Security Interest and Pledge Agreement dated as of October 31, 2007 by and among CAMOFI Master LDC, CAMHZN Master LDC, D. L. Claire Capital, Inc., Marshall Holdings International, Inc. and Richard A. Bailey, Florian R. Ternes, and Neptune Communications, Inc

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SECURITY INTEREST AND PLEDGE AGREEMENT (“Pledge Agreement”) dated as of October 31, 2007 by and among CAMOFI Master LDC and CAMHZN Master LDC (collectively, “Secured Parties”), D. L. Claire Capital, Inc., a Delaware corporation with its principal business address at 60 East 42nd Street, Suite 3405, New York, New York 10165 (the “Company” or the “Debtor”), Marshall Holdings International, Inc., a Nevada corporation with its principal business address at 2555 East Washburn Road, North Las Vegas, Nevada 89081 (“MHII”) and Richard A. Bailey, Florian R. Ternes, and Neptune Communications, Inc., a Nevada corporation.

A.            Reference is made to (i) that certain Purchase Agreement of even date herewith (the “Purchase Agreement”) to which the Company and the Secured Parties are parties, and (ii) the Transaction Agreements (as that term is defined in the Loan Agreement), including, without limitation, the Notes. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the relevant Transaction Agreements.

B.            Pursuant to the Transaction Agreements, the Debtor has certain obligations to the Secured Parties (all such obligations, the “Obligations”), including, but not limited to, obligations to pay principal and interest of the Notes, which was issued in the original aggregate principal amount of $650,000, on the Maturity Date. The Note Obligations are secured by (i) the pledge of certain stock of (a) the Company and (b) MHII and (ii) certain real estate as more fully described below. The obligations of the Company and of the Pledgors, if any, under the Notes are referred to collectively as the “Note Obligations.”

C.            To secure the Note Obligations, the Pledgors have agreed to pledge certain shares of Common Stock of (a) the Company and (b) MHII held by the Pledgors to the Secured Parties as security for the performance of the Note Obligations.

D.            The Pledgors are shareholders and/or affiliates of the Debtor or otherwise benefit from the transactions described in the Purchase Agreement and have determined that it is in the Pledgors’ best interests, including to the benefit of the other interests of the Pledgors in the Company, to provide the pledge referred to herein.

E.             The Secured Parties is willing to enter into the Purchase Agreement and the other Transaction Agreements only upon receiving the Pledgors’ pledge of certain stock of (a) the Company and (b) MHII, as set forth in this Pledge Agreement.

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

1.             Grant of Security Interest.

 

(a)           To secure the Note Obligations of Debtor, the Pledgors hereby pledge to the Secured Parties (i) all of the shares of Common Stock (the “Pledged Shares”) set forth on the attached Schedule 2 of this Agreement (Unless otherwise set forth on Schedule 2 of this Agreement, the Pledgors are the beneficial and record owner of the Pledged Shares set forth opposite the Pledgor’s name on such Schedule), (ii) certain real estate (the “Real Estate”) evidenced by mortgages in the form attached hereto as Exhibit A (collectively, the “Mortgage”). Such Pledged Shares and Real Estate together with any substitutes therefor, or proceeds thereof, are hereinafter referred to collectively as the “Collateral.”

(b)           MHII represents and warrants to the Secured Parties that the Pledged Shares are duly authorized, validly issued, fully paid and non-assessable and that it will not permit the transfer of the Pledged Shares except in accordance with this Pledge Agreement while the same is in effect.

(c)           (i)    MHII has given written notice to the Transfer Agent regarding the creation of the security interest of the Secured Parties in the Collateral. MHII has instructed the Transfer Agent (A) to record on its books the existence of such security interest with respect to the Pledged Shares, (B) to transfer Pledged Shares in accordance with the instructions of the Secured Parties without further action of MHII, and (C) except upon such instructions of the Secured Parties or until written notice is given by the Secured Parties that such security interest has been released to the Pledgor in whole or in part, to not allow a transfer of the shares representing any part of the Collateral or to replace the certificates representing the Collateral; and

(ii)    The Pledgors hereby consent to the provisions of the preceding subparagraph (i) and authorizes the Company to provide such notice and instructions to the Transfer Agent.

