any such sums or instruments, or both (to the extent permitted by law
and in accordance with the Visa and MasterCard Association Rules), to the
Secured Parties, pro-rata in proportion to their initial purchases of Notes for
application to the satisfaction of the Obligations (and if any Debenture is not
outstanding, pro-rata in proportion to the initial purchases of the remaining
Notes).

    

    
      
        
           

        

        
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    (b)       
    If any Debtor shall become entitled to receive or shall
receive any securities or other property (including, without limitation, shares
of Pledged Securities or instruments representing Pledged Securities acquired
after the date hereof, or any options, warrants, rights or other similar
property or certificates representing a dividend, or any distribution in
connection with any recapitalization, reclassification or increase or reduction
of capital, or issued in connection with any reorganization of such Debtor or
any of its direct or indirect subsidiaries) in respect of the Pledged Securities
(whether as an addition to, in substitution of, or in exchange for, such Pledged
Securities or otherwise), such Debtor agrees to (i) accept the same as the agent
of the Secured Parties;
(ii)           hold the
same in trust on behalf of and for the benefit of the Secured Parties; and (iii)
to deliver any and all certificates or instruments evidencing the same to the
Secured Parties on or before the close of business on the fifth business day
following the receipt thereof by such Debtor, in the exact form received
together with the Necessary Endorsements, to be held by the Secured Parties
subject to the terms of this Agreement as Collateral.

    

    8.           
  Rights and Remedies
Upon Default.

    

    (a)           
Upon the occurrence of any Event of Default and at any time thereafter provided
the same is then continuing, the Secured Parties, acting through any agent
appointed by them for such purpose, shall have the right to exercise all of the
remedies conferred hereunder and under the Notes, and the Secured Parties shall
have all the rights and remedies of a secured party under the
UCC.  Without limitation, the Secured Parties shall have the following
rights and powers:

    

    (i)            
The Secured Parties shall have the right to take possession of the Collateral
and, for that purpose, enter, with the aid and assistance of any person, any
premises where the Collateral, or any part thereof, is or may be placed and
remove the same, and the Debtor shall assemble the Collateral and make it
available to the Secured Parties at places which the Secured Parties shall
reasonably select, whether at such Debtor's premises or elsewhere, and make
available to the Secured Parties, without rent, all of such Debtor’s respective
premises and facilities for the purpose of the Secured Parties taking possession
of, removing or putting the Collateral in saleable or disposable
form.

    

    (ii)           
Upon notice to the Debtors by the Secured Parties, all rights of the Debtor to
exercise the voting and other consensual rights which it would otherwise be
entitled to exercise and all rights of the Debtor to receive the dividends and
interest which it would otherwise be authorized to receive and retain, shall
cease.  Upon such notice, the Secured Parties shall have the right to
receive any interest, cash dividends or other payments on the Collateral and, at
the option oft, to exercise in such the Secured Parties’ discretion all voting
rights pertaining thereto. Without limiting the generality of the foregoing, the
Secured Parties shall have the right (but not the obligation) to exercise all
rights with respect to the Collateral as it were the sole and absolute owners
thereof, including, without limitation, to vote and/or to exchange, at its sole
discretion, any or all of the Collateral in connection with a merger,
reorganization, consolidation, recapitalization or other readjustment concerning
or involving the Collateral or any Debtor or any of its direct or indirect
subsidiaries.

    

    
      
        
           

        

        
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    (iii)           The
Secured Parties shall have the right to operate the business of the Debtor using
the Collateral and shall have the right to assign, sell, lease or otherwise
dispose of and deliver all or any part of the Collateral, at public or private
sale or otherwise, either with or without special conditions or stipulations,
for cash or on credit or for future delivery, in such parcel or parcels and at
such time or times and at such place or places, and upon such terms and
conditions as the Secured Parties may deem commercially reasonable, all without
(except as shall be required by applicable statute and cannot be waived)
advertisement or demand upon or notice to any Debtor or right of redemption of a
Debtor, which are hereby expressly waived. Upon each such sale, lease,
assignment or other transfer of Collateral, the Secured Parties may, unless
prohibited by applicable law which cannot be waived, purchase all or any part of
the Collateral being sold, free from and discharged of all trusts, claims, right
of redemption and equities of any Debtor, which are hereby waived and
released.

    

    (iv)       
   The Secured Parties shall have the right (but not the
obligation) to notify any account debtors and any obligors under instruments or
accounts to make payments directly to the Secured Parties and to enforce the
Debtors’ rights against such account debtors and obligors.

