Document:

MARMION
      INDUSTRIES CORP.

     

    
      
        

      

    

    

    SUBSCRIPTION
      AGREEMENT

     

    
      
        

      

       

    

    $3,000,000
      Of The Company’s Five-Year Secured Debentures Convertible Into
      The

    Company’s
      Common Stock.

     

    
      
        

      

    

     

    
      
        
        

      

      
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    SUBSCRIPTION
      PROCEDURES

    

    Convertible
      Debentures (the “Debentures”)
      of
      Marmion Industries Corp., a Nevada corporation (the “Company”)
      are
      being offered pursuant to this Subscription Agreement (this “Subscription
      Agreement”).
      This
      offering is being made in accordance with the exemptions from registration
      provided under Section 4(2) of the Securities Act of 1933, as amended (the
      “Securities
      Act”)
      and
      Rule 506 of Regulation D promulgated under the Securities Act. 

    

    In
      order
      to purchase Debentures, each Subscriber must complete and execute this
      Subscription Agreement and the accompanying investor questionnaire (the
“Questionnaire”).
      In
      addition, the Holder, as defined herein, must make a payment for the amount
      being subscribed for hereunder directly to the Company. All subscriptions are
      subject to acceptance by the Company, which shall not occur until the Company
      has returned the signed “Company Signature Page”. 

    

    The
      Questionnaire is designed to enable the Holder to demonstrate the minimum legal
      requirements under federal and state securities laws to purchase the Debentures.
      The Signature Page for the Questionnaire and the Subscription Agreement contain
      representations relating to the subscription and should be reviewed carefully
      by
      each subscriber.

    

    If
      the
      Holder is a foreign person or foreign entity, the Holder may be subject to
      a
      withholding tax equal to thirty percent (30%) of any dividends paid by the
      Company. In order to eliminate or reduce such withholding tax, the Holder must
      submit a properly executed I.R.S. Form 4224 “Exemption from Withholding of Tax
      on Income Effectively Connected with the Conduct of a Trade or Business in
      the
      United States” or I.R.S. Form 1001 “Ownership Exemption or Reduced Trade
      Certificate”, claiming exemption from withholding or eligibility for treaty
      benefits in the form of a lower rate of withholding tax on interest or
      dividends.

    

    Payment
      of the full subscription amount will be made by wire transfer by Dutchess
      Private Equities Fund, LTD (the “Holder”)
      on or
      prior to the closing per the wire instructions that will be established. In
      the
      event of a termination of the offering or the rejection of a subscription,
      subscription funds will be returned by the Company without interest or charges.
      

     

    
      
        
        

      

      
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    SUBSCRIPTION
      AGREEMENT

    

    THE
      SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
      OF
      1933, AS AMENDED (THE “SECURITIES
      ACT”)OR
      ANY
      STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS
      FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE SECURITIES ARE SUBJECT
      TO
      RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
      EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO REGISTRATION OR AN EXEMPTION
      THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION (THE “SEC”
OR
      THE
“COMMISSION”)
      OR ANY
      OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED
      UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF
      THE
      OFFERING MATERIALS. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

    

    Marmion
      Industries Corp.

    9103
      Emmott Road, Building 6, Suite A 

    Houston,
      Texas 77040

    Attention:
      Wilbert Marmion

    

    This
      Subscription Agreement is made between Marmion Industries Corp., a Nevada
      corporation (the “Company”),
      and
      the undersigned prospective Holder (the “Holder”)
      who is
      subscribing hereby for the Company’s secured convertible debentures (the
“Debentures”)
      on
      March 22, 2007. This subscription is submitted to you in accordance with and
      subject to the terms and conditions described in this Subscription Agreement,
      together with any Exhibits hereto, relating to an offering (the “Offering”)
      of
      Three Million dollars ($3,000,000) of the Debentures. The Offering is limited
      to
      accredited investors and is made in accordance with the exemptions from
      registration provided for under Section 4(2) of the Securities Act and Rule
      506
      of Regulation D promulgated under the Securities Act (“Regulation
      D”).

    

    Contemporaneously
      with the execution and delivery of this Subscription Agreement, the parties
      hereto are executing and delivering a Debenture Registration Rights Agreement,
      Warrant, Security Agreement and Debenture, all of even date herewith
      (collectively with the documents referenced in the foregoing documents, the
      “Transaction
      Documents”).

    

    1.   
Subscription.

    

    (a) The
      closing shall be deemed to have occurred on March 22, 2007 (the “Closing
      Date”
or
      a
“Closing”).
      The
      Company shall pay twelve percent (12%) interest per annum on the unpaid
      principal amount of the Debenture at such times and in such amounts as outlined
      in the Debenture. 

    

    
      
        
        

      

      
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    (b) Upon
      receipt by the Company of the requisite payment for the Debentures being
      purchased, the Debentures so purchased will be forwarded by the Company to
      the
      Holder or its broker, as listed on the signature page, and the name of the
      Holder will be registered on the Debenture transfer books of the Company as
      the
      record owner of such Debentures. 

    

    (c) As
      long
      as the Holder owns the Debenture, the Holder shall have the right, to change
      the
      terms for the balance of the Debenture it then holds, to change the terms of
      any
      other offering of securities made by the Company as set forth in Section 3
      (v.).

     

    (d)
       The
      Holder shall fund (i) seven hundred fifty thousand dollars ($750,000) upon
      the
      Closing (minus any fees due) (ii) an additional two million two hundred fifty
      thousand dollars ($2,250,000) simultaneously on the date the registration
      statement covering this Offering is filed with SEC; 

    

    (e) The
      Holder will be granted a security interest in all of the Company's and its
      Subsidiaries' assets, currently owned or hereinafter acquired, (as defined
      in
Schedule
      3(a)
      of this
      Subscription Agreement), as more fully set forth in the Security
      Agreement.

     

    2.    Representations
      And Warranties Of The Holder.

     

    The
      Holder hereby represents and warrants to, and agrees with, the Company as
      follows:

    

    (a) The
      Holder has been furnished with, and has carefully read the applicable form
      of
      Debenture Registration Rights Agreement, and the Debenture and is familiar
      with
      and understands the terms of the Offering. With respect to tax and other
      economic considerations involved in his investment, the Holder is not relying
      on
      the Company. The Holder has carefully considered and has, to the extent the
      Holder believes such discussion necessary, discussed with the Holder's
      professional legal, tax, accounting and financial advisors the suitability
      of an
      investment in the Company, by purchasing the Debentures, for the Holder's
      particular tax and financial situation and has determined that the investment
      being made by the Holder is a suitable investment for the Holder.

    

    (b) The
      Holder acknowledges that all documents, records, and books pertaining to this
      investment which the Holder has requested, have been made available for
      inspection, or the Holder has had access thereto.

    

    (c) The
      Holder has had a reasonable opportunity to ask questions of and receive answers
      from a person or persons acting on behalf of the Company concerning the
      Offering, and if such opportunity was taken, then all such questions have been
      answered to the full satisfaction of the Holder.

    

    
      
        
        

      

      
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    (d) The
      Holder will not sell, or otherwise dispose of the Debentures or the common
      stock
      of the Company, par value $0.001 per share (the “Common
      Stock”)
      issued
      upon conversion of the Debentures without registration under the Securities
      Act
      or applicable state securities laws or compliance with an exemption therefrom
      including but not limited to Rule 144(b) and 144(k) under the Securities Act
      (an
“Exemption”).
      The
      Debentures have not been registered under the Securities Act or under the
      securities laws of any state. Resales of the Common Stock underlying the
      Debentures or issued in payment of accrued interest on the Debentures are to
      be
      registered by the Company pursuant to the terms of the Debenture Registration
      Rights Agreement incorporated herein and made a part hereof. 

    

    (e) The
      Holder recognizes that an investment in the Debentures involves substantial
      risks, including loss of the entire amount of such investment. Further, the
      Holder has carefully read and considered the schedules attached hereto.

    

    (f)
       The
      Holder acknowledges that each certificate representing the Debentures (and
      the
      shares of Common Stock issued upon conversion of the Debentures, unless
      registered or with an Exemption) or in payment of interest on the Debentures
      shall be stamped or otherwise imprinted with a legend substantially in the
      following form:

    

    THE
      SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD,
      TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT
      TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
      AMENDED, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT
      (OR
      ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES),
      OR
      (iii) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH
      ACT.

    

    If
      the
      Holder sends a Notice of Conversion (see Exhibit
      A
      attached
      hereto), and a registration statement under the Securities Act is in effect
      as
      to the sale, then in such event the Company shall have its transfer agent send
      Holder the appropriate number of shares of Common Stock without restrictive
      legends (other than a legend referring to the resale registration and prospectus
      delivery requirements) and not subject to stop transfer instructions.

    

    (g) If
      this
      Subscription Agreement is executed and delivered on behalf of a corporation
      or
      legal entity other than a natural person: (i) such corporation or other entity
      has the full legal right and power and all authority and approval required
      (a)
      to execute and deliver, or authorize execution and delivery of this Subscription
      Agreement and all other Transaction Documents executed and delivered by or
      on
      behalf of such corporation in connection with the purchase of the Debentures,
      and (b) to purchase and hold the Debentures; and (ii) the signature of the
      party
      signing on behalf of such corporation or entity is binding upon such
      corporation. 

    

    
      
        
        

      

      
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    (h) The
      Holder is not subscribing for the Debentures as a result of, or pursuant to,
      any
      advertisement, article, notice or other communication published in any
      newspaper, magazine or similar media or broadcast over television or radio
      or
      presented at any seminar or meeting, or any other general
      solicitation.

    

    (i) The
      Holder is purchasing the Debentures for its own account for investment, and
      not
      with a view toward the resale or distribution thereof, except pursuant to sales
      registered or exempted from registration under the Securities Act. The Holder
      has not offered or sold any portion of the Debentures being acquired nor does
      the Holder have any present intention of dividing the Debentures with others
      or
      of selling, distributing or otherwise disposing of any portion of the Debentures
      either currently or after the passage of a fixed or determinable period of
      time
      or upon the occurrence or non-occurrence of any predetermined event or
      circumstance in violation of the Securities Act provided, however, that by
      making the representations herein, the Holder does not agree to hold any of
      the
      Debentures for any minimum or other specific term and reserves the right to
      dispose of the Debentures at any time in accordance with or pursuant to a
      registration statement or an exemption under the Securities Act. The Holder
      is
      neither an underwriter of, nor a dealer in, the Debentures or the Common Stock
      issuable upon conversion thereof or upon the payment of interest thereon and
      is
      not participating in the distribution or resale of the Debentures or the Common
      Stock issuable upon conversion or exercise thereof. Notwithstanding anything
      in
      this Section to the contrary, the Holder reserves the right to pledge any of
      the
      Debenture for margin purposes and dispose of the Debentures at any time in
      accordance with federal and state securities laws applicable to such
      dispositions. 

    

    (j) The
      Holder or the Holder's representatives, as the case may be, has such knowledge
      and experience in financial, tax and business matters so as to enable the Holder
      to utilize the information made available to the Holder in connection with
      the
      Offering to evaluate the merits and risks of an investment in the Debentures
      and
      to make an informed investment decision with respect thereto.

    

    (k) The
      Holder is an “accredited investor” as that term is defined in Rule 501(a) of
      Regulation D.

    

    (l) The
      Holder understands that the Debentures and the related warrants are being
      offered and sold to ti in reliance upon specific exemptions from the
      registration requirements of the Unites States federal and state securities
      laws
      and that the Company is relying upon the truth and accuracy of, and the Holder’s
      compliance with, the representations, warranties, agreement, acknowledgments
      and
      understandings of the Holder set forth herein in order to determined the
      availability of such exemptions and the eligibility of the Holder to acquire
      the
      Debentures and related warrants.

    

    
      
        
        

      

      
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    (m) The
      Holder understands that no United States federal or state agency or any other
      government or governmental agency has passed upon or made any recommendation
      or
      endorsement of the Debentures or related warrants 

    

    3.    Representations
      And Warranties Of The Company.

    

    Except
      as
      set forth in any filing made by the Company with the Securities and Exchange
      Commission or the Schedules attached hereto, the Company hereby represents
      and
      warrants to, and agrees with the Holder, as follows:

    

    a.
       Organization
      and Qualification.
      The
      Company and its “Subsidiaries”
(which
      for purposes of this Subscription Agreement means any entity in which the
      Company, directly or indirectly, owns capital stock or holds an equity or
      similar interest) (a complete list of which is set forth in Schedule
      3(a))
      are
      corporations duly organized and validly existing in good standing under the
      laws
      of the respective jurisdictions of their incorporation, and have the requisite
      corporate power and authorization to own their properties and to carry on their
      business as now being conducted. Both the Company and its Subsidiaries are
      duly
      qualified to do business and are in good standing in every jurisdiction in
      which
      their ownership of property or the nature of the business conducted by them
      makes such qualification necessary, except to the extent that the failure to
      be
      so qualified or be in good standing would not have a Material Adverse Effect.
      As
      used in this Subscription Agreement, the term “Material
      Adverse Effect”
means
      any material adverse effect on the business, properties, assets, operations,
      results of operations, financial condition or prospects of the Company and
      its
      Subsidiaries, if any, taken as a whole, or on the transactions contemplated
      hereby or by the agreements and instruments to be entered into in connection
      herewith, or on the authority or ability of the Company to perform its
      obligations under the Transaction Documents (as defined in Section
      3.b
      hereof).

    

    b.
       Authorization;
      Enforcement; Compliance with Other Instruments.
      (i) The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under the Transaction Documents, and to issue the
      Debentures in accordance with the terms hereof and thereof, (ii) the execution
      and delivery of the Transaction Documents by the Company and the consummation
      by
      it of the transactions contemplated hereby and thereby, including without
      limitation the reservation for issuance and the issuance of the Debentures
      pursuant to this Subscription Agreement, have been duly and validly authorized
      by the Company's Board of Directors and no further consent or authorization
      is
      required by the Company, its Board of Directors, or its shareholders, (iii)
      the
      Transaction Documents have been duly and validly executed and delivered by
      the
      Company, and (iv) the Transaction Documents constitute the valid and binding
      obligations of the Company enforceable against the Company in accordance with
      their terms, except as such enforceability may be limited by general principles
      of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
      liquidation or similar laws relating to, or affecting generally, the enforcement
      of creditors' rights and remedies.

