8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) March 22, 2007

Marmion Industries Corp.

(Exact name of registrant as specified in its charter)

Nevada	000-31507	06-158816
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

9103 Emmott Road, Building 6, Suite A, Houston, Texas	77040
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (713) 466-3585

None

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 1 - Registrant’s Business and Operations

Item 1.01 Entry into a Material Definitive Agreement.

See Item 3.02 below.

Section 3 - Securities and Trading Markets

Item 3.02 Unregistered Sales of Equity Securities.

On March 22, 2007, we entered into a Subscription Agreement with certain accredited investors pursuant to which they agreed to issue up to $3,000,000 of principal amount of convertible promissory notes and warrants to purchase 100,000,000 shares of our common stock (the “Purchase Agreement”). The convertible notes have a 5 year term and bear interest at twelve percent (12%). Beginning on the 7^th month following issuance, we are required to make amortizing payments of principal plus interest in the amount equal to $224,375.41. If a registration statement is effective, this amount can be satisfied by conversion of the debenture. The notes are convertible into our common stock pursuant to a “variable conversion price” equal to the lesser of $0.075 and 75% of the lowest bid price for our common stock during the 20 trading day period prior to conversion. Provided, however, upon an event of default (as defined) this conversion price will be reduced to the lesser of the then current conversion price and 50% of the lowest bid price for the 15 trading days prior to conversion. In no event shall the conversion price be less than $0.001 per share. In addition, upon an event of default (as defined) the holder can exercise its right to increase the face amount of the Debenture by 10% for the first default and by 10% for each subsequent event of default. In addition, the Holder may else to increase the face amount by 2.5% per month paid as liquidated damages The maximum amount that the face amount may be increased by holder for all defaults under the note and any other transaction document is 30%,. The debenture is secured by a 1^st lien, a guaranty by our subsidiary and a pledge of 4 million shares of Mr. Marmion’s series B preferred stock

Under the terms of these notes and the related warrants, the notes and the warrants are convertible/exercisable by any holder only to the extent that the number of shares of common stock issuable pursuant to such securities, together with the number of shares of common stock owned by such holder and its affiliates (but not including shares of common stock underlying unconverted shares of the note or unexercised portions of the warrants) would not exceed 4.99% of our then outstanding common stock as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended

Subject to certain terms and conditions set forth therein, the notes are redeemable by us at a rate of between 125% of the outstanding principal amount of the notes plus interest. In addition, so long as the average daily price of our common stock is below the “initial market price” (as defined) we may prepay a such monthly portion due on the outstanding notes and the investors agree that no conversions will take place during such month where this option is exercised by us.

The notes were issued with warrants to purchase up to 100,000,000 shares of our common stock at an exercise price of $0.015 per share, subject to adjustment. To the extent that the shares of common stock underlying the warrant of not registered for resale, the warrant holder may designate a "cashless exercise option." This option entitles the warrant holders to elect to receive fewer shares of common stock without paying the cash exercise price. The number of shares to be determined by a formula based on the total number of shares to which the warrant holder is entitled, the current market value of the common stock and the applicable exercise price of the warrant.

We agreed to register the secondary offering and resale of the shares issuable upon conversion of the notes, the shares issuable upon exercise of the warrants by April 16, 2007.

We relied on the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, for the offer and sale of the notes and the warrants.

The paragraphs above describe certain of the material terms of the financing transaction with the Subscribers. Such description is not a complete description of the material terms of the financing transaction and is qualified in its entirety by reference to the agreements entered into in connection with the financing which are included as exhibits to this Current Report on Form 8-K.

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Section 9 - Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(c)Exhibits.

Exhibit Number Description

10.1 Subscription Agreement

10.2 Registration Rights Agreement

10.3 Form of Debenture

10.4 Security Agreement

10.5 Form of Warrant

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Marmion Industries, Corp
Date: March 26, 2007	By:	/s/ Wilbert H. Marmion
		Wilbert H. Marmion, President

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EX-10.1

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 issuanceprovided, 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.

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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.

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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”)

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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.

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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.

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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.

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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.

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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.

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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

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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.

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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.

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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)

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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.

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   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.

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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

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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 theCompany 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

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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

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EX-10.2

DEBENTURE 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.

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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 SECone 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.

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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.

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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 becomeeffective 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.

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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.

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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.

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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.

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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.

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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).

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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.

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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:

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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.

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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.

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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.

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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:

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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 Documentsconstitute 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.

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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.

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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]

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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

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EX-10.3

DEBENTURE

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 OF 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 “COMMISSION” OR THE “SEC”) 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.

FACE AMOUNT:	$3,000,000
PRICE:	$3,000,000
DEBENTURE NUMBER:	March 2007 101
ISSUANCE DATE:	March 22, 2007
MATURITY DATE:	March 22, 2012

FOR VALUE RECEIVED, Marmion Industries Corp., a Nevada corporation (the “Company”), hereby promises to pay DUTCHESS PRIVATE EQUITIES FUND, LTD. (the “Holder”) by March 22, 2007 (the “Maturity Date”), the principal amount of Three Million U.S. Dollars ($3,000,000), and to pay interest and redemption on the principal amount thereof, and any accrued penalties, in such amounts, at such times and on such terms and conditions as are specified herein.

This Debenture (this “Debenture”) is subject to automatic conversion at the end of five (5) years from the date of issuance, at which time the Debenture outstanding will be automatically converted based upon the formula set forth in Article 3.2(c) hereof.

Article 1Interest.

(a)The Company shall pay interest (“Interest”) at the rate of twelve percent (12%) per annum, compounded daily, on the unpaid Face Amount of this Debenture at such times and in such amounts as outlined in this Article 1. The Company shall make mandatory monthly prepayments of interest (the “Interest Payments”), in an amount equal to the interest accrued on the principal balance of the Debenture from the last Interest Payment until such time as the current Interest Payment is due and payable. The Interest Payments shall commence the month of the Issuance Date and shall continue for five (5) months thereafter (for a total of six (6) Interest Payments), and the Interest Payments shall be paid the last day of each such month. The Holder shall retain the right, but not the obligation, to convert any Interest due and payable under this Debenture on terms outlined in Section 3 of this Debenture.

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(b)Any monies paid to the Holder in excess of the Interest due when paid shall be credited toward the redemption of the Face Amount of this Debenture.

Article 2Method of Payment.

Section 2.1Repayment of Debenture.

(a)Commencing on the seventh (7th) month following the Issuance Date, the Company shall make monthly amortizing payments to the Holder (the “Amortizing Payments”) consisting of (i) the Interest outlined in Article 1 hereof, plus the principal amount at the Redemption Rate (as defined in Article 14 hereof), with such Amortizing Payments to be paid on the last business day of each month (each, a “Payment Date”) for so long as there is an outstanding balance on this Debenture, in an amount equal to $224,375.41 (the “Amortizing Payment Amount”). Amounts of conversion of Face Amount and Interest made by Holder or the Company pursuant to Section 2.1 or Article 3, amounts redeemed pursuant to 2.1(f) shall first be applied to reduce the amount of the Face Amount.