    

    (v)         
  The Secured Parties may (but are not obligated to) direct any
financial intermediary or any other person or entity holding any investment
property to transfer the same to the Secured Parties or their
designee.

    

    (vi)           The
Secured Parties may (but are not obligated to) transfer any or all Intellectual
Property registered in the name of any Debtor at the United States Patent and
Trademark Office and/or Copyright Office into the name of the Secured Parties or
any designee or any purchaser of any Collateral.

    

    (b)     
      The Secured Parties may comply with any
applicable law in connection with a disposition of Collateral and such
compliance will not be considered adversely to affect the commercial
reasonableness of any sale of the Collateral.  The Secured Parties may
sell the Collateral without giving any warranties and may specifically disclaim
such warranties.  If the Secured Parties sells any of the Collateral
on credit, the Debtors will only be credited with payments actually made by the
purchaser.  In addition, the Debtor waives any and all rights that it
may have to a judicial hearing in advance of the enforcement of any of the
Secured Parties’ rights and remedies hereunder, including, without limitation,
its right following an Event of Default to take immediate possession of the
Collateral and to exercise its rights and remedies with respect
thereto.

    

    
      
        
           

        

        
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    (c)          
 For the purpose of enabling the Secured Parties to further exercise rights
and remedies under this Section 8 or elsewhere provided by agreement or
applicable law, the Debtor hereby grants to the Secured Parties an irrevocable,
nonexclusive license (exercisable without payment of royalty or other
compensation to such Debtor) to use, license or sublicense following an Event of
Default, any Intellectual Property now owned or hereafter acquired by such
Debtor, and wherever the same may be located, and including in such license
access to all media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation or printout
thereof.

    

    9.        
    Applications of Proceeds. The
proceeds of any such sale, lease or other disposition of the Collateral
hereunder shall be applied first, to the expenses of retaking, holding, storing,
processing and preparing for sale, selling, and the like (including, without
limitation, any taxes, fees and other costs incurred in connection therewith) of
the Collateral, to the reasonable attorneys’ fees and expenses incurred by the
Secured Parties in enforcing their rights hereunder and in connection with
collecting, storing and disposing of the Collateral, and then to satisfaction of
the Obligations pro rata among the Secured Parties (based on then-outstanding
principal amounts of Notes at the time of any such determination), and to the
payment of any other amounts required by applicable law, after which the Secured
Parties shall pay to the applicable Debtor any surplus proceeds. If, upon the
sale, license or other disposition of the Collateral, the proceeds thereof are
insufficient to pay all amounts to which the Secured Parties are legally
entitled, the Debtors will be liable for the deficiency, together with interest
thereon, at the rate of 20% per annum or the lesser amount permitted by
applicable law (the “Default Rate”), and the reasonable fees of any attorneys
employed by the Secured Parties to collect such deficiency.  To the
extent permitted by applicable law, the Debtor waives all claims, damages and
demands against the Secured Parties arising out of the repossession, removal,
retention or sale of the Collateral, unless due solely to the gross negligence
or willful misconduct of the Secured Parties as determined by a final judgment
(not subject to further appeal) of a court of competent
jurisdiction.

    

    10.         
  Securities Law
Provision. The Debtor recognizes that the Secured Parties may be limited
in its ability to effect a sale to the public of all or part of the Pledged
Securities by reason of certain prohibitions in the Securities Act of 1933, as
amended, or other federal or state securities laws (collectively, the
“Securities Laws”), and may be compelled to resort to one or more sales to a
restricted group of purchasers who may be required to agree to acquire the
Pledged Securities for their own account, for investment and not with a view to
the distribution or resale thereof.  The Debtor agrees that sales so
made may be at prices and on terms less favorable than if the Pledged Securities
were sold to the public, and that the Secured Parties has no obligation to delay
the sale of any Pledged Securities for the period of time necessary to register
the Pledged Securities for sale to the public under the Securities
Laws.  The Debtor shall cooperate with the Secured Parties in its
attempt to satisfy any requirements under the Securities Laws (including,
without limitation, registration thereunder if requested by the Secured Parties)
applicable to the sale of the Pledged Securities by the Secured
Parties.