    

    
      
        
        

      

      
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    c.
       Capitalization.
      As of
      the date hereof, the authorized capital stock of the Company consists of (i)
      500,000,000 shares of Common Stock, of which as of the date hereof,
      approximately 57,709,990 shares are issued and outstanding; (ii) 500,000,000
      shares of preferred stock, par value $.001 per share of which (A) 10,000,000
      shares have been designated Class A Preferred Stock of which 9,500,000 shares
      are issued and outstanding and (B) 30,000,000 shares have been designated Series
      B Preferred Stock of which 30,000,000 shares are issued and outstanding. All
      of
      such outstanding shares have been, or upon issuance will be, validly issued
      and
      are fully paid for and nonassessable. Except as disclosed in Schedule
      3(c),
      which
      is attached hereto and made a part hereof, (i) no shares of the Company's
      capital stock are subject to preemptive rights or any other similar rights
      or
      any liens or encumbrances suffered or permitted by the Company, (ii) there
      are
      no outstanding debt securities, (iii) there are no outstanding shares of capital
      stock, options, warrants, scrip, rights to subscribe to, calls or commitments
      of
      any character whatsoever relating to, or securities or rights convertible into,
      any shares of capital stock of the Company or any of its Subsidiaries, or
      contracts, commitments, understandings or arrangements by which the Company
      or
      any of its Subsidiaries is or may become bound to issue additional shares of
      capital stock of the Company or any of its Subsidiaries or options, warrants,
      scrip, rights to subscribe to, calls or commitments of any character whatsoever
      relating to, or securities or rights convertible into, any shares of capital
      stock of the Company or any of its Subsidiaries, (iv) there are no agreements
      or
      arrangements under which the Company or any of its Subsidiaries is obligated
      to
      register the sale of any of their securities under the Securities Act (except
      the as otherwise set forth in the Transaction Documents), (v) there are no
      outstanding securities of the Company or any of its Subsidiaries which contain
      any redemption or similar provisions, and there are no contracts, commitments,
      understandings or arrangements by which the Company or any of its Subsidiaries
      is or may become bound to redeem a security of the Company or any of its
      Subsidiaries, (vi) there are no securities or instruments containing
      anti-dilution or similar provisions that will be triggered by the issuance
      of
      the Securities as described in this Subscription Agreement, (vii) the Company
      does not have any stock appreciation rights or "phantom stock" plans or
      agreements or any similar plan or agreement, and (viii) there is no dispute
      as
      to the class of any shares of the Company's capital stock. The Company has
      furnished to the Holder, or the Holder has had access through EDGAR to, true
      and
      correct copies of the Company's Articles of Incorporation, as in effect on
      the
      date hereof (the “Articles
      Of Incorporation”),
      and
      the Company's Bylaws, as in effect on the date hereof (the “Bylaws”).

    

    d. Issuance
      of Debentures. A
      sufficient number of Debentures issuable pursuant to this Subscription
      Agreement, but not more than four and ninety-nine one hundredths percent (4.99%)
      of the shares of Common Stock outstanding as of the date hereof (if, and only
      if, the Company becomes listed on Nasdaq or the American Stock Exchange), has
      been duly authorized and reserved for issuance pursuant to this Subscription
      Agreement. Upon issuance in accordance with this Subscription Agreement, the
      Debentures will be validly issued, fully paid for and nonassessable and free
      from all taxes, liens and charges with respect to the issue thereof. In the
      event the Company cannot register a sufficient number of shares of Common Stock,
      due to the remaining number of authorized shares of Common Stock being
      insufficient, the Company will use its best efforts to register the maximum
      number of shares it can based on the remaining balance of authorized shares
      and
      will use its best efforts to increase the number of its authorized shares as
      soon as reasonably practicable.

    

    
      
        
        

      

      
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    e.
       No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the transactions contemplated hereby
      and
      thereby will not (i) result in a material violation of the Articles of
      Incorporation, any Certificate of Designations, Preferences and Rights of any
      outstanding series of preferred stock of the Company or the Bylaws or (ii)
      conflict with, or constitute a material default (or an event which with notice
      or lapse of time or both would become a material default) under, or give to
      others any rights of termination, amendment, acceleration or cancellation of,
      any material agreement, contract, indenture mortgage, indebtedness or instrument
      to which the Company or any of its Subsidiaries is a party, or result in a
      material violation of any law, rule, regulation, order, judgment or decree,
      including United States federal and state securities laws and regulations and
      the rules and regulations of the principal securities exchange or trading market
      on which the Common Stock is traded or listed (the “Principal
      Market”),
      applicable to the Company or any of its Subsidiaries or by which any property
      or
      asset of the Company or any of its Subsidiaries is bound or affected. Except
      as
      disclosed in Schedule
      3(e),
      neither
      the Company nor its Subsidiaries is in material violation of any term of, or
      in
      default under, the Articles of Incorporation, any Certificate of Designations,
      Preferences and Rights of any outstanding series of preferred stock of the
      Company or the Bylaws or their organizational charter or bylaws, respectively,
      or any contract, agreement, mortgage, indebtedness, indenture, instrument,
      judgment, decree or order or any statute, rule or regulation applicable to
      the
      Company or its Subsidiaries, except for possible conflicts, defaults,
      terminations, amendments, accelerations, cancellations and violations that
      would
      not individually or in the aggregate have a Material Adverse Effect. To its
      knowledge, the business of the Company and its Subsidiaries is not being
      conducted, and shall not be conducted, in violation of any law, statute,
      ordinance, rule, order or regulation of any governmental authority or agency,
      regulatory or self-regulatory agency, or court, except for possible violations
      the sanctions for which either individually or in the aggregate would not have
      a
      Material Adverse Effect. Except as specifically contemplated by this
      Subscription Agreement and as required under the Securities Act, the Company
      is
      not required to obtain any consent, authorization, permit or order of, or make
      any filing or registration (except the filing of a registration statement)
      with,
      any court, governmental authority or agency, regulatory or self-regulatory
      agency or other third party in order for it to execute, deliver or perform
      any
      of its obligations under, or contemplated by, the Transaction Documents in
      accordance with the terms hereof or thereof. All consents, authorizations,
      permits, orders, filings and registrations which the Company is required to
      obtain pursuant to the preceding sentence have been obtained or effected on
      or
      prior to the date hereof and are in full force and effect as of the date hereof.
      Except as disclosed in Schedule 3(e), the Company and its Subsidiaries are
      unaware of any facts or circumstances which might give rise to any of the
      foregoing. The Company is not, and will not be, in violation of the listing
      requirements of the Principal Market as in effect on the date hereof and on
      each
      of the Closing Dates and is not aware of any facts which would reasonably lead
      to delisting of the Common Stock by the Principal Market in the foreseeable
      future.

    

    
      
        
        

      

      
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    f.
       SEC
      Documents; Financial Statements.
      Since
      February 27, 2004, the Company has to its knowledge filed all reports,
      schedules, forms, statements and other documents required to be filed by it
      with
      the SEC pursuant to the reporting requirements of the Securities and Exchange
      Act of 1934, as amended (“Exchange
      Act”)
      (all
      of the foregoing filed since the date hereof and all exhibits included therein
      and financial statements and schedules thereto and documents incorporated by
      reference therein being hereinafter referred to as the “SEC
      Documents”).
      The
      Company has delivered to the Holder or its representatives, or they have had
      access through EDGAR, to true and complete copies of the SEC Documents. As
      of
      their respective dates, the SEC Documents complied in all material respects
      with
      the requirements of the Exchange Act and the rules and regulations of the SEC
      promulgated thereunder applicable to the SEC Documents, and none of the SEC
      Documents, at the time they were filed with the SEC, contained any untrue
      statement of a material fact or omitted to state a material fact required to
      be
      stated therein or necessary to make the statements therein, in light of the
      circumstances under which they were made, and are not misleading. As of their
      respective dates, the financial statements of the Company included in the SEC
      Documents complied as to form in all material respects with applicable
      accounting requirements and the published rules and regulations of the SEC
      with
      respect thereto. Such financial statements have been prepared in accordance
      with
      generally accepted accounting principles, consistently applied, during the
      periods involved (except (i) as may be otherwise indicated in such financial
      statements or the notes thereto, or (ii) in the case of unaudited interim
      statements, to the extent they may exclude footnotes or may be condensed or
      summary statements) and fairly present in all material respects the financial
      position of the Company as of the dates thereof and the results of its
      operations and cash flows for the periods then ended (subject, in the case
      of
      unaudited statements, to normal year-end audit adjustments). No other written
      information provided by or on behalf of the Company to the Holder which is
      not
      included in the SEC Documents, including, without limitation, information
      referred to in Section
      3.d.
      hereof,
      contains any untrue statement of a material fact or omits to state any material
      fact necessary to make the statements therein, in the light of the circumstance
      under which they are or were made, and are not misleading.

    

    g.
       Absence
      of Certain Changes.
      Except
      as disclosed in Schedule
      3.g
      or the
      SEC Documents, since November 1, 2006 there has been no change or development
      in
      the business, properties, assets, operations, financial condition, results
      of
      operations or prospects of the Company or its Subsidiaries which has had or
      reasonably could have a Material Adverse Effect. The Company has not taken
      any
      steps, and does not currently expect to take any steps, to seek protection
      pursuant to any bankruptcy law nor does the Company or its Subsidiaries have
      any
      knowledge or reason to believe that its creditors intend to initiate involuntary
      bankruptcy proceedings.

    

    
      
        
        

      

      
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    h.
       Absence
      of Litigation.
      Except
      as set forth in the Company’s SEC filings, there is no action, suit, proceeding,
      inquiry or investigation before or by any court, public board, government
      agency, self-regulatory organization or body pending or, to the knowledge of
      the
      executive officers of Company or any of its Subsidiaries, threatened against
      or
      affecting the Company, the Common Stock or any of the Company's Subsidiaries
      or
      any of the Company's or the Company's Subsidiaries' officers or directors in
      their capacities as such, in which an adverse decision could have a Material
      Adverse Effect.

    

    i.
       Acknowledgment
      Regarding the Purchase of Debentures.
      The
      Company acknowledges and agrees that the Holder is acting solely in the capacity
      of an arm's-length investor with respect to the Transaction Documents and the
      transactions contemplated hereby and thereby. The Company further acknowledges
      that the Holder is not acting as a financial advisor or fiduciary of the Company
      (or in any similar capacity) with respect to the Transaction Documents and
      the
      transactions contemplated hereby and thereby and any advice given by the Holder
      or any of its respective representatives or agents in connection with the
      Transaction Documents and the transactions contemplated hereby and thereby
      is
      merely incidental to the Holder's purchase of the Debentures. The Company
      further represents to the Holder that the Company's decision to enter into
      the
      Transaction Documents has been based solely on the independent evaluation by
      the
      Company and its representatives.

    

    j. Intentionally
      omitted.

    

    k.
       Employee
      Relations.
      Neither
      the Company nor any of its Subsidiaries is involved in any union labor dispute
      nor, to the knowledge of the Company or any of its Subsidiaries, is any such
      dispute threatened. Neither the Company nor any of its Subsidiaries is a party
      to a collective bargaining agreement, and the Company and its Subsidiaries
      believe that relations with their employees are good. No executive officer
      (as
      defined in Rule 501(f) under the Securities Act) has notified the Company that
      such officer intends to leave the Company's employ or otherwise terminate such
      officer's employment with the Company.

    

    l.
       Intellectual
      Property Rights.
      All
      patents, patent applications, trademark registrations and applications for
      trademark registration held by the Company are owned free and clear of all
      mortgages, liens, charges or encumbrances whatsoever. No licenses have been
      granted with respect to these items and the Company and its Subsidiaries do
      not
      have any knowledge of any infringement by the Company or its Subsidiaries of
      trademark, trade name rights, patents, patent rights, copyrights, inventions,
      licenses, service names, service marks, service mark registrations, trade secret
      or other similar rights of others, and, except as set forth on Schedule
      3.l.,
      there
      is no claim, action or proceeding being made or brought against, or to the
      Company's knowledge, being threatened against, the Company or its Subsidiaries
      regarding trademark, trade name, patents, patent rights, invention, copyright,
      license, service names, service marks, service mark registrations, trade secret
      or other infringement; and the Company and its Subsidiaries are unaware of
      any
      facts or circumstances which might give rise to any of the foregoing. The
      Company and its Subsidiaries have taken reasonable security measures to protect
      the secrecy, confidentiality and value of all of their intellectual
      property.

    

    
      
        
        

      

      
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    m.
       Environmental
      Laws.
      To its
      knowledge, the Company and its Subsidiaries (i) are in material compliance
      with
      any and all applicable foreign, federal, state and local laws and regulations
      relating to the protection of human health and safety, the environment or
      hazardous or toxic substances or wastes, pollutants or contaminants
      (“Environmental
      Laws”),
      (ii)
      have received all permits, licenses or other approvals required of them under
      applicable Environmental Laws to conduct their respective and (iii) are in
      material compliance with all terms and conditions of any such permit, license
      or
      approval where, in each of the three foregoing cases, the failure to so comply
      would have, individually or in the aggregate, a Material Adverse
      Effect.

    

    n.
       Title.
      The
      Company and its Subsidiaries have good and marketable title in fee simple to
      all
      real property and good and marketable title to all personal property owned
      by
      them which is material to the business of the Company and its Subsidiaries,
      in
      each case free and clear of all liens, encumbrances and defects except such
      as
      are described in Schedule
      3.n.
      or such
      as do not materially affect the value of such property and do not interfere
      with
      the use made and proposed to be made of such property by the Company or any
      of
      its Subsidiaries. Any real property and facilities held under lease by the
      Company or any of its Subsidiaries are held by them under valid, subsisting
      and
      enforceable leases with such exceptions as are not material and do not interfere
      with the use made and proposed to be made of such property and buildings by
      the
      Company and its Subsidiaries.

    

    o.
       Insurance.
      [The
      Company and each of its Subsidiaries are insured by insurers of recognized
      financial responsibility against such losses and risks and in such amounts
      as
      management of the Company believes to be prudent and customary in the businesses
      in which the Company and its Subsidiaries are engaged. Neither the Company
      nor
      any such Subsidiary has been refused any insurance coverage sought or applied
      for and neither the Company nor any such Subsidiary has 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 at a cost that would not have a Material
      Adverse Effect.]

    

    p.
       Regulatory
      Permits.
      The
      Company and its Subsidiaries have in full force and effect all certificates,
      approvals, authorizations and permits from the appropriate federal, state,
      local
      or foreign regulatory authorities and comparable foreign regulatory agencies,
      necessary to own, lease or operate their respective properties and assets and
      conduct their respective businesses, and neither the Company nor any such
      Subsidiary has received any notice of proceedings relating to the revocation
      or
      modification of any such certificate, approval, authorization or permit, except
      for such certificates, approvals, authorizations or permits which if not
      obtained, or such revocations or modifications which, would not have a Material
      Adverse Effect.

    

    
      
        
        

      

      
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    q.
       Internal
      Accounting Controls.
      The
      Company and each of its Subsidiaries maintain 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 generally accepted accounting principles 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.

    

    r.
       No
      Materially Adverse Contracts.
      Neither
      the Company nor any of its Subsidiaries is subject to any charter, corporate
      or
      other legal restriction, or any judgment, decree, order, rule or regulation
      which in the judgment of the Company's officers has or is expected in the future
      to have a Material Adverse Effect. Neither the Company nor any of its
      Subsidiaries is a party to any contract or agreement which in the judgment
      of
      the Company's officers has or is expected to have a Material Adverse
      Effect.

    

    s.
       Tax
      Status.
      To its
      knowledge, the Company has filed all federal and state income tax returns,
      as
      required and the Company and each of its Subsidiaries has made or filed all
      United States federal and state income and all other tax returns, reports and
      declarations required by any jurisdiction to which it is subject. The Company
      represents that there are no unpaid taxes in any material amount claimed to
      be
      due by the taxing authority of any jurisdiction, and the officers of the Company
      know of no basis for any such claim.