(b)Notwithstanding any provision to the contrary in this Debenture, the Company may pay in full to the Holder the Face Amount, or any balance remaining thereon, in readily available funds, at any time and from time to time without penalty.

(c)After the date on which United States Securities and Exchange Commission (the “Commission” or the “SEC”) declares the registration statement (the “Registration Statement") covering the shares underlying the conversion of this Debenture (the “Conversion Shares”) effective the “Effective Date”), the Holder, at its sole option, shall be entitled to either (i) request a cash payment for any amounts due and payable under Article 1 or this Article 2, from the Company in the amounts set forth above (or such lesser amount as set forth in Payment Notice, as determined by the Holder); or (ii) elect to convert a portion of this Debenture pursuant to Article 3 hereof in an amount equal to or greater than the Amortizing Payment Amount; provided, however, that any Amortizing Payment Amount submitted for Conversion shall consist of the Interest and the remainder shall be applied to reduce the principal of the Debenture. In the event the Holder is unable to convert that portion of this Debenture equal to the Amortizing Payment Amount during any calendar month, the Holder may elect to request from the Company the remaining Amortizing Payment Amount then due, in cash on the Payment Date (each, a “Cash Payment”). In addition, in any month where the Holder’s Conversions exceed the Amortizing Payment Amount (the “Excess”), the Cash Payment due on the Amortizing Payment Amount in the month(s) following shall be reduced by the amount of such Excess but in no event shall such Excess be applied to more than 2 successive Payment Dates. For example, if Holder converted $800,000 in month 8, the Excess would equal $575,624.59.  Accordingly, this would reduce the Holder’s right to request any Cash Payments of the Company in month 9 and month 10 to zero.  However, no reduction would be made to the Amortizing Monthly Amount due in month 11 despite the remaining Excess. The Holder will send to the Company a notice (a “Payment Notice”) 4 business days prior to each Payment Date under which it will set forth the aggregate dollar amount of this Debenture actually converted during such month and the Cash Payment due, if any, on the Payment Date for such month.

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(d)Nothing contained in this Article 2 shall limit the amount the Holder can elect to convert during a calendar month except as defined in Section 3.2 (i) hereof.

(e)All Payments made under this Article 2 shall be applied toward the total Redemption Amount as outlined in Article 14 hereof.

(f)The Company may make additional payments toward Redemption (“Prepayments”) without any penalties.

Article 3Conversion.

Section 3.1Conversion Privilege.

(a)The Holder of this Debenture shall have the right to convert (a “Conversion”) any and all amounts owing under this Debenture into shares of common stock of the Company, par value $0.001 per share (the “Common Stock”), at any time following the Closing Date (as such term is defined in that certain Debenture Registration Rights Agreement, of even date herewith, by and between the Company and the Holder (the “Debenture Registration Rights Agreement”) but which is before the close of business on the Maturity Date, except as set forth in Section 3.2(c) hereof. The number of shares of Common Stock issuable upon the Conversion of this Debenture is determined pursuant to Section 3.2 hereof and rounding the result up to the nearest whole share.

(b)This Debenture may not be converted, whether in whole or in part, except in accordance with this Article 3.

(c)In the event all or any portion of this Debenture remains outstanding on the Maturity Date, the unconverted portion of such Debenture shall automatically be converted into shares of Common Stock on such date in the manner set forth in Section 3.2 hereof.

Section 3.2Conversion Procedure.

(a)Conversion Procedures.The Holder may elect to convert the unpaid Face Amount of and accrued Interest on this Debenture, in whole or in part, at any time following the Closing Date. Such Conversion shall be effectuated by the Holder sending to the Company a facsimile or electronic mail version of the signed Notice of Conversion, attached hereto as Exhibit A, which evidences the Holder’s intention to convert the Debenture as indicated. The date on which the Notice of Conversion is delivered (the “Conversion Date”) shall be deemed to be the date on which the Holder has delivered to the Company a facsimile or electronic mail of the signed Notice of Conversion. Notwithstanding the above, any Notice of Conversion received after 5:00 P.M. Boston Time shall be deemed to have been received the following business day, with receipt being via a confirmation of time of facsimile of the Holder.

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(b)Common Stock to be Issued.Upon the Holder's Conversion of any Debenture, the Company shall issue the number of shares of Common Stock equal to amount of the Debenture being converted divided by the Conversion Price (as defined in Section 3.2(c)). If, at the time of Conversion, the Registration Statement has been declared effective, the Company shall instruct its transfer agent to issue stock certificates without restrictive legend (other than a legend referring to such Registration Statement and prospectus delivery requirements) or stop transfer instructions. If, at the time of the Holder's Conversion, the Registration Statement has not been declared effective, the Company shall instruct the transfer agent to issue the certificates with an appropriate legend. The Company shall act as Registrar and shall maintain an appropriate ledger containing the necessary information with respect to this Debenture.The Company represents and warrants to the Holder that no instructions, other than these instructions, have been given or will be given to the transfer agent and that the Common Stock shall otherwise be freely resold, except as may be otherwise set forth herein.

(c)Conversion Price.The Holder is entitled to convertthe unpaid Face Amount of this Debenture, plus accrued interest, any time following a Closing Date, at the lesser of the following prices (the “Conversion Price”): (i) seventy-five percent (75%) of the lowest closing bid price of the Common Stock during the twenty (20) trading days immediately prior to a Conversion Notice; or (ii) seven and one-half cents ($.075) (the “Maximum Conversion Price”); provided, however, that in no event shall the Conversion Price be less than $.001 (The “Floor Conversion Price”). No fractional shares or scrip representing fractions of shares will be issued upon Conversion, but the number of shares issuable shall be rounded up, in the event of a partial share, to the nearest whole share. The Holder shall retain all rights of Conversion during any partial trading days.

(d)Maximum Interest. Nothing contained in this Debenture shall be deemed to establish or require the Company to pay interest to the Holder at a rate in excess of the maximum rate permitted by applicable law. In the event that the rate of interest required to be paid exceeds the maximum rate permitted by applicable law, the rate of interest required to be paid thereunder shall be automatically reduced to the maximum rate permitted under applicable law and such excess, if so ordered, shall be credited on any remaining balances due to the Holder. In the event that the interest rate on this Debenture is required to be adjusted pursuant to this Section 3.2(d), then the parties hereto agree that the terms of this Debenture shall remain in full force and effect except as is necessary to make the interest rate comply with applicable law.

(e)Opinion Letter. It shall be the Company’s responsibility to take all necessary actions and to bear all such costs to issue the Common Stock as provided herein, including the responsibility and cost for delivery of an opinion letter to the transfer agent, if so required. The person or entity in whose name the certificate of Common Stock is to be registered shall be treated as a shareholder of record on and after the Conversion Date. Upon surrender of any Debentures that are to be converted in part, the Company shall issue to the Holder a new Debenture equal to the unconverted amount. The Company hereby acknowledges that the date of consideration for this Debenture is the Issuance Date and shall use all commercially reasonable best efforts to facilitate sales under Rule 144 of the Securities Act.