2.             Obligations Secured. During the term hereof, the Collateral shall secure the following:

(a)           The performance by the Company of the Note Obligations; and

(b)           The payment of all fees and the delivery of all stock other than principal and interest under the Notes and any other agreements between the Company and the Secured Parties.

(c)           The performance by the Pledgors of their obligations, covenants, and agreements under this Agreement.   

 

The obligations, covenants and agreements described in clauses (a), (b) and (c) are the “Obligations.”

3.              Perfection of Security Interests. Upon execution of this Pledge Agreement by the Debtor and the Pledgors,

(a)           the Pledgors shall deliver and transfer possession of the stock certificates identified opposite the Pledgor’s name on Schedule 2 of this Agreement (collectively, the “Pledged Certificates”), together with stock transfer powers duly executed in blank by the registered owner of the shares represented by such Certificates, with appropriate Medallion signature guaranty (“Stock Powers”), to the Secured Parties.

(b)           the Pledgors shall deliver and transfer possession of the Mortgage, to the Secured Parties. Said Mortgage shall be recorded in the County Clerk’s Office.

The Collateral will be held by the Secured Parties or the Brokerage Firm, to perfect the security interest of the Secured Parties, until the earlier of

(i) the payment in full of all amounts due under the Notes and all other agreements between the Company and the Secured Parties, or

(ii) foreclosure of Secured Parties's security interests as provided herein.

(c)           The Debtor and the Pledgors hereby appoint the Secured Parties, as attorney-in-fact with powers of substitution, to execute all documents and perform all acts in order to perfect and maintain a valid security interest for Secured Parties in the Collateral.

4.              Reserved.

5.              Pledgors’ Warranty. The Pledgors represent and warrant hereby to the Secured Parties as follows with respect to the Pledged Shares set forth opposite the Pledgor’s name on Schedule 2 to this Agreement:

A.            With respect to title to the Transferred Shares

(i)             that upon transfer by the Pledgor of the Pledgor’s Certificates and Stock Powers to Secured Parties pursuant to this Agreement at such time, if any, as contemplated hereby upon the occurrence of an Event of Default, the purchaser of the Pledged Shares or the Secured Parties, as contemplated herein, as the case may be, will have good title (both record and beneficial) to the relevant Pledged Shares;

(ii)            that there are no restrictions upon transfer and pledge of the Pledged Shares pursuant to the provisions of this Agreement except the restrictions, to the extent applicable, imposed by Rule 144 under the Securities Act of 1933;

(iii)           that the Pledged Shares are free and clear of any encumbrances of every nature whatsoever, the Pledgor is the sole owner of the Pledged Shares, and such shares are duly authorized, validly issued, fully paid and non-assessable;

(iv)           that the Pledgor has owned the Pledged Shares since the date specified on Schedule 2 to this Agreement and that such shares were fully paid for as of such specified date; and

(v)           that the Pledgor agrees not to grant or create, any security interest, claim, lien, pledge or other encumbrance with respect to the Pledgor’s Pledged Shares or attempt to sell, transfer or otherwise dispose of any of such shares until the Obligations have been paid in full or this Agreement has terminated.

B.             With respect to certain other matters:

(i)             that the Pledgor has made necessary inquiries of the Company and believes that the Company fully intends to fulfill and has the capability of fulfilling the Obligations to be performed by the Company in accordance with the terms of the Transaction Agreements;

(ii)            that the Pledgor is not acting, and has not agreed to act, in any plan to sell or dispose of the Pledged Shares in a manner intended to circumvent the registration requirements of the Securities Act of 1933, as amended, or any applicable state law;

(iii)           that Pledgor has been advised by counsel of the elements of a bona-fide pledge for purposes of Rule 144(d)(3)(iv) under the Securities Act of 1933, as amended, including the relevant SEC interpretations and affirms the pledge of shares by the Pledgor pursuant to this Pledge Agreement will constitute a bona-fide pledge of such shares for purposes of such Rule; and

(iv)           that this Pledge Agreement constitutes a legal, valid and binding obligation of the Pledgor enforceable in accordance with its terms (except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and similar laws, now or hereafter in effect).