    

    t.
       Certain
      Transactions.
      Except
      as set forth in the SEC Documents and except for arm's-length transactions
      pursuant to which the Company makes payments in the ordinary course of business
      upon terms no less favorable than the Company could obtain from third parties
      and other than the grant of stock options disclosed on Schedule
      3.c.
      none of
      the officers, directors, or employees of the Company is presently a party to
      any
      transaction with the Company or any of its Subsidiaries (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 corporation, partnership, trust or other entity in which
      any
      officer, director, or any such employee has a substantial interest or is an
      officer, director, trustee or partner.

    

    u.
       Dilutive
      Effect.
      The
      Company understands and acknowledges that the number of shares of Common Stock
      issuable upon purchases pursuant to this Subscription Agreement will increase
      in
      certain circumstances including, but not necessarily limited to, the
      circumstance wherein the trading price of the Common Stock declines following
      the effective date of the registration statement covering the Common Stock
      underlying the Debentures (the “Effective
      Date”).
      The
      Company’s executive officers and directors have studied and fully understand the
      nature of the transactions contemplated by this Subscription Agreement and
      recognize that they have a potential dilutive effect. The board of directors
      of
      the Company has concluded, in its good faith business judgment that such
      issuance is in the best interests of the Company. The Company specifically
      acknowledges that, subject to such limitations as are expressly set forth in
      the
      Transaction Documents, its obligation to issue shares of Common Stock upon
      purchases pursuant to this Subscription Agreement is absolute and unconditional
      regardless of the dilutive effect that such issuance may have on the ownership
      interests of other shareholders of the Company.

    

    
      
        
        

      

      
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    v.
      Additional
      Financings.
      The
      Company shall not, directly nor indirectly, without the prior written consent
      of
      the Holder, offer, sell, grant any option to purchase, or otherwise dispose
      of
      (or announce any offer, sale, grant or any option to purchase or other
      disposition) any of its Common Stock or securities convertible into Common
      Stock, or file any registration statement, including those on Form S-8 for
      any
      securities (a “Subsequent
      Financing”),
      in
      either case ending on the earlier to occur of (i) one hundred and eighty (180)
      days after the effective date of the registration statement covering resale
      of
      the shares of Common Stock underlying the Debentures (also the “Effective
      Date”)
      or
      (ii) the date on which the full Face Amount, accrued interest and penalties,
      if
      any, on the Debentures have been paid (“Lock
      Up Period”),
      as
      set forth in the Debenture.

    

    During
      the Lock Up Period, the Holder shall retain a first right of refusal for any
      additional financings. The Company must submit to the Holder a duly authorized
      term sheet of the financing and the Holder may elect, in writing within five
      (5)
      business days, to exercise its right to finance the Company upon the same terms
      and conditions, as set forth in the Debenture. In the event the Holder does
      not
      elect to complete such financing within such period, the Company may proceed
      with the proposed third-party financing on the same terms and conditions as
      contained in the notice to Holder. 

    

    If
      at any
      time while the Debenture is outstanding, if the Company issues or agrees to
      issue any Common Stock or securities convertible into or exercisable for shares
      of Common Stock (or modify any of the foregoing which may be outstanding prior
      to the execution of this Agreement) to any person or entity at a price per
      share
      or conversion price per share less than the Conversion Price, with or without
      the consent of the Holder, the Conversion Price shall automatically be reduced
      to the price of the new issuance provided,
      however,
      that in
      no event shall the Conversion Price be less than the Floor Conversion Price
      (as
      defined in the Debenture) and provided,
      further,
      that no
      adjustment shall be made in the event the Company issues or distributes shares
      or its Common Stock in connection with (i) full or partial consideration in
      connection with a strategic merger, acquisition, consolidation or purchase
      of
      substantially all of the securities or assets of a corporation or other entity,
      (ii)
      the
      Company’s issuance of securities in connection with strategic license
      agreements, the entering into or acquiring of material contracts in connection
      with the Company’s business as currently being conducted, and other partnering
      arrangements so long as such issuances are not for the purpose of raising
      capital
      and are
      not issued for services,
      (iii)
      the Company’s issuance of Common Stock or the issuances or grants of options to
      purchase Common Stock pursuant to stock option plans and employee stock purchase
      plans in existence on the date hereof, (iv) the conversion of any notes,
      debentures or exercise of any warrants in existence on the date hereof, (v)
      as a
      result of the exercise of Warrants or conversion of Debentures which are granted
      or issued pursuant to this Agreement, (v) the payment of any interest on the
      Debenture issued pursuant to this Agreement and liquidated damages, or damages
      pursuant to the Transaction Documents (as defined in the Subscription Agreement,
      and (vi)
      as has
      been described in the Reports or Other Written Information filed with the
      Commission or delivered to the Holder prior to the Closing Date.

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

       

    

    Additionally,
      if the Company shall issue or agree to issue any of the aforementioned
      securities to any person, firm or corporation at terms deemed by the Holder
      to
      be more favorable to the other person or entity than the terms or conditions
      of
      this Offering, then the Holder is granted the right, at its election, to modify
      any term of this Offering to match a more favorable term provided by the Company
      to such person or entity; provided,
      however,
      that
      Holder must review the terms of such other transaction in context of the entire
      transaction as compared to the Offering in determining whether such terms are
      more favorable than the Offering and provided,
      further,
      that
      Holder covenants and agrees not to solely isolate individual terms of such
      other
      transaction and modify terms of this Offering to match the most favorable terms
      of any such other Offering. The rights of the Holder in this Section are in
      addition to any other right the Holder has pursuant to this Subscription
      Agreement and the Transaction Documents.

    

    In
      the
      event the exercise of the rights described in the preceding paragraph
would
      result in the issuance of an amount of Common Stock of the Company that would
      exceed the maximum amount that may be issued to the Holder calculated in the
      manner described in Section
      3.d.
      of this
      Subscription Agreement, then the issuance of such additional shares of Common
      Stock of the Company to such Subscriber will be deferred in whole or in part
      until such time as such Subscriber is able to beneficially own such Common
      Stock
      without exceeding the maximum amount set forth calculated in the manner
      described in Section
      3.d.
      of this
      Subscription Agreement. The determination of when such Common Stock may be
      issued shall be made by the Holder.

    

    w.
      [Sarbanes-Oxley
      Compliance.
      The
      Company hereby acknowledges that they are current with the requirement of
      Sarbanes-Oxley Act of 2002 (“SOX”),
      and
      will remain compliant with SOX and its rules and regulations for reporting
      requirements in the time frame required by SOX, and any updates to deadlines
      imposed by SOX.]

    

    x.
      Code
      of Ethics.
      The
      Company has adopted a Code of Ethics and has filed the Code with the
      SEC.

    

    y.
      No
      Disagreements with Accountants, Auditors and Lawyers.
      There
      are no disagreements of any kind presently existing, or reasonably anticipated
      by the Company to arise, between the Company and the accountants, auditors
      and
      lawyers formerly or presently used by the Company, including but not limited
      to
      disputes or conflicts over payment owed to such accountants, auditors or
      lawyers.

    

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

       

    

    z.
      Investment
      Company.
      Neither
      the Company nor any Affiliate is an “investment company” within the meaning of
      the Investment Company Act of 1940, as amended.

    

    4.    Covenants
      Of The Company.

    

    a.
       Best
      Efforts.
      The
      Company shall use its reasonable best efforts timely to satisfy each of the
      conditions to be satisfied by it as provided in this Subscription
      Agreement.

     

    b.
       Blue
      Sky.
      The
      Company shall, at its sole cost and expense, make all filings and reports
      relating to the offer and sale of the Debentures and the Common Stock underlying
      the Debentures as required under the applicable securities or “Blue Sky” laws of
      such states of the United States as specified by the Holder or as required
      by
      law.

    

    c.
       Reporting
      Status.
      Until
      the earlier of (i) the date that the Holder may sell all of the Common Stock
      underlying the Debentures acquired pursuant to this Subscription Agreement
      without restriction pursuant to Rule 144(k) under the Securities Act, or (ii)
      the date on which the Holder shall have sold all the Common Stock underlying
      the
      Debentures, the Company shall file all reports required to be filed with the
      SEC
      pursuant to the Exchange Act, and the Company shall not terminate its status
      as
      a reporting company under the Exchange Act.

    

    d. Use
      of
      Proceeds.
      The
      Company shall use the entire proceeds from the Debenture exclusively to further
      the growth and interest of the Company as described herein: 

    -
      Four
      hundred and sixty thousand dollars ($460,000) for equipment purchases; two
      hundred and fifty thousand dollars ($250,000) to pay down current vendor debt;
      sixty thousand dollars ($60,000) for the purchase of four pickup trucks for
      use
      by the Company; one million one hundred thousand dollars ($1,100,000) to
      construct a new manufacturing facility. Any other use of the funds contemplated
      herein, shall be considered a breach of contract and an Event of Default. All
      the purchases described herein shall also be designated as Pledged Collateral
      as
      defined in the Security Agreement, in addition to any current assets described
      in the Security Agreement.

    

    e. Conditions
      to Closing.
      The
      Company shall sign and be in compliance with the Transaction Documents with
      the
      Holder. 

    

    f.
       Financial
      Information.
      The
      Company agrees to make available to the Holder via EDGAR or other electronic
      means the following: (i) within five (5) business days after the filing thereof
      with the SEC, a copy of its Annual Reports on Form 10-KSB, its Quarterly Reports
      on Form 10-QSB, any Current Reports on Form 8-K and any registration statements
      or amendments filed pursuant to the Securities Act; (ii) on the same day as
      the
      release thereof, facsimile copies of all press releases issued by the Company
      or
      any of its Subsidiaries, (iii) copies of any notices and other information
      made
      available or given to the shareholders of the Company generally,
      contemporaneously with the making available or giving thereof to the
      shareholders and (iv) within two (2) calendar days of filing or delivery
      thereof, copies of all documents filed with, and all correspondence sent to,
      the
      Principal Market, any securities exchange or market, or the National Association
      of Securities Dealers, Inc. (the “NASD”)
      

    

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

       

    

    g. Reservation
      of Common Stock.
      Subject
      to the following sentence, the Company shall its reasonable best efforts to
      have
      authorized, and reserved for the purpose of issuance, a sufficient number of
      shares of Common Stock to provide for the issuance of the Common Stock
      underlying the Debentures. In the event that the Company determines that it
      does
      not have a sufficient number of authorized shares of Common Stock to reserve
      and
      keep available for issuance, the Company shall use its reasonable best efforts
      to increase the number of authorized shares of Common Stock by seeking
      shareholder approval for the authorization of such additional shares. The Holder
      shall have the right to reasonably determine the amount of shares to be
      re-registered such as are necessary to satisfy the terms of the Agreement.
      

    

    h.
       Listing.
      The
      Company shall promptly secure the listing of all of the Common Stock underlying
      the Debentures upon the Principal Market and each other national securities
      exchange and automated quotation system, if any, upon which shares of Common
      Stock are then listed (subject to official notice of issuance) and shall
      maintain, such listing. The Company shall maintain the Common Stock's
      authorization for quotation on the Principal Market, unless the Holder and
      the
      Company agree otherwise. Neither the Company nor any of its Subsidiaries shall
      take any action which would be reasonably expected to result in the delisting
      or
      suspension of the Common Stock on the Principal Market (excluding suspensions
      of
      not more than one trading day resulting from business announcements by the
      Company). The Company shall promptly provide to the Holder copies of any notices
      it receives from the Principal Market regarding the continued eligibility of
      the
      Common Stock for listing on such automated quotation system or securities
      exchange. The Company shall pay all fees and expenses in connection with
      satisfying its obligations under this Section.

     

    i. Transactions
      With Affiliates.
      During
      the Lock Up Period, the Company shall not, and shall cause each of its
      Subsidiaries not to, enter into, amend, modify or supplement, or permit any
      Subsidiary to enter into, amend, modify or supplement, any agreement,
      transaction, commitment or arrangement with any of its or any Subsidiary's
      officers, directors, persons who were officers or directors at any time during
      the previous two years, shareholders who beneficially own five percent (5%)
      or
      more of the Common Stock, or affiliates or with any individual related by blood,
      marriage or adoption to any such individual or with any entity in which any
      such
      entity or individual owns a five percent (5%) or more beneficial interest (each
      a “Related
      Party”)
      during
      the Lock Up Period; except for (i) customary employment arrangements and benefit
      programs on reasonable terms (including changes currently under discussion
      with
      the Company's Board of Directors concerning the compensation, to be payable
      in
      stock, of the Chairman of the Board), (ii) any agreement, transaction,
      commitment or arrangement on an arms-length basis on terms no less favorable
      than terms which would have been obtainable from a person other than such
      Related Party, or (iii) any agreement, transaction, commitment or arrangement
      which is approved by a majority of the disinterested directors of the Company.
      For purposes hereof, any director who is also an officer of the Company or
      any
      Subsidiary of the Company shall not be a disinterested director with respect
      to
      any such agreement, transaction, commitment or arrangement. “Affiliate”
for
      purposes hereof means, with respect to any person or entity, another person
      or
      entity that, directly or indirectly, (i) has a five percent (5%) or more equity
      interest in that person or entity, (ii) has five percent (5%) or more common
      ownership with that person or entity, (iii) controls that person or entity,
      or
      (iv) shares common control with that person or entity. “Control”
or
      “Controls”
for
      purposes hereof means that a person or entity has the power, direct or indirect,
      to conduct or govern the policies of another person or entity.

    

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

       

    

    j.
       Corporate
      Existence.
      The
      Company shall use its commercially reasonable best efforts to preserve and
      continue the corporate existence of the Company.

    

    k. Notice
      of Certain Events Affecting Registration.
      The
      Company shall promptly notify Holder upon the occurrence of any of the following
      events in respect of a registration statement or related prospectus covering
      the
      Common Stock underlying the Debentures: (i) receipt of any request for
      additional information by the SEC or any other federal or state governmental
      authority during the period of effectiveness of the registration statement
      for
      amendments or supplements to the registration statement or related prospectus;
      (ii) the issuance by the SEC or any other federal or state governmental
      authority of any stop order suspending the effectiveness of any registration
      statement or the initiation of any proceedings for that purpose; (iii) receipt
      of any notification with respect to the suspension of the qualification or
      exemption from qualification of any of the Common Stock underlying the
      Debentures for sale in any jurisdiction or the initiation or threatening of
      any
      proceeding for such purpose; (iv) the happening of any event that makes any
      statement made in such registration statement or related prospectus or any
      document incorporated or deemed to be incorporated therein by reference untrue
      in any material respect or that requires the making of any changes in the
      registration statement, related prospectus or documents so that, in the case
      of
      a registration statement, it will not contain any untrue statement of a material
      fact or omit to state any material fact required to be stated therein or
      necessary to make the statements therein not misleading, and that in the case
      of
      the related prospectus, it will not contain any untrue statement of a material
      fact or omit to state any material fact required to be stated therein or
      necessary to make the statements therein, in the light of the circumstances
      under which they were made, not misleading; and (v) the Company's reasonable
      determination that a post-effective amendment to the registration statement
      would be appropriate, and the Company shall promptly make available to the
      Holder any such supplement or amendment to the related prospectus. 