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(f)Delivery of Shares.

(i)  Within three (3) business days after receipt of the Notice of Conversion (the “Certificate Deadline”), the Company shall deliver a certificate, in accordance with Section 3.2(c) hereof for the number of shares of Common Stock issuable upon a Conversion. In the event the Company does not make delivery of said certificate by the Certificate Deadline, the Company shall pay to Holder in cash, as liquidated damages, an additional fee per business day equal to two percent (2%) of the dollar value of the Debentures being converted.

(ii)  If the failure of the Company to issue the certificate pursuant to this Article 3.2(f) is due to the unavailability of a sufficient number of authorized shares of Common Stock of the Company, then the provisions of this Article 3.2(f) shall apply as well as the provisions of Article 3.2(k) hereof shall apply.

(iii)  The Company shall make any payments required under this Article 3.2(f) by the 5^th day of the month following the month in which it is accrued. Nothing herein shall limit the Holder’s right, at the Holder's sole discretion, to pursue actual damages or cancel the conversion for the Company’s failure to issue and deliver the certificate by the Certificate Deadline.

(iv)  The Company shall at all times reserve (or make alternative written arrangements for reservation or contribution of shares)and have available all Common Stock necessary to meet Conversion of the full amount of the Debentures then outstanding and due to the Holder, unless so waived by the Holder in writing. If, at any time, the Holder submits a Notice of Conversion and the Company does not have sufficient authorized but unissued shares of Common Stock (or alternative shares of Common Stock as may be contributed by Stockholders) available to effect, in full, a Conversion of the Debentures (a “Conversion Default”, the date of such default being referred to herein as the “Conversion Default Date”), the Company shall issue to the Holder all of the shares of Common Stock which are then currently available. Any Debentures or any portion thereof, which cannot be converted due to the Company's lack of sufficient authorized common stock (the “Unconverted Debentures”), may be deemed null and void upon written notice sent by the Holder to the Company. The Company shall provide notice of such Conversion Default (“Notice of Conversion Default”) to the Holder, by facsimile, within one (1) business days of such default.

(v)  In the event of Conversion Default, the Company will pay to the Holder an amount computed as follows (the “Conversion Default Rate”):

(N / 365) x (0.24) x (initial issuance price of outstanding and/or tendered but not converted Debentures held by the Holder)

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Where N is equal to the number of days from the Conversion Default Date to the date that the Company authorizes a sufficient number of shares of Common Stock to effect conversion of all remaining Debentures (the “Authorization Date”).

(vi)  The Company shall send notice to Holder of outstanding Debenture that additional shares of Common Stock have been authorized, stating the Authorization Date and the amount of Holder’s accrued Conversion Default Payments (“Authorization Notice”). The accrued Conversion Default shall be paid in cash or shall be convertible into Common Stock at the Conversion Rate, upon written notice sent by the Holder to the Company, as follows: (i) in the event the Holder elects to take such payment in cash, cash payment shall be made to the Holder by the 5^th day of the month following the month in which it was accrued, or (ii) in the event Holder elects to take such payment in stock, the Holder may convert at the Conversion Default Rate within five (5) business days until the expiration of the Conversion period.

(vii)  The Company acknowledges that its failure to maintain a sufficient number of authorized but unissued shares of Common Stock to effect in full a Conversion of the Debentures 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 Debenture 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 deliver the Common Stock pursuant to the terms of this Debenture. Nothing herein shall limit the Holder’s right to pursue actual damages for the Company’s failure to maintain a sufficient number of authorized shares of Common Stock.

(viii)  If by the Certificate Deadline, any portion of the shares of the Debentures have not been delivered to the Holder and the Holder purchases, in an open market transaction or otherwise, shares of Common Stock necessary to make delivery of shares which would have been delivered if the full amount of the shares to be converted and delivered to the Holder by the Company (the “Covering Shares”), then the Company shall pay to the Holder, in addition to any other amounts due to the Holder pursuant to this Debenture, and not in lieu thereof, the Buy-In Adjustment Amount (as defined below). The “Buy In Adjustment Amount” is the amount equal to the excess, if any, of (x) the Holder's total purchase price (including brokerage commissions, if any) for the Covering Shares, minus (y) the net proceeds (after brokerage commissions, if any) received by the Holder from the sale of the sold shares. The Company shall pay the Buy-In Adjustment Amount to the Holder in immediately available funds within five (5) business days of written demand by the Holder. By way of illustration and not in limitation of the foregoing, if the Holder purchases shares of Common Stock having a total purchase price (including brokerage commissions) of $11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount which the Company would be required to pay to the Holder would be $1,000.

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(g)Prospectus and Other Documents. The Company shall furnish to the Holder one (1) prospectus and any other documents incidental to the registration of the Conversion Shares, including any amendment of or supplements thereto. Any filings submitted via EDGAR will constitute fulfillment of the Company's obligation under this Section.

(h)Limitation on Issuance of Shares. If the Company’s Common Stock becomes listed on the Nasdaq SmallCap Market after the issuance of this Debenture, the Company may be limited in the number of shares of Common Stock it may issue by virtue of (A) the number of authorized shares or (B) the applicable rules and regulations of the principal securities market on which the Common Stock is listed or traded, including, but not necessarily limited to, NASDAQ Rule 4310(c)(25)(H)(i) or Rule 4460(i)(1), as may be applicable (collectively, the “Cap Regulations”). Without limiting the other provisions thereof: (i) the Company will take all steps necessary to issue the Conversion Shares without violating the Cap Regulations, and (ii) if, despite taking such steps, the Company cannot issue such Conversion Shares without violating the Cap Regulations or the Holder cannot convert as a result of the Cap Regulations (each such Debenture, an “Unconverted Debenture”) the Holder shall have the right to elect either of the following options:

(i)  if permitted by the Cap Regulations, require the Company to issue shares of Common Stock in accordance with the Holder's Notice of Conversion at a conversion purchase price equal to the average of the closing bid price per share of Common Stock for any five (5) consecutive Trading Days (subject to certain equitable adjustments for certain events occurring during such period) during the sixty (60) Trading Days immediately preceding the Conversion Date; or

(ii)  require the Company to redeem each Unconverted Debenture for an amount (the “Redemption Amount”), payable in cash, equal to the sum of (i) one hundred thirty-three percent (133%) of the principal of an Unconverted Debenture, plus (ii) any accrued but unpaid interest thereon through and including the date on which the Redemption Amount is paid to the holder (the “Redemption Date”).

The Holder may elect, without limitation, one of the above remedies with respect to a portion of such Unconverted Debenture and the other remedy with respect to other portions of the Unconverted Debenture. The Unconverted Debenture shall contain provisions substantially consistent with the above terms, with such additional provisions as may be consented to by the Holder. The provisions of this Section are not intended to limit the scope of the provisions otherwise included in the Unconverted Debenture.