    

    11.       
    Costs
and Expenses. The Debtor agrees to pay all reasonable out-of-pocket fees,
costs and expenses incurred in connection with any filing required hereunder,
including without limitation, any financing statements pursuant to the UCC,
continuation statements, partial releases and/or termination statements related
thereto or any expenses of any searches reasonably required by the Secured
Parties. The Debtors shall also pay all other claims and charges which in the
reasonable opinion of the Secured Parties might prejudice, imperil or otherwise
affect the Collateral or the Security Interest therein. The Debtors will also,
upon demand, pay to the Secured Parties the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its counsel and of any
experts and agents, which the Secured Parties may incur in connection with (i)
the enforcement of this Agreement, (ii) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Collateral, or
(iii) the exercise or enforcement of any of the rights of the Secured Parties
under the Notes. Until so paid, any fees payable hereunder shall be added to the
principal amount of the Notes and shall bear interest at the Default
Rate.

    

    
      
        
           

        

        
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    12.        
   Responsibility for Collateral.
The Debtors assume all liabilities and responsibility in connection with all
Collateral, and the Obligations shall in no way be affected or diminished by
reason of the loss, destruction, damage or theft of any of the Collateral or its
unavailability for any reason. The Secured Party agrees to act in accordance
with commercially reasonable standards and the UCC.  Without limiting
the generality of the foregoing, (a) no Secured Party (i) has any duty (either
before or after an Event of Default) to collect any amounts in respect of the
Collateral or to preserve any rights relating to the Collateral, or (ii) has any
obligation to clean-up or otherwise prepare the Collateral for sale, and (b) the
Debtor shall remain obligated and liable under each contract or agreement
included in the Collateral to be observed or performed by such Debtor
thereunder.  No Secured Party shall have any obligation or liability
under any such contract or agreement by reason of or arising out of this
Agreement or the receipt by any Secured Party of any payment relating to any of
the Collateral, nor shall any Secured Party be obligated in any manner to
perform any of the obligations of any Debtor under or pursuant to any such
contract or agreement, to make inquiry as to the nature or sufficiency of any
payment received by any Secured Party in respect of the Collateral or as to the
sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to any Secured Party or to which it may be entitled at any time or
times.

    

    13.           Security Interest Absolute.
All rights of the Secured Parties and all obligations of the Debtors hereunder,
shall be absolute and unconditional, irrespective of: (a) any lack of validity
or enforceability of this Agreement, the Notes or any agreement entered into in
connection with the foregoing, or any portion hereof or thereof; (b) any change
in the time, manner or place of payment or performance of, or in any other term
of, all or any of the Obligations, or any other amendment or waiver of or any
consent to any departure from the Notes or any other agreement entered into in
connection with the foregoing; (c) any exchange, release or nonperfection of any
of the Collateral, or any release or amendment or waiver of or consent to
departure from any other collateral for, or any guaranty, or any other security,
for all or any of the Obligations; (d) any action by the Secured Parties to
obtain, adjust, settle and cancel in its sole discretion any insurance claims or
matters made or arising in connection with the Collateral; or (e) any other
circumstance which might otherwise constitute any legal or equitable defense
available to a Debtor, or a discharge of all or any part of the Security
Interest granted hereby. Until the Obligations shall have been paid and
performed in full, the rights of the Secured Parties shall continue even if the
Obligations are barred for any reason, including, without limitation, the
running of the statute of limitations or bankruptcy.  The Debtor
expressly waives presentment, protest, notice of protest, demand, notice of
nonpayment and demand for performance. In the event that at any time any
transfer of any Collateral or any payment received by the Secured Parties
hereunder shall be deemed by final order of a court of competent jurisdiction to
have been a voidable preference or fraudulent conveyance under the bankruptcy or
insolvency laws of the United States, or shall be deemed to be otherwise due to
any party other than the Secured Parties, then, in any such event, the Debtor’s
obligations hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or cancellation
of this Agreement, but shall remain a valid and binding obligation enforceable
in accordance with the terms and provisions hereof.  The Debtor waives
all right to require the Secured Parties to proceed against any other person or
entity or to apply any Collateral which the Secured Parties may hold at any
time, or to marshal assets, or to pursue any other remedy. The Debtor waives any
defense arising by reason of the application of the statute of limitations to
any obligation secured hereby.

    

    
      
        
           

        

        
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    14.         
  Term of
Agreement. This Agreement and the Security Interest shall terminate on
the date on which all payments under the Notes have been indefeasibly paid in
full and all other Obligations have been paid or discharged; provided, however,
that all indemnities of the Debtors contained in this Agreement shall survive
and remain operative and in full force and effect regardless of the termination
of this Agreement.