    

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

       

    

    l. Indemnification.
      In
      consideration of the Holder’s execution and delivery of this Agreement and the
      Debenture Registration Rights Agreement and acquiring the Debentures hereunder
      and in addition to all of the Company's other obligations under the Transaction
      Documents, the Company shall defend, protect, indemnify and hold harmless the
      Holder and all of its shareholders, officers, directors, employees and direct
      or
      indirect investors and any of the foregoing person's agents or other
      representatives (including, without limitation, those retained in connection
      with the transactions contemplated by this Agreement) (collectively, the
“Indemnitees”)
      from
      and against any and all actions, causes of action, suits, claims, losses, costs,
      penalties, fees, liabilities and damages, and expenses in connection therewith
      (irrespective of whether any such Indemnitee is a party to the action for which
      indemnification hereunder is sought), and including reasonable attorneys' fees
      and disbursements (the “Indemnified
      Liabilities”),
      incurred by any Indemnitee directly as a result of (i) any material
      misrepresentation or breach of any representation or warranty made by the
      Company in the Transaction Documents or any other certificate, instrument or
      document contemplated hereby or thereby, (ii) any material breach of any
      covenant, agreement or obligation of the Company contained in the Transaction
      Documents or any other certificate, instrument or document contemplated hereby
      or thereby, (iii) any cause of action, suit or claim brought or made against
      such Indemnitee by a third party and arising out of or resulting from the
      execution, delivery, performance or enforcement of the Transaction Documents
      or
      any other certificate, instrument or document contemplated hereby or thereby,
      (iv) any transaction financed or to be financed in whole or in part, directly
      or
      indirectly, with the proceeds of the issuance of the Debentures, (v) the status
      of the Holder as an investor in the Company, except, in the case of any of
      such
      clauses, insofar as any such Indemnified Liability was attributable to gross
      negligence, willful misconduct or any illegal activity on the part of Holder
      and, in the case of clause, (v) only, insofar as any such Indemnified Liability
      was attributable to an untrue statement, alleged untrue statement, omission
      or
      alleged omission made in reliance upon and in conformity with written
      information furnished to the Company by the Holder which is specifically
      intended by the Holder for use in the preparation of any Registration Statement,
      preliminary prospectus or prospectus. To the extent that the foregoing
      undertaking by the Company may be unenforceable for any reason, the Company
      shall make the maximum contribution to the payment and satisfaction of each
      of
      the Indemnified Liabilities which is permissible under applicable law. The
      indemnity provisions contained herein shall be in addition to any cause of
      action or similar rights the Holder may have, and any liabilities to which
      the
      Holder may be subject. Notwithstanding the foregoing, the Company shall have
      no
      indemnification responsibility in the event Holder fails to timely notify the
      Company of a claim or potential claim for which indemnification is sought,
      but
      only to the extent the Company is prejudiced thereby. The Company shall have
      the
      right to control the defense of any such claim and the Holder shall not consent
      to any settlement of any such claim without the prior written consent of the
      Company (which shall not be unreasonably withheld or delayed). The Holder shall
      provide indemnification comparable in scope and coverage to the Company and
      corresponding related persons in respect of any Indemnified Liability if and
      to
      the extent attributable to (i) any material misrepresentation or breach of
      any
      representation or warranty made by the Holder in the Transaction Documents
      or
      any other certificate, instrument or document contemplated hereby or thereby,
      (ii) any material breach of any covenant, agreement or obligation of the Company
      contained in the Transaction Documents or any other certificate, instrument
      or
      document contemplated hereby or thereby, and specifically including the
      coventants of Holder under Section 14 of this Agreement for which Holder will
      indemnify Company for any breach thereof, or (iii) gross negligence, willful
      misconduct or any illegal activity on the part of the Holder, and shall be
      obligated to reimburse the Company and such persons to the same extent as the
      Company’s reimbursement obligations under Section
      4.m.
      hereof.

    

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

       

    

    m. Reimbursement.
      If (i)
      the Holder, other than by reason of its gross negligence or willful misconduct,
      becomes involved in any capacity in any action, proceeding or investigation
      brought by any shareholder of the Company, in connection with or as a result
      of
      the consummation of the transactions contemplated by the Transaction Documents,
      or if the Holder is impleaded in any such action, proceeding or investigation
      by
      any person, or (ii) the Holder, other than by reason of its gross negligence
      or
      willful misconduct or by reason of its trading of the Common Stock in a manner
      that is illegal under the federal securities laws, becomes involved in any
      capacity in any action, proceeding or investigation brought by the SEC against
      or involving the Company or in connection with or as a result of the
      consummation of the transactions contemplated by the Transaction Documents,
      or
      if the Holder is impleaded in any such action, proceeding or investigation
      by
      any person, then in any such case, the Company will reimburse the Holder for
      its
      reasonable legal and other expenses (including the cost of any investigation
      and
      preparation) incurred in connection therewith, as such expenses are incurred.
      In
      addition, other than with respect to any matter in which the Holder is a named
      party, the Company will pay to the Holder the charges, as reasonably determined
      by the Holder, for the time of any officers or employees of the Holder devoted
      to appearing and preparing to appear as witnesses, assisting in preparation
      for
      hearings, trials or pretrial matters, or otherwise with respect to inquiries,
      hearing, trials, and other proceedings relating to the subject matter of this
      Subscription Agreement. The reimbursement obligations of the Company under
      this
      Section shall be in addition to any liability which the Company may otherwise
      have, shall extend upon the same terms and conditions to any affiliates of
      Holder that are actually named in such action, proceeding or investigation,
      and
      partners, directors, agents, employees, attorneys, accountants, auditors and
      controlling persons (if any), as the case may be, of Holder and any such
      affiliate, and shall be binding upon and inure to the benefit of any successors
      of the Company, Holder and any such affiliate and any such person.

    

    n.
       Transfer
      Agent.
      The
      Company covenants and agrees that, in the event that the Company's agency
      relationship with the transfer agent should be terminated for any reason prior
      to the Maturity Date (as defined in the Debenture), and the Company shall
      immediately appoint a new transfer agent. The Company shall be up to date with
      all payments to the transfer agent, and continue to pay transfer agent as
      outlined in the Irrevocable Transfer Agent Agreement.

    

    5.    Opinion
      Letter/Board Resolution.

    

    Prior
      to
      or on the Closing Date, the Company shall deliver to the Holder an opinion
      letter signed by counsel for the Company in the form attached hereto as
Exhibit
      D.
      

    

    If
      so
      requested by the Holder (and Holder has not breached its obligations under
      Section 14 hereof), the Company shall instruct counsel to write a Rule 144
      opinion letter provided the necessary paperwork has been submitted and the
      Exemption applies (as defined in the Debenture); provided, that, the Company
      may
      rely on the advice of its legal counsel as to whether such Exemption applies.
      If
      the Exemption applies and Company’s counsel fails to provide a Rule 144 opinion
      letter in a timely manner, then the Company shall: (a) pay the Holder’s counsel
      to write said Rule 144 opinion letter; and (b) instruct the designated transfer
      agent to accept and rely upon the Rule 144 Opinion letter. The parties agree
      that for the purposes of Rule 144, the Closing Date shall constitute the
      original date of consideration. Also, prior to or on the Closing Date, the
      Company shall deliver to the Holder a signed Board Resolution authorizing this
      Offering, which shall be attached hereto as Exhibit
      F.

    

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

       

    

    6.    Delivery
      Instructions; Fees.  

    

    The
      Debentures being purchased hereunder shall be delivered to the Holder on the
      Closing Date at which time funds will be wired to the Company and the Debentures
      will be delivered to the Holder, per the Holder’s instructions.

     

    7.    Understandings.

    

    The
      Holder understands, acknowledges and agrees as follows:

    

    a. No
      U.S.
      federal or state agency or any agency of any other jurisdiction has made any
      finding or determination as to the fairness of the terms of the Offering for
      investment nor any recommendation or endorsement of the Debentures or the
      Company.

    

    b. The
      representations, warranties and agreements of the Holder and the Company
      contained herein shall be true and correct in all material respects on and
      as of
      the date of the sale of the Debentures as if made on and as of such date and
      shall survive the execution and delivery of this Subscription Agreement and
      the
      purchase of the Debentures.

    

    c. In
      making
      an investment decision, the Holder is relying on its own examination of the
      Company and the terms of the Offering, including the merits and risks involved.
      The shares have not been recommended by any federal or state securities
      commission or regulatory authority. Furthermore, the foregoing authorities
      have
      not confirmed the accuracy or determined the adequacy of this document. Any
      representation to the contrary is a criminal offense.

    

    d. The
      Offering is intended to be exempt from registration by virtue of Section 4(2)
      of
      the Securities Act and the provisions of Regulation D thereunder, which is
      in
      part dependent upon the truth, completeness and accuracy of the statements
      made
      by the undersigned herein and in the Questionnaire.

    

    e. It
      is
      understood that in order not to jeopardize the Offering’s exempt status under
      Section 4(2) of the Securities Act and Regulation D, the Holder may, at a
      minimum, be required to fulfill the investor suitability requirements
      thereunder.

    

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

       

    

    f. The
      shares may not be resold except as permitted under the securities act and
      applicable state securities laws, pursuant to registration or exemption
      therefrom. Holder should be aware that they will be required to bear the
      financial risks of this investment for an indefinite period of
      time.

    

    
      	
              8.

            	
              Disputes
                Subject To Arbitration Governed By Massachusetts Law.

            

    

    

    a.
       All
      disputes arising under this Subscription Agreement shall be governed by and
      interpreted in accordance with the laws of the Commonwealth of Massachusetts,
      without regard to principles of conflict of laws. The parties to this
      Subscription Agreement shall submit all disputes arising under this Subscription
      Agreement to arbitration in Boston, Massachusetts before a single arbitrator
      of
      the American Arbitration Association (the “AAA”).
      The
      arbitrator shall be selected by application of the rules of the AAA, or by
      mutual agreement of the parties, except that such arbitrator shall be an
      attorney admitted to practice law in the Commonwealth of Massachusetts. No
      party
      to this Subscription Agreement shall challenge the jurisdiction or venue
      provisions as provided in this Section
      8.
      Nothing
      in this Section
      8
      shall
      limit the Holder's right to seek and obtain an injunction for violation of
      the
      terms and conditions of this Subscription Agreement. 

    

    9.    Miscellaneous.

    

    a. Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Subscription Agreement must be in writing and
      will
      be deemed to have been delivered (i) upon receipt, when delivered personally;
      (ii) upon receipt, when sent by facsimile (provided a confirmation of
      transmission is mechanically or electronically generated and kept on file by
      the
      sending party); or (iii) one (1) day after deposit with a nationally recognized
      overnight delivery service, in each case properly addressed to the party to
      receive the same. The addresses and facsimile numbers for such communications
      shall be:

    

    If
      to the
      Company:  Marmion
      Industries Corp.

    9103
      Emmott Road, Building 6, Suite A 

    Houston,
      Texas 77040

    Attention:
      Wilbert Marmion

    Telephone:
      (713) 466-6585

    Facsimile:
      (713) 466-6742

     

    If
      to the
      Holder:          Dutchess
      Capital Management, LLC 

    50
      Commonwealth Ave, Suite 2

    Boston,
      MA 02116

    Attention:
      Douglas Leighton

    Telephone:
      (617) 301-4700

    Facsimile:
      (617) 249-0947

    

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

       

    

    Each
      party shall provide five (5) business days prior notice to the other party
      of
      any change in address, phone number or facsimile number.

    

    b. All
      pronouns and any variations thereof used herein shall be deemed to refer to
      the
      masculine, feminine, impersonal, singular or plural, as the identity of the
      person or persons may require.

    

    c. Neither
      this Subscription Agreement nor any provision hereof shall be waived, modified,
      changed, discharged, terminated, revoked or canceled, except by an instrument
      in
      writing signed by the party effecting the same against whom any change,
      discharge or termination is sought.

    

    d. Notices
      required or permitted to be given hereunder shall be in writing and shall be
      deemed to be sufficiently given when personally delivered or sent by facsimile
      transmission: (i) if to the Company, at it’s executive offices, or (ii) if to
      the Holder, at the address for correspondence set forth in the Questionnaire,
      or
      at such other address as may have been specified by written notice given in
      accordance with this paragraph.

    

    e. This
      Subscription Agreement shall be enforced, governed and construed in all respects
      in accordance with the laws of the Commonwealth of Massachusetts, as such laws
      are applied by Massachusetts courts to agreements entered into, and to be
      performed in, Massachusetts by and between residents of Massachusetts, and
      shall
      be binding upon the undersigned, the undersigned's heirs, estate and legal
      representatives and shall inure to the benefit of the Company and its
      successors. If any provision of this Subscription Agreement is invalid or
      unenforceable under any applicable statue or rule of law, then such provisions
      shall be deemed inoperative to the extent that it may conflict therewith and
      shall be deemed modified to conform with such statute or rule of law. Any
      provision hereof that may prove invalid or unenforceable under any law shall
      not
      affect the validity or enforceability of any other provision
      hereof.

    

    f. This
      Subscription Agreement shall not be assignable.

    

    f. This
      Subscription Agreement, together with Exhibit
      A
      through
Exhibit
      E
      and the
      Schedules attached hereto and made a part of this Subscription Agreement by
      this
      reference, constitute the entire agreement between the parties hereto with
      respect to the subject matter hereof and may be amended only by a writing
      executed by both parties hereto.

    

    g. This
      Subscription Agreement may be executed in two or more counterparts, all of
      which
      taken together shall constitute one instrument. Execution and delivery of this
      Subscription Agreement by exchange of facsimile copies bearing the facsimile
      signature of a party shall constitute a valid and binding execution and delivery
      of this Subscription Agreement by such party. Such facsimile copies shall
      constitute enforceable original documents.

    

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

       

    

    h.
       When
      in
      this Agreement or the Transaction Documents, reference is made to any party,
      such reference shall be deemed to include the successors, assigns, heirs and
      legal representatives of such party. No party hereto may transfer any rights
      under this Agreement or the Transaction Documents, unless the transferee agrees
      to be bound by, and comply with all of the terms and provision of this Agreement
      and the Transaction Documents, as if an original signatory hereto on the date
      hereof.

    

    i. The
      Company hereby represent and warrants to the Holder that: (i) it has voluntarily
      entered into this Subscription Agreement of its own freewill, (ii) it is not
      entering into this Subscription Agreement under economic duress, (iii) the
      terms
      of this Subscription Agreement are reasonable and fair to the Company, and
      (iv)
      the Company has had independent legal counsel of its own choosing review this
      Subscription Agreement, advise the Company with respect to this Subscription
      Agreement, and represent the Company in connection with its entering into this
      Subscription Agreement.

    

    j. Notwithstanding
      anything in this Subscription Agreement to the contrary, the parties hereto
      hereby acknowledge and agree to the following: (i) the
      Company shall, within 4 business days following the date hereof, file a current
      report on Form 8-K disclosing the material terms of the transactions
      contemplated hereby and in the other Transaction Documents; (ii) [the Company
      has not] and shall not provide material non-public information to the Holder
      unless prior thereto the Holder shall have executed a written agreement
      regarding the confidentiality and use of such information; and (iii) the Company
      understands and confirms that the Holder will be relying on the acknowledgements
      set forth in clauses (i) through (ii) above if the Holder effects any
      transactions in the securities of the Company. 