(i)Limitation on Amount of Conversion and Ownership. Notwithstanding anything to the contrary in this Debenture, in no event shall the Holder be entitled to convert that amount of Debenture, and in no event shall the Company permit that amount of conversion, into that number of shares, which when added to the sum of the number of shares of Common Stock beneficially owned, (as such term is defined under Section 13(d) and Rule 13d-3 of the Securities Exchange Act of 1934, as may be amended, (the “Exchange Act”)), by the Holder, would exceed four and ninety-nine one hundredths percent (4.99%) of the number of shares of Common Stock outstanding on the Conversion Date, as determined in accordance with Rule 13d-1(j) of the Exchange Act. In the event that the number of shares of Common Stock outstanding as determined in accordance with Section 13(d) of the Exchange Act is different on any Conversion Date than it was on the Closing Date, then the number of shares of Common Stock outstanding on such Conversion Date shall govern for purposes of determining whether the Holder would be acquiring beneficial ownership of more than four and ninety-nine one hundredths percent (4.99%) of the number of shares of Common Stock outstanding on such Conversion Date. However, nothing in this Section 3.2(i) shall be read to reduce the amount of principal, Interest or penalties, if any, due to the Holder.

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(j)Legend. The Holder acknowledges that each certificate representing the Debentures, and the Common Stock unless registered pursuant to the Debenture Registration Rights Agreement, 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.

(k)Prior to Conversion of this Debenture, if at any time the Conversion of all the Debentures and exercise of all the Warrants outstanding would result in an insufficient number of authorized shares of Common Stock being available to cover all the Conversions, then in such event, the Company will move to call and hold a shareholder’s meeting or have shareholder action with written consent of the proper number of shareholders within thirty (30) days of such event, or such greater period of time if statutorily required or reasonably necessary as regards standard brokerage house and/or SEC requirements and/or procedures, for the purpose of authorizing additional shares of Common Stock such as necessary to facilitate the Holder's Conversions. In such an event, management of the Company shall recommend to all shareholders to vote their shares in favor of increasing the authorized number of shares of Common Stock. Management of the Company shall vote all of its shares of Common Stock in favor of increasing the number of shares of authorized Common Stock to an amount equal to three hundred percent (300%) of the remaining balance on this Debenture. Subject to Section 3(i) hereof, the Company represents and warrants that under no circumstances will it deny or prevent the Holder’s right to convert the Debentures as permitted under the terms of any of the Transaction Documents (as such term is defined in that certain Debenture Registration Rights Agreement, of even date herewith, by and between the Company and the Holder). Nothing in this Section shall limit the obligation of the Company to make the payments set forth in this Article 3. The Holder, at its sole option, may request the company to authorize and issue additional shares if the Holder feels it is necessary for Conversions in the future. In the event the Company’s shareholder’s meeting does not result in the necessary authorization, the Company shall redeem the outstanding Debentures for an amount equal to the sum of the principal of the outstanding Debentures plus accrued interest thereon multiplied by one hundred thirty-three percent (133%).

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Section 3.3Fractional Shares. The Company shall not issue fractional shares of Common Stock, or scrip representing fractions of such shares, upon the conversion of this Debenture. Instead, the Company shall round up, to the nearest whole share.

Section 3.4Taxes on Conversion. The Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon the conversion of this Debenture. However, the Holder shall pay any such tax which is due because the shares are issued in a name other than its name.

Section 3.5Company to Reserve Stock.The Company shall reserve and maintain the number of shares of Common Stock required pursuant to and upon the terms set forth in the Transaction Documents to permit the Conversion of this Debenture. All Conversion Shares shall, upon issuance by the Company, be validly issued, fully paid and nonassessable and free and clear from all taxes, liens, charges and encumbrances with respect to the issuance thereof.

Section 3.6Restrictions on Sale.This Debenture has not been registered under the Securities Act and is being issued under Section 4(2) of Securities Act and Rule 506 of Regulation D promulgated under the Securities Act. This Debenture and the Conversion Shares may onlybe sold pursuant to registration under or an exemption from the Securities Act.

Section 3.7Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Maximum Conversion Price shall be proportionately reduced in the case of a subdivision of shares or stock dividend, or proportionately increased in the case of combination of shares, in each such case, by the ratio that the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event.

Article 4Mergers.

The Company shall not consolidate or merge into, or transfer any or all of its assets to, any person, unless such person assumes in writing the obligations of the Company under this Debenture and immediately after such transaction no Event of Default (as defined below) exists. Any reference herein to the Company shall refer to such surviving or transferee corporation and the obligations of the Company shall terminate only upon such written assumption of the Company's obligation. In the event of a merger, or other consolidation, the Company shall give notice to the Holder simultaneously with the announcement to the public markets.

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Article 5 Security.

This Debenture, and the Company’s obligations hereunder, are secured by that certain Security Agreement, of even date herewith, by and between the Company and the Holder (the “Security Agreement”).

Article 6Defaults and Remedies.

Section 6.1Events of Default.An “Event of Default” occurs if any one of the following occur:

(a) the Company does not make timely payment (as set forth hereunder) or Conversion, in whole or in part, necessary to cover the principal, interest or other sum due on the Maturity Date, Conversion Date, upon redemption, or otherwise described herein;

(b)the Company does not make a Payment in cash for a period of ten (10) business days when due as described in this Debenture;

(c)any of the Company’s representations or warranties contained in the Transaction Documents or this Debenture were materially false when made or the Company fails to comply with any of its other agreements in the Transaction Documents and such failure continues for a period of ten (10) business days;

(d) the Company pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case; (ii) consents to the entry of an order for relief against it in an involuntary case; (iii) consents to the appointment of a Custodian (as defined below) of it or for all or substantially all of its property or (iv) makes a general assignment for the benefit of its creditors or (v) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company in an involuntary case; (B) appoints a Custodian of the Company for all or substantially all of its property or (C) orders the liquidation of the Company, and the order or decree remains unstayed and in effect for sixty (60) calendar days;

(e)the Company’s Common Stock is suspended or no longer listed on any recognized exchange including electronic over-the-counter bulletin board (“Principal Market”) for in excess of three (3) consecutive Trading Days. Failure to comply with the requirements for continued listing on a Principal Market for a period of five (5) trading days; or notification from a Principal Market that the Company is not in compliance with the conditions for such continued listing on such Principal Market;

(f)the Company materially breaches any covenant or condition of the Transaction Documents, and such breach, if subject to cure, continues for a period of five (5) business days; or,

(g)the Registration Statement is not declared effective by the SEC within twelve (12) months of the Issuance Date; provided, however, that if such delay in effectiveness is due to certain information requested by the SEC related to the Holder, then such failure to procure effectiveness shall not constitute an Event of Default.

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(h).after the Effective Date, the Registration Statement is no longer effective for any reason whatsoever other than an Allowed Delay (as defined in the Registration Rights Agreeement) or if the Holder requests withdrawal of the Registration Statement. .