(v)           that the Pledgor’s address is as provided under the Pledgor’s signature on the signature page hereof.

6.             Reports under Securities Act and Exchange Act. With a view to making available to Secured Parties the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit Secured Parties to sell securities of MHIIto the public without Registration (“Rule 144”), MHII agrees to:

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

(ii)            file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

(iii)           until the date when the Secured Parties may sell all Registrable Securities under Rule 144 without volume or other restrictions or limits (the “Unrestricted Sale Date”), furnish to the Secured Parties so long as the Secured Parties owns or has a security interest in the Pledged Shares (a “Holder”), promptly upon request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange 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 the Company and (iii) such other information as may be reasonably requested to permit the Secured Parties to sell such securities pursuant to Rule 144 without registration; and

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

the Transfer Agent is to effect the transfer of the Securities Being Sold and issue to the buyer(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 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 Holder). If the Transfer Agent reasonably requires any additional documentation at the time of the transfer, the Company shall deliver or cause to be delivered all such reasonable additional documentation as may be necessary to effectuate the issuance of an unlegended certificate.

7.             Voting Rights. Unless and until the Secured Parties has exercised its rights under this Pledge Agreement to foreclose its security interest in the Collateral, the Pledgor shall have the right to exercise any voting rights evidenced by, or relating to, the Collateral.

8.             Warrants and Options. In the event that, during the term of this Pledge Agreement, subscription, warrants, dividends, or any other rights or option shall be issued to the Pledgors in connection with the Collateral, such warrants, dividends, rights and options shall be immediately delivered to Secured Parties to be held under the terms hereof in the same manner as the Collateral.

9.             Preservation of the Value of the Collateral and Reimbursement of Secured Parties. Pledgor shall pay all taxes, charges, and assessments against the Collateral and do all acts necessary to preserve and maintain the value thereof. On failure of Pledgor so to do, Secured Parties may make such payments on account thereof as (in Secured Parties's discretion) is deemed desirable, and Pledgor shall reimburse Secured Parties immediately on demand for any and all such payments expended by Secured Parties in enforcing, collecting, and exercising its remedies hereunder.

10.           Default and Remedies.

(a)            For purposes of this Agreement, “Event of Default” shall mean any one or more of the following events:

(i)            any default in the performance by the Company or any Pledgor of any of the Note Obligations, after the expiration, without cure, of the cure period (but only if any such cure period is specifically provided in the Transaction Agreements and without any regard to any cure period if no such cure period is provided; it being specifically acknowledged by the Company and the Pledgor that all payment obligations are time of the essence obligations, with no cure periods provided), or

(ii)            a breach by the Company or Pledgor of any of the its respective representations, warranties, covenants or agreements in this Pledge Agreement, subject to applicable cure periods.

(b)    During the term of this Pledge Agreement, the Secured Parties shall have the following rights after any Event of Default and for so long as the Obligations are not satisfied in full:

(i) the rights and remedies provided by the Uniform Commercial Code as adopted by the State of New York (as said law may at any time be amended), except that the Secured Parties waives any right to a deficiency pursuant to Section 9-608 thereof or otherwise;

(ii) the right to receive and retain all dividends, payments and other distributions of any kind upon any or all of the Pledged Shares as additional Collateral; and