    

    10.   Intentionally
      Omitted.

    

    11.   Waiver.

    

    The
      Holder's delay or failure at any time or times hereafter to require strict
      performance by Company of any undertakings, agreements or covenants shall not
      waiver, affect, or diminish any right of the Holder under this Agreement to
      demand strict compliance and performance herewith. Any waiver by the Holder
      of
      any Event of Default shall not waive or affect any other Event of Default,
      whether such Event of Default is prior or subsequent thereto and whether of
      the
      same or a different type. None of the undertakings, agreements and covenants
      of
      the Company contained in this Agreement, and no Event of Default, shall be
      deemed to have been waived by the Holder, nor may this Agreement be amended,
      changed or modified, unless such waiver, amendment, change or modification
      is
      evidenced by an instrument in writing specifying such waiver, amendment, change
      or modification and signed by the Holder. 

    

    12.   Governmental
      Changes.

    

    In
      the
      event that any rules, regulations, oral or written interpretations or Comments
      (as defined in the Debenture Registration Rights Agreement) from the SEC, NASD,
      NYSE, NASDAQ or other governing or regulatory body, prohibit or
      hinder any operation of this Subscription Agreement or the other Transaction
      Documents, the parties hereto hereby agree that those specific terms and
      conditions shall be negotiated in good faith on similar terms within five
      (5) business days, and shall not alter, diminish or affect any other rights,
      duties, obligations or covenants in Transaction Documents and that all
      terms and conditions will remain in full force and effect except as is necessary
      to make those specific terms and conditions comply with applicable rule,
      regulation, interpretation or Comment. Failure for the Company to agree to
      on
      such new terms as necessary to achieve the intent of the original documents
      shall constitute and Event of Default as outlined in Article 6 in the Debenture
      and accordingly the Holder may elect to take actions as outlined in the
      Debenture and the other Transaction Documents.

    

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

       

    

    13.   No
      Oral Agreements.

    

    This
      Subscription Agreement and the other Transaction Documents represent the final
      definitive agreements between the Company and the Holder and may not be
      contradicted by evidence of prior, contemporaneous, or subsequent oral
      agreements of the parties; there are no unwritten oral agreements among the
      parties.

    

    14.   No
      Shorting.

    

    The
      Holder, and its affiliates represent and warrant that they have not directly
      or
      indirectly, nor has any person acting on behalf of or pursuant to any
      understanding with the Holder or its affiliates, engaged in any transactions
      in
      the securities of the Issuer (including, without limitations, any short sales
      involving the Issuer’s securities) since the time the Holder was first contacted
      by the Issuer or any other person regarding an investment in the Issuer. The
      Holder and its affiliates covenant that neither they nor any person acting
      on
      their behalf or pursuant to any direct instructions from the Holder will engage
      in any transactions in the securities of the Company from the date of the
      execution of this term sheet until the end of the Debenture is paid in
      full.

    

    [BALANCE
      OF PAGE INTENTIONALLY LEFT BLANK)

    

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    MARMION
      INDUSTRIES CORP.

    

    INVESTOR
      QUESTIONNAIRE

    

    The
      information contained in this Investor Questionnaire (this “Questionnaire”)
      is
      being furnished in order to determine whether the undersigned’s subscription to
      purchase the Debentures described in the accompanying Subscription Agreement
      may
      be accepted.

    

    ALL
      INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED CONFIDENTIALLY.
      The
      undersigned understands, however, that the Company may present this
      Questionnaire to such parties as it deems appropriate if called upon to
      establish that the proposed offer and sale of the securities is exempt from
      registration under the Securities Act of 1933, as amended (the “Securities
      Act”).
      Further, the undersigned understands that the offering is required to be
      reported to the United States Securities and Exchange Commission (the
“SEC”
or
      the
“Commission”),
      and
      to various state securities and “blue sky” regulators.

    

    IN
      ADDITION TO SIGNING THE SIGNATURE PAGE, IF REQUESTED BY MARMION INDUSTRIES
      CORP., A NEVADA CORPORATION (THE “COMPANY”),
      THE
      UNDERSIGNED MUST COMPLETE FORM W-9.

     

    I.    PLEASE
      CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES.

    

    o             
1. The
      undersigned: (a) has total assets in excess of $5,000,000; (b) was not formed
      for the specific purpose of acquiring the securities; and (c) has its principal
      place of business in ___________.

     

    o      
      2. The
      undersigned is a natural person whose individual net worth* or joint net worth
      with his or her spouse exceeds $1,000,000.

    

    o      3. The
      undersigned is a natural person who had an individual income* in excess of
      $200,000 in each of the two most recent years and who reasonably expects an
      individual income in excess of $200,000 in the current year. Such income is
      solely that of the undersigned and excludes the income of the undersigned’s
      spouse.

    

    o      4. The
      undersigned is a natural person who, together with his or her spouse, has had
      a
      joint income* in excess of $300,000 in each of the two most recent years and
      who
      reasonably expects a joint income in excess of $300,000 in the current
      year.

    

    *    For
      purposes of this Questionnaire, the term “net
      worth”
means
      the excess of total assets over total liabilities. In determining “income”,
      an
      investor should add to his or her adjusted gross income any amounts attributable
      to tax-exempt income received, losses claimed as a limited partner in any
      limited partnership, deductions claimed for depletion, contributions to IRA
      or
      Keogh retirement plan, alimony payments and any amount by which income from
      long-term capital gains has been reduced in arriving at adjusted gross
      income.

    

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

       

           
        5. The
        undersigned is:

    

    

    o      (a) a
      bank as
      defined in Section 3(a)(2) of the Securities Act; or

    

    o      (b) a
      savings
      and loan association or other institution as defined in Section 3(a)(5)(A)
      of
      the Securities Act whether acting in its individual or fiduciary capacity;
      or

    

    o      (c) a
      broker
      or dealer registered pursuant to Section 15 of the Securities Exchange Act
      of
      1934, as amended (the “Exchange
      Act”);
      or

    

    o      (d) an
      insurance company as defined in Section 2(13) of the Securities Act;
      or

    

    o      (e) An
      investment company registered under the Investment Company Act of 1940 (the
      “ICA”),
      as
      amended, or a business development company as defined in Section 2(a)(48) of
      the
      ICA; or 

    

    o      (f) a
      small
      business investment company licensed by the U.S. Small Business Administration
      under Section 301 (c) or (d) of the Small Business Investment Act of 1958;
      or

     

    x      
      6. The
      undersigned is an entity in which all of the equity owners are accredited
      investors.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    II.    HOLDER
      INFORMATION.

    

    Name
      of
      Entity: Dutchess
      Private Equities Fund, LTD

    

    Person’s
      Name: Douglas
      Leighton, Managing Member

    

    State
      of
      Organization: Cayman
      Islands

    

    Principal
      Business Address: 50
      Commonwealth Ave., Suite 2 

    

    City,
      State, Zip Code: Boston,
      MA 02116

    

    Taxpayer
      Identification Number: ___________ 

    

    Phone:
      617-301-4700
      Fax:
617-249-0947

    

    Send
      Correspondence to: Same
      as above

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    MARMION
      INDUSTRIES CORP.

    

    SIGNATURE
      PAGE

    

    Your
      signature on this Signature Page evidences your agreement to be bound by the
      accompanying Questionnaire and the Transaction Documents (as such term is
      defined in the accompanying Subscription Agreement). 

    

    1. The
      undersigned hereby represents that (a) the information contained in the
      Questionnaire is complete and accurate and (b) the undersigned will notify
      the Company
      immediately if any material change in any of the information occurs prior to
      the
      acceptance of the undersigned’s subscription and will promptly send the Company
      written confirmation of such change.

    

    2. The
      undersigned signatory hereby certifies that he/she has read and understands
      the
      Transaction Documents, including the Subscription Agreement and Questionnaire,
      and the representations made by the undersigned in said documents are true
      and
      accurate.

    

    
      	
              $3,000,000

            	 	
              March
                22, 2007

            
	
              Amount
                of Debentures being
                purchased

            	 	
              Date

            

    

     

    DUTCHESS
      PRIVATE EQUITIES FUND, LTD,

     

     

    By:  /s/
      Douglas H. Leighton

    
      

    

    Name:
      Douglas H. Leighton

    Title:  
      Director

    

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    MARMION
      INDUSTRIES CORP.

    

    COMPANY
      ACCEPTANCE PAGE

    

    This
      Subscription Agreement accepted and agreed to this 22nd day of March, 2007,
      by
      Marmion Industries Corp. and duly authorized to sign on behalf of the
      Company.

    

    MARMION
      INDUSTRIES CORP. 

     

     

    By 
      /s/ Wilbert Marmion

    
      

    

    Name: Wilbert
      Marmion

    Title:  Chief
      Executive Officer

     

     

    By 
      /s/ Ellen Raidl

    
      

    

    Name:
      Ellen Raidl

    Title:
       Treasurer

    

    
      
        
        

      

      
        30DEBENTURE
      REGISTRATION
      RIGHTS AGREEMENT

    

    THIS
      DEBENTURE REGISTRATION RIGHTS AGREEMENT
      (this
“Agreement”),
      dated
      as of March 22, 2007, by and between Marmion Industries Corp., a Nevada
      corporation (the “Company”),
      and
      Dutchess Private Equities Fund, LTD, a Cayman Islands exempted company (the
      “Holder”).
      The
      Company and the Holder are hereinafter sometimes collectively referred to as
      the
“Parties”
and
      each a “Party”
to
      this
      Agreement. 

    

    RECITALS:

    

    WHEREAS,
      upon the terms and subject to the conditions of that certain Subscription
      Agreement, of even date herewith, by and between the Holder and the Company
      (the
“Subscription
      Agreement”),
      the
      Company has agreed to issue and sell to the Holder convertible debentures of
      the
      Company, which will be convertible into shares of common stock, $0.001 par
      value
      per share (the “Common
      Stock”),
      of
      the Company; and

    

    WHEREAS,
      to induce the Holder to execute and deliver (i) the Subscription Agreement,
      (ii)
      this Agreement, (iii) that certain Warrant, of even date herewith, by and
      between the Company and the Holder (the “Warrant”),
      (iv)
      that certain Security Agreement, of even date herewith, by and between the
      Company and the Holder (the “Security
      Agreement”),
      (v)
      that certain Debenture, of even date herewith, by and between the Company and
      the Holder (the “Debenture”),
      and
      (vi) all agreements referenced in the foregoing documents (collectively, the
      “Transaction
      Documents”),
      the
      Company has agreed to provide certain registration rights under the Securities
      Act of 1933, as amended (the “Securities
      Act”)
      and
      the rules and regulations promulgated thereunder, and applicable state
      securities laws, with respect to the shares of Common Stock issuable pursuant
      to
      the Transaction Documents.

    

    NOW,
      THEREFORE, for and in consideration of the foregoing premises, the agreements
      and covenants herein contained, and other good and valuable consideration,
      the
      receipt and sufficiency of which are hereby acknowledged, the Company and the
      Holder, intending to be legally bound, hereby agree as follows:

    

    

    1.    Definitions.
      As
      used
      in this Agreement, the following terms shall have the following
      meanings:

    

    a. “Closing
      Date”
shall
      mean the date in the preamble of this Agreement. 

    

    b. “Debentures”
shall
      mean the convertible debenture issued by the Company to the Holder pursuant
      to
      the Debenture.

    

    c. “Holder”
shall
      mean Dutchess Private Equities Fund, LTD.

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

       

    

    d.
       “Effective
      Date”
shall
      mean the date the SEC declares the Registration Statement effective and the
      Company has filed all necessary amendments, including the letter to request
      accelerated effectiveness and the Prospectus covering the resale of
      Shares.

    

    e.
       “Face
      Amount”
means:
      $3,000,000.

    

    f.
       “Filing
      Date”
shall
      mean the date the Registration Statement has been filed with the SEC (as
      determined by EDGAR) and no stop order of acceptance has been issued by the
      SEC.

    

    g.
       “Person”
means
      a
      corporation, a limited liability company, an association, a partnership, an
      organization, a business, an individual, a governmental or political subdivision
      thereof or a governmental agency. 

    

    h.
       “Potential
      Material Event”
means
      any of the following: (i) the possession by the Company 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 the Company that
      disclosure of such information in the Registration Statement would be
      detrimental to the business and affairs of the Company, or (ii) any event or
      activity concerning the Company which would, based on a good faith determination
      by the Company's Board of Directors, adversely affect the Company or its
      shareholders if it were included in a Registration Statement or other
      filing.

    

    i. “Principal
      Market”
means
      either The American Stock Exchange, Inc., The New York Stock Exchange, Inc.,
      the
      Nasdaq National Market, The Nasdaq SmallCap Market or the National Association
      of Securities Dealer’s, Inc. OTC electronic bulletin board, whichever is the
      principal market on which the Common Stock is listed. 

    

    j.
       “Register”,
      “Registered”
and
      “Registration”
refer
      to a registration effected by preparing and filing with
      the
      SEC one
      or
      more Registration Statements in compliance with the Securities Act and pursuant
      to Rule 415 under the Securities Act or any successor rule providing for
      offering securities on a continuous basis (“Rule
      415”),
      and
effectiveness
      of such Registration Statement(s).

    

    k.
       “Registrable
      Securities”
means
      the (i) Conversions Shares issued or issuable upon conversion or otherwise
      pursuant to the Debenture; (ii) Warrant Shares issued or issuable upon exercise
      of the Warrant (iii) any shares of capital stock issued or issuable with respect
      to Debenture and Warrant, if any, as a result of any stock split, stock
      dividend, recapitalization, exchange or similar event or otherwise, which have
      not been (x) included in a Registration Statement that has been declared
      effective by the SEC, (y) sold under circumstances meeting all of the applicable
      conditions of Rule 144, promulgated under the Securities Act or (z) saleable
      without limitation as to time, manner and volume pursuant to Rule 144(k) (or
      any
      similar provision then in force) under the Securities Act. 

    

    l. “Registration
      Statement”
means
      a
      registration statement of the Company filed under the Securities
      Act.

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    m. “SEC”
means
      the United States Securities and Exchange Commission.

    

    All
      capitalized terms used but not defined in this Agreement shall have the meaning
      ascribed to them in the Transaction Documents. 

    

    For
      the
      purposes of determining dates for penalties or filing deadlines, as outlined
      in
      this Agreement, both parties agree that the date given by the SEC shall
      constitute the official date.

    

    2.    Registration.

    

    a. Mandatory
      Registration.
      On or
      before April 16, 2007, the Company shall prepare and file with the SEC a
      Registration Statement or Registration Statements (as is necessary) covering
      the
      resale of all of the Registrable Securities, which Registration Statement(s)
      shall state that, in accordance with Rule 415 promulgated under the Securities
      Act, such Registration Statement also covers such indeterminate number of
      additional shares of Common Stock as may become issuable upon stock splits,
      stock dividends or similar transactions. The Company shall initially register
      for resale an amount of shares of Common Stock which would be issuable on the
      date preceding the filing of the Registration Statement based on the Conversion
      Price (as defined in the Debenture) of the Debenture and the amount reasonably
      calculated that represents the number of shares issuable pursuant to the terms
      of the Warrant; or, an amount equal to the maximum amount allowed under Rule
      415
      (a)(1)(i) as interpreted by the SEC. In the event the Company cannot register
      sufficient shares of Common Stock, due to the remaining number of authorized
      shares of Common Stock being insufficient, the Company will use its best efforts
      to register the maximum number of shares it can based on the remaining balance
      of authorized shares and will use all commercially reasonable best efforts
      to
      increase the number of its authorized shares as soon as reasonably
      practicable.