Section 6.2Remedies.

(a)In the Event of Default, the Holder may elect to secure a portion of the Company's assets in Pledged Collateral (as defined in the Security Agreement.

(b)In the Event of Default, as outlined in this Debenture, the Holder can exercise its right to increase the Face Amount of the Debenture by ten percent (10%) as an initial penalty, and by ten percent (10%) for each subsequent Event of Default. In addition, the Holder may elect to increase the Face Amount by two and one-half percent (2.5%) per month (pro-rata for partial periods) paid as liquated damages (“Liquidated Damages”); provided, however, that the maximum amount that Holder shall be entitled to increase the Face Amount of the Debenture for all defaults collectively under this Debenture and the Registration Rights Agreement is 30% of the Face Amount on the original date of issuance (the “Damages Cap”). It is the intention and acknowledgement of both parties that the Liquidated Damages not be deemed as interest or a penalty under the terms of this Debenture.

(c)In the event of Default, under Section 6.1(g) hereof, the Holder may elect to switch the Conversion Price of the Debenture as outlined in Section 3.2(c) above (“Default Conversion Price”). The Default Conversion Price shall be equal to the lesser of (i) the Conversion Price or (ii) fifty percent (50%) of the lowest closing bid price of the Common Stock during the fifteen (15) trading days prior to conversion; provided, however, that in no event will the Default Conversion Price be less than the Floor Conversion Price. Upon written notice being sent to the Company by the Holder of Default under Section 6.1(g), and the Holder's election to exercise the remedy to switch the conversion price to the Default Conversion Price, the Company shall immediately withdraw the Registration Statement. Further, the Company agrees that the date of consideration for the Debenture shall remain the Issuance Date stated herein. The Company shall provide an opinion letter from counsel within two (2) business days of written request by the Holder stating that the date of consideration for the Debenture is the Issuance Date and submission of proper Rule 144 support documentation consisting of a Form 144, a broker's representation letter and a seller's representation letter. In the event the Company does not deliver the opinion letter within two business days, the Default Conversion Price shall immediately decrease by two percent (2%) for each business day an opinion letter fails to be delivered. In the event that counsel to the Company fails or refuses to render an opinion as required to issue the Shares in accordance with this paragraph (either with or without restrictive legends, as applicable), then the Company irrevocably and expressly authorizes counsel to the Holder to render such opinion and shall authorize the Transfer Agent to accept and to rely on such opinion for the purposes of issuing the Shares (which is attached as Exhibit E to that certain Subscription Agreement, of even date herewith, by and between the Company and the Holder). Any costs incurred by Holder for such opinion letter shall be added to the Face Amount of the Debenture.

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Section 6.3Acceleration. If an Event of Default occurs, the Holder by notice to the Company may declare the remaining principal amount of this Debenture, together with all accrued interest and any liquidated damages, to be immediately due and payable in full.

Section 6.4Seniority.The Company warrants that no indebtedness of the Company is senior to this Debenture in right of payment, whether with respect to interest, damages or upon liquidation or dissolution or otherwise. The Company warrants that it has taken all necessary steps to subordinate its other obligations to the rights of the Holder hereunder.

Section 6.5Cost of Collections. If an Event of Default occurs, the Company shall pay the Holder's reasonable costs of collection, including reasonable attorney's fees and costs of arbitration.

Article 7Registered Debentures.

Section 7.1Record Ownership. The Company or its attorney shall maintain a register of the Holder of the Debentures (the “Register”) showing their names and addresses and the serial numbers and principal amounts of Debentures issued to them. The Register may be maintained in electronic, magnetic or other computerized form. The Company may treat the person named as the Holder of this Debenture in the Register as the sole owner of this Debenture. The Holder of this Debenture is exclusively entitled to receive payments of interest on this Debenture, receive notifications with respect to this Debenture, convert it into Common Stock and otherwise exercise all of the rights and powers as the absolute owner hereof.

Section 7.2Worn or Lost Debentures. If this Debenture becomes worn, defaced or mutilated but is still substantially intact and recognizable, the Company or its agent may issue a new Debenture in lieu hereof upon its surrender. Where the Holder of this Debenture claims that the Debenture has been lost, destroyed or wrongfully taken, the Company shall issue a new Debenture in place of the Debenture if the Holder so requests by written notice to the Company.

Article 8Notice.

Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Debenture 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:

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

Article 9Time.

Where this Debenture authorizes or requires the payment of money or the performance of a condition or obligation on a Saturday or Sunday or a holiday on which the United States Stock Markets (“US Markets”) are closed (a “Holiday”), such payment shall be made or condition or obligation performed on the last business day preceding such Saturday, Sunday or Holiday. A “business day” shall mean a day on which the US Markets are open for a full day or half day of trading.

Article 10No Assignment.

This Debenture and the obligations of the Company hereunder shall not be assignable by the Company.

Article 11Rules of Construction.

In this Debenture, unless the context otherwise requires, words in the singular number include the plural, and in the plural include the singular, and words of the masculine gender include the feminine and the neuter, and when the tense so indicates, words of the neuter gender may refer to any gender. The numbers and titles of sections contained in the Debenture are inserted for convenience of reference only, and they neither form a part of this Debenture nor are they to be used in the construction or interpretation hereof. Wherever, in this Debenture, a determination of the Company is required or allowed, such determination shall be made by a majority of the Board of Directors of the Company and if it is made in good faith, it shall be conclusive and binding upon the Company and the Holder of this Debenture. Any capitalized term used but not defined in this Debenture shall have the meaning ascribed to it in the Transaction Documents.

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Article 12Governing Law.

The validity, terms, performance and enforcement of this Debenture shall be governed and construed by the provisions hereof and in accordance with the laws of the Commonwealth of Massachusetts applicable to agreements that are negotiated, executed, delivered and performed solely in the Commonwealth of Massachusetts.

Article 13Disputes Under Debenture.

All disputes arising under this Debenture 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 Debenture shall submit all disputes arising under this Debenture 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 hereto will 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 Debenture from a court of law. Any injunction obtained shall remain in full force and effect until the arbitrator, as set forth in Article 13, fully adjudicates the dispute.

Article 14 Redemption.

The Company shall have the right to redeem the Holder, only with the expressed written consent of the Holder, in cash, the Debenture, in whole or in part (“Redemption Amount”), at a price equal to one hundred and twenty-five percent (125%) (the “Redemption Rate”)f the outstanding principal amount of the Debenture, including accrued interest (and penalties if applicable). Any Payments, as defined in Article 2 hereof, shall apply to the Redemption Amount. Any portion of the Redemption Amount not converted shall be paid in cash to the Holder under the terms described in this Article 14.

Article 15Holder Warrants.

As an additional inducement to the Holder entering into the Transaction Documents, the Company shall issue to the Holder a warrant to purchase one hundred million (100,000,000) shares of its common stock exercisable at the strike prices outlined in the Warrant.

Article 16 Waiver.