(iii) the right to sell, at a public or private sale, the Collateral or any part thereof for cash, upon credit or for future delivery, and at such price or prices in accordance with the Uniform Commercial Code (as such law may be amended from time to time); it being understood that one or more of the Secured Parties may, but shall not be required to, take such actions jointly. Upon any such sale, Secured Parties shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral so sold. Secured Parties shall give the Pledgor not less than ten (10) days written notice of its intention to make any such sale. Any such sale shall be held at such time or times during ordinary business hours and at such place or places as Secured Parties may fix in the notice of such sale. Secured Parties may adjourn or cancel any sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. In case of any sale of all or any part of the Collateral upon terms calling for payments in the future, any Collateral so sold may be retained by Secured Parties until the selling price is paid by the purchaser thereof, but Secured Parties shall incur no liability in the case of the failure of such purchaser to take up and pay for the Collateral so sold and, in the case of such failure, such Collateral may again be sold upon like notice. Secured Parties, however, instead of exercising the power of sale herein conferred upon it, may proceed by a suit or suits at law or in equity to foreclose the security interest and sell the Collateral, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction, the Pledgors having been given due notice of all such action. Secured Parties shall incur no liability as a result of a sale of the Collateral or any part thereof.

(iv) in addition to its rights and remedies under this agreement, the Notes and all Transaction Agreements, the Company shall have full recourse against any real, personal, tangible or intangible assets of Pledgors, and may pursue any legal or equitable remedies that are available to it.

11.           Waiver. Each of the Debtor and the Pledgors waives any right that it may have to require Secured Parties to proceed against any other person, or proceed against or exhaust any other security, or pursue any other remedy Secured Parties may have.

12.           Term of Agreement. This Pledge Agreement shall continue in full force and effect until the earlier of the payment in full of the Notes. If the Notes is paid in full, the security interests in the relevant Collateral shall be deemed released, and any portion of the Collateral not transferred to or sold by any one or more Secured Parties shall be returned to the Pledgors. Upon termination of this Pledge Agreement, the relevant Collateral shall be returned within five (5) Trading Days to Debtor or to the Pledgor, as contemplated above.

13.           Reserved.

14.           General Provisions:

14.1         Binding Agreement; No Modification of Transaction Agreements. This Pledge Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the respective parties hereto. Except to the extent specifically provided herein, nothing in this Pledge Agreement shall limit or modify any provision of any of the Transaction Agreements

14.2         Captions. The headings used in this Pledge Agreement are inserted for reference purposes only and shall not be deemed to define, limit, extend, describe, or affect in any way the meaning, scope or interpretation of any of the terms or provisions of this Pledge Agreement or the intent hereof.

14.3         Counterparts. This Pledge Agreement may be signed in any number of counterparts with the same effect as if the signatures upon any counterpart were upon the same instrument. All signed counterparts shall be deemed to be one original. A facsimile transmission of this signed Pledge Agreement shall be legal and binding on all parties hereto.

 

 

14.5         Waiver of Breach. Any waiver by either party of any breach of any kind or character whatsoever by the other, whether such be direct or implied, shall not be construed as a continuing waiver of or consent to any subsequent breach of this Pledge Agreement.

14.6         Cumulative Remedies. The rights and remedies of the parties hereto shall be construed cumulatively, and none of such rights and remedies shall be exclusive of, or in lieu or limitation of any other right, remedy, or priority allowed by applicable law.

14.7          Amendment. This Pledge Agreement may be modified only in a written document that refers to this Pledge Agreement and is executed by Secured Parties, the Pledgor and the Debtor.

14.8          Interpretation. This Pledge Agreement shall be interpreted, construed, and enforced according to the substantive laws of the State of New York.

14.9          Governing Law. This Pledge Agreement shall be governed by and construed in accordance with the laws of the State of New York. Each of the parties consents to the 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 Pledge Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non coveniens, to the bringing of any such proceeding in such jurisdictions.

14.10        WAIVER OF JURY TRIAL. The parties to this Pledge Agreement hereby waive a trial by jury in any action, proceeding or counterclaim brought by any of them against any other in respect of any matter arising out or in connection with this Pledge Agreement.

14.11        Notice. Any notice or other communication required or permitted to be given hereunder shall be effective upon receipt. Such notices may be sent (i) in the United States mail, postage prepaid and certified, (ii) by express courier with receipt, (iii) by facsimile transmission, with a copy subsequently delivered as in (i) or (ii) above. Any such notice shall be addressed or transmitted as follows:

If to the Secured Parties, to:

CAMOFI Master LDC

350 Madison Avenue

New York, NY 10017

Tel: 646 ###-###-####

Fax: 646 ###-###-####

If to the Company, to:

D.L. Claire Capital, Inc.