    

    b. The
      Company shall use all commercially reasonable best efforts to have the
      Registration Statement filed with the SEC by April 16, 2007 (“Filing
      Deadline”).
      If
      the Registration Statement covering the Registrable Securities required to
      be
      filed by the Company pursuant to Section
      2(a)
      hereof
      is not filed by the Filing Deadline, then the Company shall pay the Holder
      the
      sum of two percent (2%) per month of the Face Amount of the Debentures
      outstanding as liquidated damages, and not as a penalty. In addition, if the
      Company fails to file the Registration Statement by the Filing Deadline, and
      for
      each fifteen (15) day calendar period the Company fails to file the Registration
      Statement, the Conversion Price of the Debentures will decrease by ten percent
      (10%) of the original Conversion Price. By way of illustration only and not
      in
      limitation of the foregoing, in the event that upon the April 17, 2007, the
      Registration Statement has not been filed with the SEC, the Conversion Price
      shall decrease by seven and one-half tenths of a cent ($0.0075) per share (i.e.,
      $.075 x 10% = $0.0075). The Holder shall have the right to lower the Conversion
      Price as described herein, at the time of each conversion.

    

    Notwithstanding
      the foregoing, the amounts payable by the Company pursuant to this Section
      2
      shall
      not be payable to the extent any delay in the filing of the Registration
      Statement occurs because of an act of, or a failure to act or to act timely
      by
      the Holder or is otherwise attributable to the Holder. 

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

       

    

    The
      liquidated damages set forth in this Section
      2
      shall
      continue until the obligation is fulfilled and shall be paid, at the Holder's
      option in cash or common stock priced at the Conversion Price, or portion
      thereof, until the Registration Statement is filed. 

    

    The
      Company acknowledges that its failure to have the Registration Statement filed
      by April 16, 2007, will cause the Holder to suffer irreparable harm, and, that
      damages will be difficult to ascertain. Accordingly, the Parties agree that
      it
      is appropriate to include in this Agreement a provision for liquidated damages.
      The Parties acknowledge and agree that the liquidated damages provision set
      forth in this section represents the parties’ good faith effort to quantify such
      damages and, as such, agree that the form and amount of such liquidated damages
      are reasonable and will not constitute a penalty. The payment of liquidated
      damages shall not relieve the Company from its obligations to register the
      Common Stock and deliver the Common Stock pursuant to the terms of this
      Agreement, the Subscription Agreement and the Debenture.

    

    c. The
      Company shall use all commercially reasonable best efforts and take all
      available steps to have the Registration Statement declared effective by the
      SEC
      within ninety (90) calendar days after the Filing Deadline. If the Registration
      Statement covering the Registrable Securities required to be filed by the
      Company pursuant to Section
      2(a)
      hereof
has
      not
become
      effective within said 90-day period of time, then the Company shall pay the
      Holder the sum of two percent (2%) of the Face Amount as liquidated damages,
      and
      not as a penalty, for each thirty (30) calendar day period, pro rata, following
      the ninety (90) calendar day period until the Registration Statement becomes
      effective provided,
      however,
      that if
      the delay in obtaining effectiveness is due to certain information requested
      by
      the SEC related to Holder, then Holder shall not be entitled to receive the
      liquidated damages set forth under this paragraph. 

     

    If
      the
      Registration Statement covering the Registrable Securities required to be filed
      by the Company pursuant to Section
      2(a)
      hereof
has
      become
      effective, and, thereafter, the Holder’s right to sell is suspended, for any
      reason other than an Allowed Delay (as defined under Section
      3(e)),
      then
      the Company shall pay the Holder the sum of two percent (2%) of the Face Amount
      plus interest and penalties due to the Holder for the Registrable Securities
      pursuant to the Subscription Agreement for each five (5) calendar day period,
      pro rata, compounded daily, following the suspension, until such suspension
      ceases. 

    

          
      Notwithstanding the foregoing, the amounts payable by the Company pursuant
      to
      this Section
      2
      shall
      not be payable to the extent any delay in the effectiveness of the Registration
      Statement or any suspension of the effectiveness occurs because of an act of,
      or
      a failure to act or to act timely by the Holder or is otherwise attributable
      to
      the Holder. 

    

    The
      damages set forth in this Section
      2
      shall
      continue until the obligation is fulfilled and shall be paid within five (5)
      business days after the end of each month in which they accrue.  

    

    The
      Company acknowledges that its failure to have the Registration Statement
become effective
      within said ninety (90) calendar day period or to permit the suspension of
      the
      effectiveness of the Registration Statement, will cause the Holder to suffer
      irreparable harm and, that damages will be difficult to ascertain. Accordingly,
      the parties agree that it is appropriate to include in this Agreement a
      provision for liquidated damages. The parties acknowledge and agree that the
      liquidated damages provision set forth in this section represents the parties’
good faith effort to quantify such damages and, as such, agree that the form
      and
      amount of such liquidated damages are reasonable and will not constitute a
      penalty. The payment of liquidated damages shall not relieve the Company from
      its obligations to register the Common Stock and deliver the Common Stock
      pursuant to the terms of this Agreement, the Subscription Agreement and the
      Debenture.

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

       

    

    d.
       The
      Company agrees to only register such securities as are necessary to meet its
      obligations to the Holder and agrees not to register additional securities
      without the Holder's prior written consent, to be agreed upon in writing by
      the
      Holder before the Filing Date. Furthermore,
      the Company agrees that it will not file any other Registration Statement,
      including those on Form S-8 or Form S-4, for other securities, until one hundred
      and eighty (180) calendar days after the Effective Date unless it has the prior
      written approval from the Holder or there are no further obligation under the
      Transaction Documents. Failure to obtain prior written approval from the Holder
      will cause the Holder to suffer damages that will be difficult to ascertain.
      Accordingly, the Parties agree that it is appropriate to include a provision
      for
      liquidated damages and the Company agrees to pay the Holder the sum of two
      percent (2%) of the Face Amount as liquidated damages and not as a penalty
      for
      each thirty (30) calendar day period, pro rata, until the unauthorized
      Registration Statement is withdrawn.

     

    3.    Related
      Obligations.

    

    At
      such
      time as the Company is obligated to prepare and file a Registration Statement
      with the SEC pursuant to Section
      2(a)
      hereof,
      the Company will use all commercially reasonable best efforts to effect the
      registration of the Registrable Securities in accordance with the intended
      method of disposition thereof and, with respect thereto, the Company shall
      have
      the following obligations:

    

    a. The
      Company shall use all commercially reasonable best efforts to cause such
      Registration Statement relating to the Registrable Securities to become
      effective within ninety (90) calendar days after the Filing Deadline and shall
      keep such Registration Statement effective pursuant to Rule 415 under the
      Securities Act until the date on which (A) the Holder shall have sold all the
      Registrable Securities or the shares included therein otherwise cease to be
      Registrable Securities, and (B) the Holder has no right to convert the
      securities it owns into Common Stock under the Subscription Agreement, Debenture
      or Warrant, respectively (the “Registration
      Period”),
      which
      Registration Statement (including any amendments or supplements thereto and
      prospectuses contained therein) shall, as of the date thereof, not contain
      any
      untrue statement of a material fact or omit to state a material fact required
      to
      be stated therein, or necessary to make the statements therein, in light of
      the
      circumstances in which they were made, not misleading. The Company shall respond
      to any and all SEC comments or correspondence, whether written or oral, direct
      or indirect, formal or informal (“Comments”),
      within fifteen (15) business days of receipt by the Company of such Comments.
      If
      the Company fails to respond within 15 business days of receipt of SEC Comments,
      the Company shall pay to the Holder an amount equal to two percent (2%) per
      month, on a pro rata basis, of the Face Amount as liquidated damages and not
      as
      a penalty; provided that the 30 day period provided herein shall be extended
      as
      may be required by delays caused by Holder's counsel pursuant to Section
      3(g)
      hereof,
      and, provided further, that such 30 day period shall be extended five (5)
      business days for responses to SEC staff accounting comments. The Company shall
      request acceleration of effectiveness of Registration Statement relating to
      the
      Registrable Securities no later than two (2) business days after notice from
      the
      SEC that the Registration Statement has been cleared of all comments. Failure
      to
      do so will result in the Face Amount of the Debentures to be increased (subject
      to the Damages Cap (as defined in the Debenture), as liquidated damages, by
      five
      percent (5%) per calendar day for each day that the Company does not request
      acceleration for effectiveness from the SEC. 

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    b. The
      Company shall prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to a Registration Statement and
      the
      prospectus used in connection with such Registration Statement, which prospectus
      is to be filed pursuant to Rule 424 under the Securities Act, as may be
      necessary to keep such Registration Statement effective during the Registration
      Period, and, during such period, comply with the provisions of the Securities
      Act with respect to the disposition of all Registrable Securities of the Company
      covered by such Registration Statement until such time as all of such
      Registrable Securities shall have been disposed of in accordance with the
      intended methods of disposition by the Holder as set forth in such Registration
      Statement. In the event the number of shares of Common Stock available under
      a
      Registration Statement filed pursuant to this Agreement is at any time
      insufficient to cover all of the Registrable Securities, the Company shall
      amend
      such Registration Statement, or file a new Registration Statement (on the short
      form available therefor, if applicable), or both, so as to cover all of the
      Registrable Securities, in each case, as soon as practicable, but in any event
      within thirty (30) calendar days after the necessity therefor arises (based
      on
      the then Purchase Price of the Common Stock and other relevant factors on which
      the Company reasonably elects to rely), assuming the Company has sufficient
      authorized shares at that time, and if it does not, within thirty (30) calendar
      days after such shares are authorized. The Company shall use it best efforts
      to
      cause such amendment and/or new Registration Statement to become effective
      as
      soon as practicable following the filing thereof. 

    

    Prior
      to
      conversion of the Debenture if at any
      time
      the
      conversion of the Debenture would result in an insufficient number of authorized
      shares of Common Stock being available to cover all the conversions, or in
      the
      event that Holder deems that the shares of Common Stock authorized will become
      insufficient to honor conversion of the Debenture, the Company will move to
      call
      and hold a shareholder’s meeting within thirty (30) calendar days for the sole
      purpose of authorizing additional shares of Common Stock to facilitate the
      conversions. In such an event the Company shall recommend to all shareholders
      and management of the Company to vote their shares in favor of increasing the
      authorized number of shares of Common Stock in sufficient number to fully cover
      the Holder's conversion rights. The Company represents and warrants that except
      as otherwise set forth under the Transaction Documents it will not deny or
      prevent Holder’s right to convert the Shares as permitted under the terms of the
      Subscription Agreement, this Agreement or any of the other Transaction
      Documents. The Holder retains the right to request additional shares upon the
      determination the company may not be able to facilitate conversions in the
      future.

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

    

    c. The
      Company shall furnish to the Holder whose Registrable Securities are included
      in
      any Registration Statement and its legal counsel without charge and upon request
      (i) promptly after the same is prepared and filed with the SEC at least one
      copy
      of such Registration Statement and any amendment(s) thereto, including financial
      statements and schedules, all documents incorporated therein by reference and
      all exhibits, the prospectus included in such Registration Statement (including
      each preliminary prospectus) and, with regards to such Registration
      Statement(s), any correspondence by or on behalf of the Company to the SEC
      or
      the staff of the SEC and any correspondence from the SEC or the staff of the
      SEC
      to the Company or its representatives, (ii) upon the effectiveness of any
      Registration Statement, a copy of the prospectus included in such Registration
      Statement and all amendments and supplements thereto (or such other number
      of
      copies as the Holder may reasonably request) and (iii) such other documents,
      including copies of any preliminary or final prospectus, as the Holder may
      reasonably request from time to time in order to facilitate the disposition
      of
      the Registrable Securities. The Company filing the documents described in this
      paragraph through EDGAR shall constitute delivery.

     

    d. The
      Company shall use reasonable efforts to (i) register and qualify the Registrable
      Securities covered by a Registration Statement under the applicable securities
      or “blue sky” laws of such states of the United States as reasonably specified
      by the Holder, (ii) prepare and file in those jurisdictions, such amendments
      (including post-effective amendments) and supplements to such registrations
      and
      qualifications as may be necessary to maintain the effectiveness thereof during
      the Registration Period, (iii) take such other actions as may be necessary to
      maintain such registrations and qualifications in effect at all times during
      the
      Registration Period, and (iv) take all other actions reasonably necessary or
      advisable to qualify the Registrable Securities for sale in such jurisdictions;
      provided, however, that the Company shall not be required in connection
      therewith or as a condition thereto to (x) qualify to do business in any
      jurisdiction where it would not otherwise be required to qualify but for this
      Section
      3(d),
      (y)
      subject itself to general taxation in any such jurisdiction, or (z) file a
      general consent to service of process in any such jurisdiction. The Company
      shall promptly notify the Holder who holds Registrable Securities of the receipt
      by the Company of any notification with respect to the suspension of the
      registration or qualification of any of the Registrable Securities for sale
      under the securities or “blue sky” laws of any jurisdiction in the United States
      or its receipt of actual notice of the initiation or threatening of any
      proceeding for such purpose.

    

    e.
      As
promptly
      as practicable after becoming aware of such event, the Company shall notify
      each
      Holder of the happening of any event, of which the Company has knowledge, as
      a
      result of which the prospectus included in any Registration Statement, as then
      in effect, includes an untrue statement of a material fact or omission to state
      a material fact required to be stated therein or necessary to make the
      statements therein not misleading, and use its best efforts promptly to prepare
      a supplement or amendment to any Registration Statement to correct such untrue
      statement or omission, and deliver such number of copies of such supplement
      or
      amendment to each Holder as such Holder may reasonably request; provided that,
      for not more than twenty five (25) consecutive trading days (or a total of
      not
      more than fifty (50) trading days while there is an outstanding balance on
      the
      Debenture), the Company may delay the disclosure of material non-public
      information concerning the Company (as well as prospectus or Registration
      Statement updating) the disclosure of which at the time is not, in the good
      faith opinion of the Company, in the best interests of the Company (an
“Allowed
      Delay”);
      provided,
      however,
      that
      such 25 and 50 day grace periods shall be extended to 45 and 90 days,
      respectively, in the event that such Allowed Delay is pursuant to an acquisition
      by the Company which is required to be reported under Item 2 of Form 8-K and
      for
      which pro forma financial information is required to be reported pursuant to
      Regulation S-X (or Regulation S-B) promulgated under the 1933 Act and
provided,
      further,
      that
      the Company shall promptly (i) notify
      the Holders in writing of the existence of (but in no event, without the prior
      written consent of a Holder, shall the Company disclose to such holder any
      of
      the facts or circumstances regarding) material non-public information giving
      rise to an Allowed Delay and (ii) advise
      the Holder in writing to cease all sales under such Registration Statement
      until
      the end of the Allowed Delay. The Holder shall be given no less than two trading
      days prior notice by the Company that an Allowed Delay is about to occur. Upon
      expiration of the Allowed Delay, the Company shall again be bound by the first
      sentence of this Section 3e. with respect to the information giving rise
      thereto. 