The Holder's delay or failure at any time or times hereafter to require strict performance by the Company of any undertakings, agreements or covenants shall not waive, affect, or diminish any right of the Holder under this Debenture 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 Debenture, and no Event of Default, shall be deemed to have been waived by the Holder, nor may this Debenture 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.

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Article 17Integration.

This Debenture is the final definitive agreement between the Company and the Holder with respect to the terms and conditions set forth herein, and, the terms of this Debenture may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties hereto. The execution and delivery of this Debenture is done in conjunction with the execution of the other Transaction Documents.

Article 18Failure To Meet Obligations by the Company.

The Company acknowledges that its failure to timely meet any of its obligations hereunder, including, but without limitation, its obligations to make payments, deliver shares and, as necessary, to register and maintain sufficient number of shares, will cause the Holder to suffer irreparable harm and that the actual damage to the Holder will be difficult to ascertain. Accordingly, the parties hereto agree that it is appropriate to include in this Debenture 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 do not constitute a penalty. The payment of liquidated damages shall not relieve the Company from its obligations to deliver the Common Stock pursuant to the terms of this Debenture.

Article 19Representations and Warranties of the Company.

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

Article 20Acknowledgements of the Parties.

Notwithstanding anything in this Debenture 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 buisiness 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 (iii) above if the Holder effects any transactions in the securities of the Company.

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IN WITNESS WHEREOF, the parties hereto have caused this Debenture 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

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EXHIBIT A

NOTICE OF CONVERSION

Marmion Industries Corp.

Re: Notice of Conversion

Gentlemen:

The undersigned hereby irrevocably elects, as of ________________, to convert $________________ of its convertible debenture (the “Debenture”) into Common Stock of Marmion Industries Corp. (the “Company”) according to the conditions set forth in the Debenture issued by the Company.

Date of Conversion_______________________________________________

Applicable Conversion Price________________________________________

Number of Debentures Issuable upon this Conversion____________________

Name: Dutchess Private Equities Fund, LTD.

Address: 50 Commonwealth Ave, Boston, MA 02116

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

DUTCHESS PRIVATE EQUITIES FUND, LTD.,

By:  

Name: Douglas H. Leighton

Title: Director

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EX-10.4

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Agreement”) is made as of the 22nd day of March, 2007, by MARMION INDUSTRIES CORP., a Nevada corporation, having a mailing address at 9103 Emmott Road, Building 6, Suite A Houston, Texas 77040 (the “Company”), MARMION INVESTMENTS, INC. a Texas corporation, (dba Marmion Air Service) having a mailing address at 9103 Emmott Road, Building 6, Suite A Houston, Texas 77040 (“Marmion Investments” together with the Company, individually and collectively, the “Debtors”), for the benefit and security of DUTCHESS PRIVATE EQUITIES FUND, LTD., having a mailing address at 50 Commonwealth Avenue, Suite 2, Boston, Massachusetts 02116 (the “Secured Party”).

WHEREAS, the Company has executed and delivered to Secured Party a debenture or instruments, including, without limitation, (i) that certain Debenture dated March 22, 2007 from the Company in favor of the Secured Party (the “Debenture”) pursuant to which the Secured Party has agreed to make certain loans and other financial accommodations to the Company;

WHEREAS, each of the other Debtors has executed and delivered a guaranty (as amended or otherwise modified from time to time, the "Guaranty") of certain obligations of the Company, including all obligations of the Company under the Debenture; and

WHEREAS, the obligations of the Company under the Debenture and the obligations of each other Debtor under the Guaranty are to be secured pursuant to this Agreement;

NOW, THEREFORE, for and in consideration of any loan, advance or other financial accommodation heretofore or hereafter made to or for the benefit of any Debtor under or in connection with the Debenture of any other Finance Documents (as defined below), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

CONSTRUCTION AND DEFINED TERMS

1.01Article and Section Headings. Article and Section headings and captions in this Agreement are for convenience only and shall not affect the construction or interpretation of this Agreement. Unless otherwise expressly stated in this Agreement, references in this Agreement to Sections shall be read as Sections of this Agreement.

1.02Schedules and Exhibits. The references in this Agreement to specific Schedules and Exhibits shall be read as references to such specific Schedules or Exhibits attached, or intended to be attached, to this Agreement and any counterpart of this Agreement and regardless of whether they are in fact attached to this Agreement, andincluding any amendments, supplements and replacements to such Schedules and Exhibits from time to time.

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1.03Defined Terms. Unless otherwise expressly stated in this Agreement, (a) capitalized terms which are not otherwise defined herein shall have the respective meanings assigned thereto in the UCC (as defined below); and (b) the following terms used in this Agreement shall have the following meanings:

“Collateral” means, with respect to any Debtor, all property and rights of such Debtor in which a security interest is granted hereunder.

“Computer Hardware and Software” means, with respect to any Debtor, all of such Debtor's rights (including rights as licensee and lessee) with respect to (i) computer and other electronic data processing hardware, including all integrated computer systems, central processing units, memory units, display terminals, printers, computer elements, card readers, tape drives, hard and soft disk drives, cables, electrical supply hardware, generators, power equalizers, accessories, peripheral devices and other related computer hardware; (ii) all software programs designed for use on the computers and electronic data processing hardware described in clause (i) above, including all operating system software, utilities and application programs in whatsoever form (source code and object code in magnetic tape, disk or hard copy format or any other listings whatsoever); (iii) any firmware associated with any of the foregoing; and (iv) any documentation for hardware, software and firmware described in clauses (i), (ii) and (iii) above, including flow charts, logic diagrams, manuals, specifications, training materials, charts and pseudo codes.

“Equity Interest” With respect to any Person, any ownership interest in such Person, including shares, partnership interests, joint venture interests, membership interests, limited liability company interests, unit interests and any other equity or ownership interests of any kind, and any subscriptions, options, warrants, commitments, purchase rights, preemptive rights or agreements of any kind (including any stockholders’ or voting trust agreements) for the issuance, sale, registration or voting of, or for securities convertible into, any shares, partnership interests, joint venture interests, membership interests, limited liability company interests, and any other equity or ownership interests in such Person.

“Finance Documents” mean, collectively, the Debenture, the Guaranty, and the Pledge Agreement.

“Lien” Any security interest (including security interest within the definition of “security interest” in the UCC), encumbrance, lien (including any judgment lien, any contract lien, any lien arising or resulting from nonpayment of any tax, assessment, charge or other imposition, and any lien arising or resulting from nonpayment for labor, materials, or supplies), security agreement (including any agreement that creates or provides for a security interest), deed of trust, mortgage, grant, pledge, assignment, hypothecation, title retention contract, or other arrangement for security purposes, and any agricultural lien (including any agricultural lien within the definition of “agricultural lien” in the UCC), and including any of the foregoing arising by operation of statute or other law or the application of equitable principles, whether perfected or unperfected, avoidable or unavoidable, consensual or nonconsensual, and any financing statement or other similar notice document, whether or not filed, and any agreement to give a financing statement or other similar notice document.