60 East 42nd Street

Suite 3405

New York, New York 10165

If to MHII, to:

Marshall Holdings International, Inc.

2555 East Washburn Road

North Las Vegas, Nevada 89081

If to Richard A. Bailey, to:

Marshall Holdings International, Inc.

2555 East Washburn Road

North Las Vegas, Nevada 89081

If to Florian R. Ternes, to:

Marshall Holdings International, Inc.

2555 East Washburn Road

North Las Vegas, Nevada 89081

If to Neptune Communications, Inc., to:

c/o Florian R. Ternes

2555 East Washburn Road

North Las Vegas, Nevada 89081

 Any party may change its address by notice similarly given to the other parties (except that a Secured Parties need not give notice to other Secured Parties).

14.12        Acknowledgement by Debtor and Pledgors. In the event that any provision of the Transaction Agreements, the Guarantee or this Pledge Agreement as applied to any party or circumstances shall be adjudged by a court to be invalid or unenforceable, each of the Debtor or the Pledgor, as the case may be, acknowledges and agrees that this Pledge Agreement shall remain valid and enforceable in all respects against the Debtor and the Pledgor.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK.

THE SIGNATURES OF THE PARTIES ARE ON THE NEXT PAGE.]

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day, month and year first above written.

By:
Name:
Title:

By:
Name:
Title:

By:	/s/ David Fuselier
Name:	David Fuselier
Title:	President

By:	/s/ Richard A. Bailey
Name:	Richard A. Bailey
Title:	President and Chief Executive Officer

/s/ Richard A. Bailey
RICHARD A. BAILEY
2555 East Washburn Road
North Las Vegas, Nevada 89081
Tax Id. No.:	###-##-####

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day, month and year first above written.

By:
Name:
Title:

By:
Name:
Title:

By:
Name:	David Fuselier
Title:	President

By:	/s/ Richard A. Bailey
Name:	Richard A. Bailey
Title:	President and Chief Executive Officer

/s/ Richard A. Bailey
RICHARD A. BAILEY
2555 East Washburn Road
North Las Vegas, Nevada 89081
Tax Id. No.:	###-##-####

/s/ Florian R. Ternes
FLORIAN R. TERNES
2555 East Washburn Road
North Las Vegas, Nevada 89081
Tax Id. No.:	###-##-####

By:	/s/ Florian R. Ternes
Name:	Florian R. Ternes
Title:	President
2555 East Washburn Road
North Las Vegas, Nevada 89081
Tax Id. No.:

 

 

The following shares are pledged hereunder as the Pledged Shares, each certificate in the name of:

 

 

Certificate No.	Name	No. of Shares	Ratio	Date of Certificate
101	Neptune Communications	125	1,000	01/13/03
102	Richard Bailey	7,000	1,000	08/13/03
108	Richard Bailey	17,000	1,000	09/04/03
109	Florian Ternes	17,000	1,000	09/04/03
110	Richard Bailey	35,000	1,000	10/06/03
111	Florian Ternes	35,000	1,000	10/06/03
112	Richard Bailey	42,000	1,000	10/22/03
113	Florian Ternes	42,000	1,000	10/22/03
114	Richard Bailey	50,000	1,000	11/14/03
116	Richard Bailey	200,000	1,000	12/16/03
117	Florian Ternes	200,000	1,000	12/16/03
118	Florian Ternes	135,000	1,000	01/07/04
119	Richard Bailey	135,000	1,000	01/07/04
121	Florian Ternes	2,000,000	1,000	08/23/04
153	Richard Bailey	10,000,000	1,000	08/31/06
154	Florian Ternes	10,000,000	1,000	08/31/06
155	Florian Ternes	5,000,000	1,000	03/28/07
157	Richard Bailey	1,000,000	1,000	08/20/07

 

 

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