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

    

    It
      is the
      intention of the parties that interest payable under any of the terms of this
      Agreement shall not exceed the maximum amount permitted under any applicable
      law. If a law, which applies to this Agreement which sets the maximum interest
      amount, is finally interpreted so that the interest in connection with this
      Agreement exceeds the permitted limits, then: (1) any such interest shall be
      reduced by the amount necessary to reduce the interest to the permitted limit;
      and (2) any sums already collected (if any) from the Company which exceed the
      permitted limits will be refunded to the Company. The Holder may choose to
      make
      this refund by reducing the amount that the Company owes under this Agreement
      or
      by making a direct payment to the Company. If a refund reduces the amount that
      the Company owes the Holder, the reduction will be treated as a partial payment.
      In the event that any provision of this Agreement is held by a court of
      competent jurisdiction to be excessive in scope or otherwise invalid or
      unenforceable, such provision shall be adjusted rather than voided, if possible,
      so that it is enforceable to the maximum extent possible, and the validity
      and
      enforceability of the remaining provisions of this Agreement will not in any
      way
      be affected or impaired thereby. 

     

    f.
       The
      Company shall use its best efforts to prevent the issuance of any stop order
      or
      other suspension of effectiveness of a Registration Statement, or the suspension
      of the qualification of any of the Registrable Securities for sale in any
      jurisdiction and, if such an order or suspension is issued, to obtain the
      withdrawal of such order or suspension at the earliest possible moment and
      to
      notify the Holder of the issuance of such order and the resolution thereof.
      The
      Company will immediately notify the Holder of a proceeding, or threat of
      proceeding, the result of which could effect the effectiveness of the
      registration statement.

    

    g. The
      Company shall permit the Holder and its counsel, of the Holder's choosing,
      to
      review and comment upon all Registration Statements, amendments and supplements,
      at least seven (7) days prior to filing. The Company shall not file any
      Registration Statement with which Holder or its counsel reasonably objects.
      

    

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

    

    h. At
      the
      request of the Holder, the Company shall cause to be furnished to the Holder,
      on
      the date of the effectiveness of a Registration Statement, an opinion, dated
      as
      of such date, of counsel representing the Company for purposes of such
      Registration Statement, in the form of Exhibit D attached to the Subscription
      Agreement.

    

    i. The
      Company shall make available for inspection by (i) the Holder and (ii) one
      firm
      of attorneys and one firm of accountants or other agents retained by the Holder
      (collectively, the “Inspectors”)
      all
      pertinent financial and other records, and pertinent corporate documents and
      properties of the Company (collectively, the “Records”),
      as
      shall be reasonably deemed necessary by each Inspector, and cause the Company's
      officers, directors and employees to supply all information which any Inspector
      may reasonably request; provided, however, that each Inspector shall hold in
      strict confidence and shall not make any disclosure (except to the Holder)
      or
      use of any Record or other information which the Company determines in good
      faith to be confidential, and of which determination the Inspectors are so
      notified, unless (a) the disclosure of such Records is necessary to avoid or
      correct a misstatement or omission in any Registration Statement or is otherwise
      required under the Securities Act, (b) the release of such Records is ordered
      pursuant to a final, non-appealable subpoena or order from a court or government
      body of competent jurisdiction, or (c) the information in such Records has
      been
      made generally available to the public other than by disclosure in violation
      of
      this or any other agreement of which the Inspector has knowledge. The Holder
      agrees that it shall, upon learning that disclosure of such Records is sought
      in
      or by a court or governmental body of competent jurisdiction or through other
      means, give prompt notice to the Company and allow the Company, at its expense,
      to undertake appropriate action to prevent disclosure of, or to obtain a
      protective order for, the Records deemed confidential.

    

    j. The
      Company shall hold in confidence and not make any disclosure of information
      concerning the Holder unless (i) disclosure of such information is necessary
      to
      comply with federal or state securities laws, (ii) the disclosure of such
      information is necessary to avoid or correct a misstatement or omission in
      any
      Registration Statement, (iii) the release of such information is ordered
      pursuant to a subpoena or other final, non-appealable order from a court or
      governmental body of competent jurisdiction, or (iv) such information has been
      made generally available to the public other than by disclosure in violation
      of
      this Agreement or any other agreement. The Company agrees that it shall, upon
      learning that disclosure of such information concerning a Holder is sought
      in or
      by a court or governmental body of competent jurisdiction or through other
      means, give prompt written notice to the Holder and allow the Holder, at the
      Holder's expense, to undertake appropriate action to prevent disclosure of,
      or
      to obtain a protective order for, such information.

    

    k. The
      Company shall use all commercially reasonable best efforts to secure designation
      and quotation of all the Registrable Securities covered by any Registration
      Statement on the Principal Market. If, despite the Company's best efforts,
      the
      Company is unsuccessful in satisfying this obligation, it shall use its best
      efforts to cause all the Registrable Securities covered by any Registration
      Statement to be listed on each other national securities exchange and automated
      quotation system, if any, on which securities of the same class or series issued
      by the Company are then listed, if any, if the listing of such Registrable
      Securities is then permitted under the rules of such exchange or system. If,
      despite the Company's best efforts, the Company is unsuccessful in satisfying
      its obligation in this Section, it will use its best efforts to secure the
      inclusion for quotation with Pink Sheets, LLC. The Company shall pay all
      reasonable fees and expenses in connection with satisfying its obligation under
      this Section
      3(k).

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    l. The
      Company shall cooperate with the Holder to facilitate the timely preparation
      and
      delivery of certificates (not bearing any restrictive legend) representing
      the
      Registrable Securities to be offered pursuant to a Registration Statement and
      enable such certificates to be in such denominations or amounts, as the case
      may
      be, as the Holder may reasonably request and registered in such names of the
      Persons who shall acquire such Registrable Securities from the Holder, as the
      Holder may request.

    

    m. The
      Company shall provide a transfer agent for all the Registrable Securities not
      later than the Closing Date of the first Registration Statement filed pursuant
      hereto.

    

    n. If
      requested by the Holder, the Company shall (i) as soon as reasonably practical,
      incorporate in a prospectus supplement or post-effective amendment such
      information as Holder reasonably determines should be included therein relating
      to the sale and distribution of Registrable Securities, including, without
      limitation, information with respect to the offering of the Registrable
      Securities to be sold in such offering; (ii) make all required filings of such
      prospectus supplement or post-effective amendment as soon as notified of the
      matters to be incorporated in such prospectus supplement or post-effective
      amendment; and (iii) supplement or make amendments to any Registration Statement
      if reasonably requested by Holder.

    

    o. The
      Company shall use its best efforts to cause the Registrable Securities covered
      by the applicable Registration Statement to be registered with or approved
      by
      such other governmental agencies or authorities as may be necessary to
      consummate the disposition of such Registrable Securities.

    

    p. The
      Company shall make available to the Holder as soon as reasonably practical,
      but
      not later than ninety (90) calendar days after the close of the period covered
      thereby, an earnings statement (in form complying with the provisions of Rule
      158 under the Securities Act) covering a 12-month period beginning not later
      than the first day of the Company's fiscal quarter next following the effective
      date of any Registration Statement. Filing via EDGAR shall constitute
      delivery.

    

    q. The
      Company shall otherwise use its best efforts to comply with all applicable
      rules
      and regulations of the SEC in connection with any registration
      hereunder.

    

    r. Within
      one (1) business day after the Registration Statement which includes Registrable
      Securities is declared effective by the SEC, the Company shall deliver, and
      shall cause legal counsel for the Company to deliver, to the transfer agent
      for
      such Registrable Securities, with copies to the Holder, confirmation that such
      Registration Statement has been declared effective by the SEC in the form
      attached hereto as Exhibit
      A.
      Failure
      to do so will result in the Face Amount on the Debentures to be increased by
      two
      percent (2%) per day, as liquidated damages, and not as a penalty.

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

    

    s. After
      the
      SEC declares the Registration Statement effective, the Company shall file a
      prospectus covering the resale of the Shares (“Prospectus”)
      within
      two (2) trading days. In the event the Company fails to file a final prospectus
      within two (2) trading days of the Effective Date, then the Company shall pay
      the Holder the sum of five percent (5%) of the Face Amount due to the Holder
      for
      each two (2) trading day period, pro-rata, compounded daily, following the
      two
      (2) trading day period until the Prospectus is filed.

    

    t. The
      Company shall take all other reasonable actions necessary to expedite and
      facilitate disposition by the Holder of the Registrable Securities pursuant
      to a
      Registration Statement.

    

    4.    Obligations
      Of The Holder.

    

    a. At
      least
      five (5) calendar days prior to the first anticipated filing date of a
      Registration Statement, the Company shall notify the Holder in writing of the
      information the Company requires from the Holder. The Holder covenants and
      agrees that, in connection with any resale of Registrable Securities by it
      pursuant to a Registration Statement, it shall comply with the “Plan of
      Distribution” section of the current prospectus relating to such Registration
      Statement.

    

    b. The
      Holder, by the Holder's acceptance of the Registrable Securities, agrees to
      cooperate with the Company as reasonably requested by the Company in connection
      with the preparation and filing of any Registration Statement hereunder and
      in
      responding to SEC comments in connection therewith.

    

    c. The
      Holder agrees that, upon receipt of any notice from the Company of the happening
      of any event of the kind described in Section
      3(f)
      hereof
      or the first sentence of Section
      3(e)
      hereof,
      the Holder will immediately discontinue disposition of Registrable Securities
      pursuant to any Registration Statement(s) covering such Registrable Securities
      until Holder's receipt of the copies of the supplemented or amended prospectus
      contemplated by Section
      3(f)
      hereof
      or the first sentence of Section
      3(e)
      hereof.

    

    5.    Expenses
      Of Registration.

    

    All
      expenses, other than underwriting discounts and commissions, incurred in
      connection with registrations, filings or qualifications pursuant to
Section
      2
      and
Section
      3
      hereof,
      including, without limitation, all registration, listing and qualifications
      fees, printing and accounting fees, and reasonable fees and disbursements of
      counsel for the Company shall be paid by, and are the sole obligation of, the
      Company.

    

    6.    Indemnification.

    

    In
      the
      event any Registrable Securities are included in a Registration Statement under
      this Agreement:

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

    a. To
      the
      fullest extent permitted by law, the Company will, and hereby agrees to,
      indemnify, hold harmless and defend the Holder who holds such Registrable
      Securities, the directors, officers, partners, employees, agents,
      representatives of, and each Person, if any, who controls Holder within the
      meaning of the Securities Act or the Exchange Act) (each, an “Indemnified
      Person”),
      against any losses, claims, damages, liabilities, judgments, fines, penalties,
      charges, costs, attorneys' fees, amounts paid in settlement or expenses, joint
      or several (collectively, “Claims”),
      incurred in investigating, preparing or defending any action, claim, suit,
      inquiry, proceeding, investigation or appeal taken from the foregoing by or
      before any court or governmental, administrative or other regulatory agency,
      body or the SEC, whether pending or threatened, whether or not an indemnified
      party is or may be a party thereto (Indemnified
      Damages”),
      to
      which any of them may become subject insofar as such Claims (or actions or
      proceedings, whether commenced or threatened, in respect thereof) arise out
      of
      or are based upon: (i) any untrue statement or alleged untrue statement of
      a
      material fact in a Registration Statement or any post-effective amendment
      thereto or in any filing made in connection with the qualification of the
      offering under the securities or other “blue sky” laws of any jurisdiction in
      which Registrable Securities are offered (“Blue
      Sky Filing”),
      or
      the omission or alleged omission to state a material fact required to be stated
      therein or necessary to make the statements therein, in light of the
      circumstances under which the statements therein were made, not misleading,
      (ii)
      any untrue statement or alleged untrue statement of a material fact contained
      in
      the final prospectus (as amended or supplemented, if the Company files any
      amendment thereof or supplement thereto with the SEC) or the omission or alleged
      omission to state therein any material fact necessary to make the statements
      made therein, in light of the circumstances under which the statements therein
      were made, not misleading, or (iii) any violation or alleged violation by the
      Company of the Securities Act, the Exchange Act, any other law, including,
      without limitation, any state securities law, or any rule or regulation
      thereunder relating to the offer or sale of the Registrable Securities pursuant
      to a Registration Statement (the matters in the foregoing clauses (i) through
      (iii) being, collectively, “Violations”).
      Subject to the restrictions set forth in Section
      6(c)
      hereof
      with respect to the number of legal counsel, the Company shall reimburse the
      Holder and each such controlling person, promptly as such expenses are incurred
      and are due and payable, for any reasonable legal fees or other reasonable
      expenses incurred by them in connection with investigating or defending any
      such
      Claim. Notwithstanding anything to the contrary contained herein, the
      indemnification agreement contained in this Section
      6(a):
      (i)
      shall not apply to a Claim arising out of or based upon a Violation committed
      by
      any Indemnified Person or which occurs in reliance upon and in conformity with
      information furnished in writing to the Company by any Indemnified Person
      expressly for use in connection with the preparation of the Registration
      Statement or any such amendment thereof or supplement thereto, if such
      prospectus were timely made available by the Company pursuant to Section
      3(c)
      hereof;
      (ii)
      shall not be available to the extent such Claim is based on (a) a failure of
      the
      Holder to deliver or to cause to be delivered the prospectus made available
      by
      the Company or (b) the Indemnified Person's use of an incorrect prospectus
      despite being promptly advised in advance by the Company in writing not to
      use
      such incorrect prospectus; and (iii) shall not apply to amounts paid in
      settlement of any Claim if such settlement is effected without the prior written
      consent of the Company, which consent shall not be unreasonably withheld. Such
      indemnity shall remain in full force and effect regardless of any investigation
      made by or on behalf of the Indemnified Person and shall survive the resale
      of
      the Registrable Securities by the Holder pursuant to the Registration
      Statement.

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

       

    

    b. In
      connection with any Registration Statement in which a Holder is participating,
      each such Holder agrees severally and not jointly to indemnify, hold harmless
      and defend, to the same extent and in the same manner set forth in Section
      6(a),
      the Company, each of its directors, each of its officers who signs the
      Registration Statement, each person, if any, who controls the Company within
      the
      meaning of the 1933 Act or the 1934 Act, any underwriter and any other
      shareholder selling securities pursuant to the Registration Statement or any
      of
      its directors or officers or any person who controls such shareholder or
      underwriter within the meaning of the 1933 Act or the 1934 Act (collectively
      and
      together with an Indemnified Person, an “Indemnified
      Party”),
      against any Claim to which any of them may become subject, under the 1933 Act,
      the 1934 Act or otherwise, insofar as such Claim arises out of or is based
      upon
      any Violation by such Investor, in each case to the extent (and only to the
      extent) that such Violation occurs in reliance upon and in conformity with
      written information furnished to the Company by such Investor expressly for
      use
      in connection with such Registration Statement; and subject to Section 6(c)
      such
      Investor will reimburse any legal or other expenses (promptly as such expenses
      are incurred and are due and payable) reasonably incurred by them in connection
      with investigating or defending any such Claim; provided,
      however,
      that
      the indemnity agreement contained in this Section 6(b) shall not apply to
      amounts paid in settlement of any Claim if such settlement is effected without
      the prior written consent of such Holder, which consent shall not be
      unreasonably withheld; provided,
      further,
      however,
      that
      the Holder shall be liable under this Agreement (including this Section 6(b)
      and
      Section 7) for only that amount as does not exceed the net proceeds to such
      Investor as a result of the sale of Registrable Securities pursuant to such
      Registration Statement. Such indemnity shall remain in full force and effect
      regardless of any investigation made by or on behalf of such Indemnified Party.
      Notwithstanding anything to the contrary contained herein, the indemnification
      agreement contained in this Section 6(b) with respect to any preliminary
      prospectus shall not inure to the benefit of any Indemnified Party if the untrue
      statement or omission of material fact contained in the preliminary prospectus
      was corrected on a timely basis in the prospectus, as then amended or
      supplemented.