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“Lien Proceeding” Any action taken (including self help) or proceeding (judicial or otherwise) commenced by any Person other than Secured Party for the purpose of enforcing or protecting any actual or alleged Lien upon any of the Collateral, and including any foreclosure, repossession, attachment, execution or other process regarding any of the Collateral.

“Permitted Lien” means those Liens described on Schedule 3.07.

“Person” Any natural person, corporation, limited liability company, partnership, joint venture, entity, association, joint-stock company, trust or unincorporated organization and any Governmental Authority, including any receiver, debtor-in-possession, trustee, custodian, conservator, or liquidator.

“Secured Obligations” All indebtedness, liabilities and obligations which are now or may at any time hereafter be due, owing or incurred in any manner whatsoever to Secured Party by any Debtor, whether under this Agreement, any Debenture, the Guaranty or any other Finance Document, in each case howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, whether at stated maturity, by acceleration or otherwise (including, without limitation, the payment of interest and other amounts which would accrue and become due but for the filing of a petition in bankruptcy or the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)), including, without limitation, all charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of such obligations.

“UCC” means the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts on the date of this Agreement, as may be amended or modified from time to time after the date hereof; provided that, "UCC" shall also mean the Uniform Commercial Code as in effect from time to time in any applicable jurisdiction.

ARTICLE II

SECURITY INTEREST; PERFECTION

2.01Security Interest. To secure the full and timely payment, performance and satisfaction of the Secured Obligations, each Debtor hereby collaterally assigns to Secured Party, and grants Secured Party a security interest in, all of such Debtor’s property, whether now owned or hereafter existing or acquired, regardless of where located including, without limitation, all of such Debtor’s:

(a)Accounts;

(b)Chattel Paper, including Electronic Chattel Paper;

(c)Computer Hardware and Software and all rights with respect thereto, including, any and all licenses, options, warranties, service contracts, program services, test rights, maintenance rights, support rights, improvement rights, renewal rights and indemnifications, and any substitutions, replacements, additions or model conversions of any of the foregoing

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(d)Commercial Tort Claims now or hereafter identified on Schedule 2.01(d) to this Agreement;

(e)Deposit Accounts;

(f)Documents;

(g)Financial Assets;

(h)General Intangibles;

(i)Goods (including all of its Equipment, Fixtures and Inventory), and all embedded software, accessions, additions, attachments, improvements, substitutions and replacements thereto and therefor);

(j)Instruments;

(k)Intellectual Property;

(l)Investment Property;

(m)Letter of Credit Rights;

(n)money (of every jurisdiction whatsoever);

(o)Security Entitlements;

(p)Supporting Obligations

(q)with respect to each Person (as hereinafter defined) listed in Schedule 2.01(q) hereto and each other corporation hereafter acquired or formed by such Debtor, the Equity Interests from time to time issued and outstanding, including the certificates, if any, representing the Equity Interests and any interest of such Debtor in the entries on the books of the issuer thereof or any financial intermediary pertaining to the Equity Interests, together with all dividends, cash, options, warrants, rights, instruments, distributions, returns of capital or principal, income, interest, profits and other property, interests (debt or equity) or proceeds as a result of a split, revision, reclassification, consolidation, merger or other like change of the Equity Interests or any issuer thereof, from time to time received, receivable or otherwise distributed to such Debtor in respect of or in exchange for any or all of the Equity Interests;

(r)all promissory notes or intercompany notes and and all certificates or instruments evidencing such promissory notes or intercompany notes; and

to the extent not included in the foregoing, other personal property of any kind or description, together with all books, records, writings, data bases, information and other property relating to, used or useful in connection with, or evidencing, embodying, incorporating or referring to any of the foregoing, and all Proceeds, products, rents, issues, profits and returns of and from any of the foregoing; provided that to the extent that the provisions of any lease or license of Computer Hardware and Software or Intellectual Property expressly prohibit (which prohibition is enforceable under applicable law) the assignment thereof, and the grant of a security interest therein, the Secured Party will not enforce its security interest (other than in respect of the Proceeds thereof) for so long as such prohibition continues, it being understood that upon request of the Secured Party, such Debtor will in good faith use reasonable efforts to obtain consent for the creation of a security interest in favor of the Secured Party (and to Secured Party’s enforcement of such security interest) in such Debtor's rights under such lease or license.

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The Secured Parties each agree that nothing set forth herein is intended or shall be construed to prohibit or limit in any way the right and ability of the Company (i) to sell, assign, transfer, license, sublease or otherwise dispose of, or grant any option or other interest or right with respect to, any of the Collateral (other than dividends to the Company's stockholders that are prohibited under the terms of the Debentures), (ii) to grant, create or suffer to exist any Lien, charge or security interest upon or with respect to any of the Collateral; (iii) to amend, modify or replace any contracts included in the Collateral or to waive any rights thereunder, or (iv) other than as expressly set forth herein, to enter into any other transactions with respect to the Collateral, and the consent of the Secured Parties shall not be required for any of the foregoing. Notwithstanding the foregoing, the Company may not sell, assign, transfer or otherwise dispose of any Collateral having a book value in excess of $200,000 in the aggregate during the term of the Debentures, unless either (x) the proceeds thereof shall constitute Collateral in which the Secured Parties shall have a valid and perfected security interest; (y) the Company applies the proceeds thereof to repay indebtedness that is secured by a Lien which is senior to the Secured Parties' security interest in the Collateral, or (z) after giving effect to such sale, assignment, transfer or other disposition, the total book value of the Collateral securing the Secured Obligations pursuant to this Agreement, less the total aggregate principal amount of all secured indebtedness of the Company for money borrowed (excluding the Secured Obligations) which is secured by the Collateral, in each case determined in accordance with generally accepted accounting principles, would exceed the then-outstanding principal amount of the Debentures.

2.02Perfection by Filing.

(a)Each Debtor authorizes Secured Party to file any financing statement and agrees to execute, in recordable form, and deliver to Secured Party any other document or instrument, and to cause any third party to execute and deliver to Secured Party any other document (including financing statement termination statements), requested by Secured Party to perfect the security interests created under this Agreement and to establish, maintain, and continue the first priority of the security interests created under this Agreement.

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(b)Each Debtor hereby appoints Secured Party as such Debtor’s attorney-in-fact, with power of substitution, which appointment is irrevocable and coupled with an interest, to execute in the name of Debtor, and to transmit to, or file, record, or register with, any Person, and at any time, any document or instrument that Secured Party may deem necessary or advisable for the purpose of creating, enforcing, defending, protecting, perfecting, continuing, or maintaining any security interest, or the perfection or priority of any security interest, created under this Agreement.

(c)Secured Party shall not be required to obtain Debtor’s consent or authorization for Secured Party to file, and Secured Party shall be entitled to file, with or without execution by Debtor (or by Secured Party as Debtor’s attorney-in-fact), any financing statement, amendment, or other record that Secured Party may be authorized to file in accordance with the terms of the UCC with respect to the security interests created under this Agreement.