    

    15.       
    Power
of Attorney; Further Assurances.

    

    (a)       
    The Debtor authorizes the Secured Parties, and does
hereby make, constitute and appoint the Secured Parties and their respective
officers, agents, successors or assigns with full power of substitution, as such
Debtor’s true and lawful attorney-infact, with power, in the name of the various
Secured Parties or such Debtor, to, after the occurrence and during the
continuance of an Event of Default, (i) endorse any note, checks, drafts, money
orders or other instruments of payment (including payments payable under or in
respect of any policy of insurance) in respect of the Collateral that may come
into possession of the Secured Parties; (ii) to sign and endorse any financing
statement pursuant to the UCC or any invoice, freight or express bill, bill of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts, and other documents
relating to the Collateral; (iii) to pay or discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on or threatened
against the Collateral; (iv) to demand, collect, receipt for, compromise, settle
and sue for monies due in respect of the Collateral; (v) to transfer any
Intellectual Property or provide licenses respecting any Intellectual Property;
and (vi) generally, at the option of the Secured Parties, and at the expense of
the Debtors, at any time, or from time to time, to execute and deliver any and
all documents and instruments and to do all acts and things which the Secured
Parties deem necessary to protect, preserve and realize upon the Collateral and
the Security Interest granted therein in order to effect the intent of this
Agreement and the Notes all as fully and effectually as the Debtors might or
could do; and the Debtor hereby ratifies all that said attorney shall lawfully
do or cause to be done by virtue hereof.  This power of attorney is
coupled with an interest and shall be irrevocable for the term of this Agreement
and thereafter as long as any of the Obligations shall be
outstanding.  The designation set forth herein shall be deemed to
amend and supersede any inconsistent provision in the Organizational Documents
or other documents or agreements to which any Debtor is subject or to which any
Debtor is a party. Without limiting the generality of the foregoing, after the
occurrence and during the continuance of an Event of Default, each Secured Party
is specifically authorized to execute and file any applications for or
instruments of transfer and assignment of any patents, trademarks, copyrights or
other Intellectual Property with the United States Patent and Trademark Office
and the United States Copyright Office.

    

    
      
        
           

        

        
          Page
18

          
            

          

        

        
           

        

      

    

    

    (b)       
    On a continuing basis, the Debtor will make, execute,
acknowledge, deliver, file and record, as the case may be, with the proper
filing and recording agencies in any jurisdiction, including, without
limitation, the jurisdictions indicated on Schedule C attached hereto, all such
instruments, and take all such action as may reasonably be deemed necessary or
advisable, or as reasonably requested by the Secured Parties, to perfect the
Security Interest granted hereunder and otherwise to carry out the intent and
purposes of this Agreement, or for assuring and confirming to the Secured
Parties the grant or perfection of a perfected security interest in all the
Collateral under the UCC.

    

    (c)       
    The Debtor hereby irrevocably appoints the Secured
Parties as such Debtor’s attorney-in-fact, with full authority in the place and
instead of such Debtor and in the name of such Debtor, from time to time in the
Secured Parties’ discretion, to take any action and to execute any instrument
which the Secured Parties may deem necessary or advisable to accomplish the
purposes of this Agreement, including the filing, in its sole discretion, of one
or more financing or continuation statements and amendments thereto, relative to
any of the Collateral without the signature of such Debtor where permitted by
law, which financing statements may (but need not) describe the Collateral as
“all assets” or “all personal property” or words of like import, and ratifies
all such actions taken by the Secured Parties. This power of attorney is coupled
with an interest and shall be irrevocable for the term of this Agreement and
thereafter as long as any of the Obligations shall be outstanding.

    

    16.      
     Notices. All notices,
requests, demands and other communications hereunder shall be subject to the
notice provision of the Purchase Agreement (as such term is defined in the
Notes).

    

    17.       
    Other
Security. To the extent that the Obligations are now or hereafter secured
by property other than the Collateral or by the guarantee, endorsement or
property of any other person, firm, corporation or other entity, then the
Secured Parties shall have the right, in its sole discretion, to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Secured Parties’ rights and
remedies hereunder.

    

    18.        
   Intentionally
Omitted.

    

    19.       
    Miscellaneous.

    

    
      
        
           

        

        
          Page
19

          
            

          

        

        
           

        

      

    

    

    (a)       
    No course of dealing between the Debtors and the Secured
Parties, nor any failure to exercise, nor any delay in exercising, on the part
of the Secured Parties, any right, power or privilege hereunder or under the
Notes shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or thereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.

    

    (b)       
    All of the rights and remedies of the Secured Parties
with respect to the Collateral, whether established hereby or by the Notes or by
any other agreements, instruments or documents or by law shall be cumulative and
may be exercised singly or concurrently.