    

    c. Promptly
      after receipt by an Indemnified Person or Indemnified Party under this
Section
      6
      of
      notice of the commencement of any action or proceeding (including any
      governmental action or proceeding) involving a Claim, such Indemnified Person
      or
      Indemnified Party shall, if a Claim in respect thereof is to be made against
      any
      indemnifying party under this Section
      6,
      deliver
      to the indemnifying party a written notice of the commencement thereof, and
      the
      indemnifying party shall have the right to participate in, and, to the extent
      the indemnifying party so desires, jointly with any other indemnifying party
      similarly noticed, to assume control of the defense thereof with counsel
      mutually satisfactory to the indemnifying party and the Indemnified Person
      or
      the Indemnified Party, as the case may be; provided, however, that an
      Indemnified Person or Indemnified Party shall have the right to retain its
      own
      counsel with the fees and expenses to be paid by the indemnifying party, if,
      in
      the reasonable opinion of counsel retained by the indemnifying party, the
      representation by such counsel of the Indemnified Person or Indemnified Party
      and the indemnifying party would be inappropriate due to actual or potential
      differing interests between such Indemnified Person or Indemnified Party and
      any
      other party represented by such counsel in such proceeding. The indemnifying
      party shall pay for only one separate legal counsel for the Indemnified Persons
      or the Indemnified Parties, as applicable, and such counsel shall be selected
      by
      the Holder, if the Holder is entitled to indemnification hereunder, or the
      Company, if the Company is entitled to indemnification hereunder, as applicable.
      The Indemnified Party or Indemnified Person shall cooperate fully with the
      indemnifying party in connection with any negotiation or defense of any such
      action or claim by the indemnifying party and shall furnish to the indemnifying
      party all information reasonably available to the Indemnified Party or
      Indemnified Person which relates to such action or claim. The indemnifying
      party
      shall keep the Indemnified Party or Indemnified Person fully apprised at all
      times as to the status of the defense or any settlement negotiations with
      respect thereto. No indemnifying party shall be liable for any settlement of
      any
      action, claim or proceeding effected without its written consent, provided,
      however, that the indemnifying party shall not unreasonably withhold, delay
      or
      condition its consent. No indemnifying party shall, without the consent of
      the
      Indemnified Party or Indemnified Person, consent to entry of any judgment or
      enter into any settlement or other compromise which does not include as an
      unconditional term thereof the giving by the claimant or plaintiff to such
      Indemnified Party or Indemnified Person of a release from all liability in
      respect to such Claim. Following indemnification as provided for hereunder,
      the
      indemnifying party shall be subrogated to all rights of the Indemnified Party
      or
      Indemnified Person with respect to all third parties, firms or corporations
      relating to the matter for which indemnification has been made. The failure
      to
      deliver written notice to the indemnifying party within a reasonable time of
      the
      commencement of any such action shall not relieve such indemnifying party of
      any
      liability to the Indemnified Person or Indemnified Party under this Section
      6,
      except
      to the extent that the indemnifying party is actually prejudiced in its ability
      to defend such action.

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

       

    

    d. The
      indemnification required by this Section
      6
      shall be
      made by periodic payments of the amount thereof during the course of the
      investigation or defense, as and when bills are received or Indemnified Damages
      are incurred.

    

    e. The
      indemnity agreements contained herein shall be in addition to (i) any cause
      of
      action or similar right of the Indemnified Party or Indemnified Person against
      the indemnifying party or others, and (ii) any liabilities the indemnifying
      party may be subject to pursuant to the law.

    

    7.    Contribution.

    

    To
      the
      extent any indemnification by an indemnifying party is prohibited or limited
      by
      law, the indemnifying party agrees to make the maximum contribution with respect
      to any amounts for which it would otherwise be liable under Section
      6
      hereof
      to the fullest extent permitted by law; provided, however, that: (i) no
      contribution shall be made under circumstances where the maker would not have
      been liable for indemnification under the fault standards set forth in
Section
      6
      hereof;
      (ii) no seller of Registrable Securities guilty of fraudulent misrepresentation
      (within the meaning of Section 11(f) of the Securities Act) shall be entitled
      to
      contribution from any seller of Registrable Securities who was not guilty of
      fraudulent misrepresentation; and (iii) contribution by any seller of
      Registrable Securities shall be limited in amount to the net amount of proceeds
      received by such seller from the sale of such Registrable
      Securities.

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    8.    Reports
      Under The Exchange Act.
      

     

    With
      a
      view to making available to the Holders the benefits of Rule 144 under the
      Securities Act or any similar rule or regulation of the SEC that may at any
      time
      permit the Investors to sell securities of the Company to the public without
      registration (“Rule
      144”)
      the
      Company 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 Securities Act and the Exchange Act so long as the Company
      remains subject to such requirements and the filing of such reports and other
      documents as are required by the applicable provisions of Rule 144; and

    

    c. furnish
      to the Holder so long as the Holder owns Registrable Securities, 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) 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 Investors to sell
      such
      securities pursuant to Rule 144 without registration. 

    

    9.    No
      Assignment Of Registration Rights.

    

    The
      registration rights and obligations under this Agreement shall not be
      assignable. 

    

    10.   Amendment
      Of Registration Rights.

    

    Provisions
      of this Agreement may be amended and the observance thereof may be waived
      (either generally or in a particular instance and either retroactively or
      prospectively), only with the written consent of both the Company and the Holder
      of the Registrable Securities. Any amendment or waiver effected in accordance
      with this Section
      10
      shall be
      binding upon the Holder and the Company. No such amendment shall be effective
      to
      the extent that it applies to less than all of the Holders of the Registrable
      Securities. No consideration shall be offered or paid to any Person to amend
      or
      consent to a waiver or modification of any provision of any of this Agreement
      unless the same consideration also is offered to all of the parties to this
      Agreement.

    

    11.   Miscellaneous.

    

    a. Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided a confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one (1) day after deposit with a nationally recognized overnight
      delivery service, in each case properly addressed to the party to receive the
      same. The addresses and facsimile numbers for such communications shall
      be:

    

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

       

    

    If
      to the
      Company:  Marmion
      Industries Corp.

    9103
      Emmott Road, Building 6, Suite A 

    Houston,
      Texas 77040

    Attention:
      Wilbert Marmion

    Telephone:
      (713) 466-6585

    Facsimile:
      (713) 466-6742

    

    If
      to the
      Holder:          Dutchess
      Capital Management, LLC 

    50
      Commonwealth Ave, Suite 2

    Boston,
      MA 02116

    Attention:
      Douglas Leighton

    Telephone:
      (617) 301-4700

    Facsimile:
      (617) 249-0947

    

    Each
      party shall provide five (5) business days prior notice to the other party
      of
      any change in address, phone number or facsimile number.

    

    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.
       All
      disputes arising under this Agreement shall be governed by and interpreted
      in
      accordance with the laws of the Commonwealth of Massachusetts, without regard
      to
      principles of conflict of laws. The Parties shall submit all disputes arising
      under this Agreement to arbitration in Boston, Massachusetts before a single
      arbitrator of the American Arbitration Association (the “AAA”).
      The
      arbitrator shall be selected by application of the rules of the AAA, or by
      mutual agreement of the parties, except that such arbitrator shall be an
      attorney admitted to practice law in the Commonwealth of Massachusetts. No
      Party
      shall challenge the jurisdiction or venue provisions as provided in this
      Section. Nothing in this Section shall limit the Holder's right to obtain an
      injunction for a breach of this Agreement from a court of law.
      Any
      injunction obtained shall remain in full force and effect until the arbitrator,
      as set forth in section c., fully adjudicates the dispute.

    

    d. This
      Agreement and the Transaction Documents constitute
      the entire set of agreements among the parties hereto with respect to the
      subject matter hereof and thereof. There are no restrictions, promises,
      warranties or undertakings, other than those set forth or referred to in the
      Transaction Documents.

    

    e. This
      Agreement and the Transaction Documents supersede all prior agreements and
      understandings among the parties hereto with respect to the subject matter
      hereof and thereof.

    

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

       

    

    f. The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

    

    g. This
      Agreement may be executed in two or more counterparts, all of which taken
      together shall constitute one instrument. Execution and delivery of this
      Agreement by exchange of facsimile copies bearing the facsimile signature of
      a
      party shall constitute a valid and binding execution and delivery of this
      Agreement by such party. Such facsimile copies shall constitute enforceable
      original documents.

    

    h. Each
      Party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as the other Party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

    

    i. All
      consents and other determinations to be made by the Holder pursuant to this
      Agreement shall be made, unless otherwise specified in this Agreement, by the
      Holder holding a majority of the Registrable Securities.

    

    j. The
      language used in this Agreement will be deemed to be the language chosen by
      the
      Parties to express their mutual intent and no rules of strict construction
      will
      be applied against any party.

    

    k. The
      Company hereby represent and warrants to the Holder that: (i) it has voluntarily
      entered into this Agreement of its own freewill, (ii) it is not entering into
      this Agreement under economic duress, (iii) the terms of this Agreement are
      reasonable and fair to the Company, and (iv) the Company has had independent
      legal counsel of its own choosing review this Agreement, advise the Company
      with
      respect to this Agreement, and represent the Company in connection with its
      entering into this Agreement.

    

    l. Notwithstanding
      anything in this Agreement to the contrary, the parties hereto hereby
      acknowledge and agree to the following:
      (i)
Holder
      makes no representations
      or covenants that it will not engage in trading in the securities of the
      Company; (ii) the Company shall, within 4 business day following the date
      hereof, file a current report on Form 8-K disclosing the material terms of
      the
      transactions contemplated hereby and in the other Transaction Documents; (ii)
      the Company [has not] and shall not provide material non-public information
      to
      the Holder unless prior thereto the Holder shall have executed a written
      agreement regarding the confidentiality and use of such information; and (iii)
      the Company understands and confirms that the Holder will be relying on the
      acknowledgements set forth in clauses (i) through (iii) above if the Holder
      effects any transactions in the securities of the Company. 

    

    12.    Waiver.

    

    The
      Holder's delay or failure at any time or times hereafter to require strict
      performance by Company of any undertakings, agreements or covenants shall not
      waive, affect, or diminish any right of the Holder under this Agreement to
      demand strict compliance and performance herewith. Any waiver by the Holder
      of
      any Event of Default shall not waive or affect any other Event of Default,
      whether such Event of Default is prior or subsequent thereto and whether of
      the
      same or a different type. None of the undertakings, agreements and covenants
      of
      the Company contained in this Agreement, and no Event of Default, shall be
      deemed to have been waived by the Holder, nor may this Agreement be amended,
      changed or modified, unless such waiver, amendment, change or modification
      is
      evidenced by an instrument in writing specifying such waiver, amendment, change
      or modification and signed by the Holder. 

    

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

       

    

    13.    Payment
      Of Liquidated Damages.

    

    Any
      liquidated damages or other fees incurred herein by the Company for failure
      to
      act in a timely manner shall be charged to the Face Amount of the Debenture
      (as
      defined in the Debenture), unless specifically noted otherwise. The Holder
      reserves the rights to take payment of such amounts in cash or in Common Stock
      priced at the Conversion Price (as defined in the Debenture).

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

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

    
      	 	 	 
	 	
              MARMION
                INDUSTRIES CORP. 

            
	 
 	 
 	 
 
	
            	By  	/s/ Wilbert Marmion
	 	
              

              Name:
                Wilbert
                Marmion

                Title:  
                  Chief
                  Executive Officer

              

            

    

    

      
        	 	 	 
	 	
                By  
                  

              	/s/ Ellen
                Raidl
	 	 	
                
                  

                

                Name:
                  Ellen Raidl

                Title: 
                  Treasurer

              

      

      

        
          	 	 	 
	 	
                  
                    DUTCHESS
                      PRIVATE EQUITIES FUND, LTD.

                  

                
	 	 	 
	 	
                  By:  
                    

                	/s/ Douglas
                  H.
                  Leighton
	 	 	
                  
                    

                  

                  
                    Name:
                      Douglas H. Leighton

                    Title:  
                      Director 

                  

                

        

         

      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

    

    FORM
      OF NOTICE OF EFFECTIVENESS

    OF
      REGISTRATION STATEMENT

    

    Date:
      __________

     

    [TRANSFER
      AGENT]

    

    Re: Marmion
      Industries Corp..

    

    Ladies
      and Gentlemen:

    

    We
      are
      counsel to Marmion Industries Corp., a Nevada corporation (the “Company”),
      and
      have represented the Company in connection with that certain Subscription
      Agreement (the "Subscription Agreement") entered into by and among the Company
      and Dutchess Private Equities Fund, LTD, a Cayman Islands exempted company
      (the
“Holder”)
      pursuant to which the Company has agreed to issue to the Holder shares of the
      Company's common stock, $0.001 par value per share (the “Common
      Stock”)
      on the
      terms and conditions set forth in the Subscription Agreement. Pursuant to the
      Subscription Agreement, the Company also has entered into a Registration Rights
      Agreement with the Holder (the “Registration
      Rights Agreement”)
      pursuant to which the Company agreed, among other things, to register the
      Registrable Securities (as defined in the Registration Rights Agreement),
      including the shares of Common Stock issued or issuable under the Subscription
      Agreement under the Securities Act of 1933, as amended (the “Securities
      Act”).
      In
      connection with the Company's obligations under the Registration Rights
      Agreement, on ____________ ___, 200__, the Company filed a Registration
      Statement on Form ________ (File No. 333-________) (the “Registration
      Statement”)
      with
      the United States Securities and Exchange Commission (the “SEC”)
      relating to the Registrable Securities which names the Holder as a selling
      shareholder thereunder.

    

    In
      connection with the foregoing, we advise you that the
      Registration Statement has become effective
      under
      the Securities Act at [enter the time of effectiveness] on [enter
      the date of effectiveness]
      and to
      the best of our knowledge, after telephonic inquiry of a member of the SEC’s
      staff, no stop order suspending its effectiveness has been issued and no
      proceedings for that purpose are pending before, or threatened by, the SEC
      and
      the Registrable Securities are available for resale under the Securities Act
      pursuant to the Registration Statement.

     

    Very
      truly yours,

    

    [Company
      Counsel]

    

    
      	 	
              By:

            	
               

            

      	 	 	
              
 

    

    
      	
              cc:

            	
              Dutchess
                Private Equities Fund, LTD

            

    

     

    
      
        
        

      

      
        19

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