    

    (c)       
    This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and is intended to supersede
all prior negotiations, understandings and agreements with respect thereto.
Except as specifically set forth in this Agreement, no provision of this
Agreement may be modified or amended except by a written agreement specifically
referring to this Agreement and signed by the parties hereto.

    

    (d)       
    In the event any provision of this Agreement is held to
be invalid, prohibited or unenforceable in any jurisdiction for any reason,
unless such provision is narrowed by judicial construction, this Agreement
shall, as to such jurisdiction, be construed as if such invalid, prohibited or
unenforceable provision had been more narrowly drawn so as not to be invalid,
prohibited or unenforceable.  If, notwithstanding the foregoing, any
provision of this Agreement is held to be invalid, prohibited or unenforceable
in any jurisdiction, such provision, as to such jurisdiction, shall be
ineffective to the extent of such invalidity, prohibition or unenforceability
without invalidating the remaining portion of such provision or the other
provisions of this Agreement and without affecting the validity or
enforceability of such provision or the other provisions of this Agreement in
any other jurisdiction.

    

    (e)       
    No waiver of any breach or default or any right under
this Agreement shall be considered valid unless in writing and signed by the
party giving such waiver, and no such waiver shall be deemed a waiver of any
subsequent breach or default or right, whether of the same or similar nature or
otherwise.

    

    (f)          
  This Agreement shall be binding upon and inure to the benefit of
each party hereto and its successors and assigns.

    

    (g)        
   Each party shall take such further action and execute and
deliver such further documents as may be necessary or appropriate in order to
carry out the provisions and purposes of this Agreement.

    

    (h)           All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof.  The Debtor agrees that all
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and the Notes (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York,
Borough of Manhattan. The Debtor hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If any party shall
commence a proceeding to enforce any provisions of this Agreement, then the
prevailing party in such proceeding shall be reimbursed by the other party for
its reasonable attorney’s fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such proceeding.

    

    
      
        
           

        

        
          Page
20

          
            

          

        

        
           

        

      

    

    

    (i)           
 This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.

    

    (j)         
   All Debtors shall jointly and severally be liable for the
obligations of the Debtor to the Secured Parties hereunder.

    

    (k)      
     The Debtor shall indemnify, reimburse and hold
harmless the Secured Parties and their respective partners, members,
shareholders, officers, directors, employees and agents (collectively,
“Indemnitees”) from and against any and all losses, claims, liabilities,
damages, penalties, suits, costs and expenses, of any kind or nature, (including
fees relating to the cost of investigating and defending any of the foregoing)
imposed on, incurred by or asserted against such Indemnitee in any way related
to or arising from or alleged to arise from this Agreement or the Collateral,
except any such losses, claims, liabilities, damages, penalties, suits, costs
and expenses which result from the gross negligence or willful misconduct of the
Indemnitee as determined by a final, nonappealable decision of a court of
competent jurisdiction.  This indemnification provision is in addition
to, and not in limitation of, any other indemnification provision in the Notes,
the Purchase Agreement (as such term is defined in the Notes) or any other
agreement, instrument or other document executed or delivered in connection
herewith or therewith.

    

    
      
        
           

        

        
          Page
21

          
            

          

        

        
           

        

      

    

    

    (l)         
   Nothing in this Agreement shall be construed to subject any
Secured Party to liability as a partner in any Debtor or any if its direct or
indirect subsidiaries that is a partnership or as a member in any Debtor or any
of its direct or indirect subsidiaries that is a limited liability company, nor
any Secured Party be deemed to have assumed any obligations under any
partnership agreement or limited liability company agreement, as applicable, of
any such Debtor or any if its direct or indirect subsidiaries or otherwise,
unless and until any such Secured Party exercises its right to be substituted
for such Debtor as a partner or member, as applicable, pursuant
hereto.

    

    (m)           To
the extent that the grant of the security interest in the Collateral and the
enforcement of the terms hereof require the consent, approval or action of any
partner or member, as applicable, of any Debtor or any direct or indirect
subsidiary of any Debtor or compliance with any provisions of any of the
Organizational Documents, the Debtors hereby grant such consent and approval and
waive any such noncompliance with the terms of said documents.

    

    
      
        
           

        

        
          Page
22

          
            

          

        

        
           

        

      

    

    

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

    

    
      

    

    
      

    

    
      	
              D.
      L. CLAIRE CAPITAL, INC.

               

            	
              MARSHALL
      HOLDINGS INTERNATIONAL, INC.

               

            
	
              /s/ David
    Fuselier

            	 
      	
              /s/ Rick
    Bailey

            	 
      
	
              Name:
      David Fuselier

            	
              Name:
      Rick Bailey

            
	
              Title:    President

            	
              Title:   President/CEO

            

    

    

    
      
        
           

        

        
          Page
23

          
            

          

        

        
           

        

      

    

    

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

    

    
      

    

    
      

    

    
      	
              D.
      L. CLAIRE CAPITAL, INC.

               

            	
              MARSHALL
      HOLDINGS INTERNATIONAL, INC.

               

            
	 
      	 
      	
              /s/ Rick
    Bailey

            	 
      
	
              Name:
      David Fuselier

            	
              Name:
      Rick Bailey

            
	
              Title:    President

            	
              Title:   President/CEO

            

    

    

    
      
        
           

        

        
          Page
23

          
            

          

        

        
           

        

      

    

    

    
      [SIGNATURE
PAGE OF HOLDERS TO MHII]

    

    
      

    

    
      Name of
Investing Entity:________________________

    

    
      Signature of Authorized Signatory of
Investing entity:________________________

    

    
      Name of
Authorized Signatory: ________________________

    

    
      Title of
Authorized Signatory: ________________________

    

    

    
      
        
           

        

        
          Page
24

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
A

    

    LOCATION
OF COLLATERAL

    

    Principal
Place of Business of Debtors:

    

    Principle
Office:

    Marshall
Holdings International, Inc.

    2555 East
Washburn Road

    North Las
Vegas, Nevada 89081

    

    

    Locations
Where Collateral is Located or Stored:

    

    
      
        
           

        

        
          Page
25

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
B

    

    EXISTING
LIENS ON COLLATERAL

    

    
      
        
           

        

        
          Page
26

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
C

    

    JURISDICTIONS
IN WHICH COLLATERAL LOCATED

    

    
      
        
           

        

        
          Page
27

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
D

    

    ORGANIZATIONAL
IDENTIFICATION NUMBERS

    

    
      
        
           

        

        
          Page
28

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
E

    

    NAMES;
MERGERS AND ACQUISITIONS

    

    
      
        
           

        

        
          Page
29

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
F

    

    INTELLECTUAL
PROPERTY

    

    
      
        
           

        

        
          Page
30

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
G

    

    ACCOUNT
DEBTORS

    

    
      
        
           

        

        
          Page
31

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
H

    

    EQUITY
INTERESTS

    

    
      
        
           

        

        
          Page
32

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
I

    

    CLAIMS

    

    
      
        
           

        

        
          Page
33

          
            

          

        

        
           

        

      

    

    

    ANNEX
A

    to

    SECURITY

    AGREEMENT

    

    FORM
OF ADDITIONAL DEBTOR JOINDER

    

    Security
Agreement dated as of ________ ___, 2007 made by

    _________________________

    and its
subsidiaries party thereto from time to time, as Debtors

    to and in
favor of

    the
Secured Parties identified therein (the “Security Agreement”)

    

    Reference
is made to the Security Agreement as defined above; capitalized terms used
herein and not otherwise defined herein shall have the meanings given to such
terms in, or by reference in, the Security Agreement.

    

    The
undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
to the Secured Parties referred to above, the undersigned shall (a) be an
Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the same
extent as if the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth in Section ___ therein
as of the date of execution and delivery of this Additional Debtor
Joinder.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE
UNDERSIGNED SPECIFICALLY GRANTS TO THE SECURED PARTIES A SECURITY INTEREST IN
THE COLLATERAL AS MORE FULLY SET FORTH IN THE SECURITY AGREEMENT AND
ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL PROVISIONS SET FORTH
THEREIN.

    

    Attached
hereto are supplemental and/or replacement Schedules to the Security Agreement,
as applicable.

    

    An
executed copy of this Joinder shall be delivered to the Secured Parties, and the
Secured Parties may rely on the matters set forth herein on or after the date
hereof.  This Joinder shall not be modified, amended or terminated
without the prior written consent of the Secured Parties.

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

    

    
      [SIGNATURE
PAGE OF HOLDERS TO MHII]

    

    
      

    

    
      Name of
Investing Entity:________________________

    

    
      Signature of Authorized Signatory of
Investing entity:________________________

    

    
      Name of
Authorized Signatory: ________________________

    

    
      Title of
Authorized Signatory: ________________________

    

     

     

     Page
24

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