(d)Any financing statement or other document filed to perfect the security interests evidenced by this Agreement may, at Secured Party’s option, describe or indicate the Collateral in the manner that the Collateral is described in this Agreement, or as all assets of Debtor, or as all personal property of Debtor, or by any other description or indication of the Collateral that may be sufficient for a financing statement under the UCC.

(e)If prior to Debtor’s execution of this Agreement, Secured Party shall have filed in any jurisdiction, or with any governmental authority, any financing statement, amendment, or other document describing or indicating the Collateral, or containing a description or indication of all assets of Debtor or all personal property of Debtor comprising the Collateral, or containing any other description or indication of the Collateral, Debtor, by executing this Agreement, irrevocably (i) authorizes, ratifies, confirms, and adopts (A) each such previously filed financing statement, amendment or other document, and (B) the filing of each such previously filed financing statement, amendment, or other document, and (ii) agrees that each such previously filed financing statement, amendment, or other document is valid and effective as though it had been authorized by Debtor and filed with Debtor’s authorization.

2.03Perfection by Possession. If Collateral is of a type as to which it is necessary, desirable, or advisable, as determined by Secured Party, for Secured Party to take possession of such Collateral in order to protect, perfect, or maintain the first priority of Secured Party’s security interest or other Lien (subject only to Permitted Security) in such (or any other) Collateral, then, promptly upon Secured Party’s request, Debtor shall deliver such Collateral to Secured Party.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES

Debtor makes the following representations and warranties to Secured Party, which shall each be continuing and in effect at all times, and Secured Party shall be entitled to rely upon the truth, accuracy, and completeness of the following representations and warranties without regard to any other information that may be now or hereafter known by or disclosed to Secured Party or any of Secured Party’s directors, officers, employees, agents, attorneys or other advisors:

3.01Debtor’s Name and Identification Number. The name of each Debtor set forth on the first page and the signature page of this Agreement is Debtor’s correct and complete legal name. The street address for Debtor in this Agreement is Debtor’s mailing address. Such Debtor's chief executive office and principal place of business are as set forth on Schedule 3.01 hereto (and such Debtor has not maintained its chief executive office and principal place of business at any other location during the five (5) years preceding the date hereof, and each other location where such Debtor maintains a place of business is also set forth on Schedule 3.01 hereto

3.02Permitted Liens; Collateral. (a) No financing statement (other than Permitted Liens) covering any of such Debtor’s rights in the Collateral is on file in any public office; (b) Secured Party’s security interest in the Collateral is a first priority perfected security interest, subject to no Liens other than Permitted Liens; (c) such Debtor is and will be the lawful owner of all Collateral, free of all liens, claims, security interests and encumbrances whatsoever, other than the security interest hereunder and Permitted Liens, with full power and authority to execute this Agreement and perform such Debtor's obligations hereunder, and to subject the Collateral to the security interest hereunder and (d) all information with respect to the Collateral set forth in any schedule, certificate or other writing at any time heretofore or hereafter furnished by such Debtor to the Secured Party is and will be true and correct in all material respects as of the date furnished.

3.03Authorization and No Conflicts. (a) Each Debtor is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation as listed on the first page of this Agreement; (b) the execution and delivery of this Agreement and the performance by such Debtor of its obligations hereunder are within such Debtor's corporate powers, have been duly authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required), and do not and will not contravene or conflict with any provision of law or of the articles of incorporation or by-laws of such Debtor or of any material agreement, indenture, instrument or other document, or any material judgment, order or decree, which is binding upon such Debtor; and (c) this Agreement is a legal, valid and binding obligation of such Debtor, enforceable in accordance with its terms, except that the enforceability of this Agreement may be limited by bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

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3.04Tangible Collateral.Schedule 3.04 hereto contains a complete listing of such Debtor’s tangible Collateral located with any bailee, warehousemen or other third parties and all of such Debtor’s Collateral which is subject to certificate of title statutes.

3.05Deposit Accounts. Except as listed on Schedule 2.02, Debtor has no Deposit Accounts and is not a party to or otherwise bound by any Deposit Account Agreement.

3.06Leases. Except as listed on Schedule 3.06 (which schedule contains a true, accurate and complete list and description of all leases to which Debtor is a lessor, lessee, or other party or otherwise bound), Debtor is not a lessor or lessee under, or a party to, or otherwise bound by the terms of, any lease.

3.07Commercial Tort Claims. Except as listed on Schedule 2.01(d), Debtor has no Commercial Tort Claims.

3.08Subsidiaries. Schedule 3.08 lists all of the subsidiaries of Debtors.

ARTICLE IV

AFFIRMATIVE COVENANTS

Debtor covenants and agrees to the following:

4.01Account Debtors. The Secured Party may, at any time that an Event of Default exists, whether before or after any revocation of such power and authority or the maturity of any of the Secured Obligations, notify an Account Debtor or other Person obligated on Collateral to make payment or otherwise render performance to or for the benefit of the Secured Party and enforce, by suit or otherwise the obligations of an Account Debtor or other Person obligated on Collateral and exercise the rights of such Debtor with respect to the obligation of the Account Debtor or other Person obligated on Collateral to make payment or otherwise render performance to such Debtor, and with respect to any property that secures the obligations of the Account Debtor or other Person obligated on the Collateral. In connection with exercise of such rights and remedies, the Secured Party may surrender, release or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder or evidenced thereby. Upon the request of the Secured Party during the existence of an Event of Default, each Debtor will, at its own expense, notify any or all parties obligated on any of the Collateral to make payment to the Secured Party of any amounts due or to become due thereunder. Upon request by the Secured Party during the existence of an Event of Default, each Debtor will forthwith, upon receipt, transmit and deliver to the Secured Party, in the form received, all cash, checks, drafts and other instruments or writings for the payment of money (properly endorsed, where required, so that such items may be collected by the Secured Party) which may be received by such Debtor at any time in full or partial payment or otherwise as proceeds of any of the Collateral. Except as the Secured Party may otherwise consent in writing, any such items which may be so received by any Debtor will not be commingled with any other of its funds or property, but will be held separate and apart from its own funds or property and upon express trust for the Secured Party until delivery is made to the Secured Party. Each Debtor will comply with the terms and conditions of any consent given by the Secured Party pursuant to the foregoing sentence.

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4.02Additional Covenants. Each Debtor:

(a) will, at the Secured Party’s request, at any time and from time to time, execute and deliver to the Secured Party such financing statements, amendments and other documents and do such acts as the Secured Party deems necessary in order to establish and maintain valid, attached and perfected first priority security interests in the Collateral in favor of the Secured Party, free and clear of all Liens and claims and rights of third parties whatsoever except Permitted Liens; each Debtor hereby irrevocably authorizes the Secured Party at any time, and from time to time, to file in any jurisdiction any initial financing statements and amendments thereto that (i) indicate the Collateral (x) as all assets of such Debtor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC of the jurisdiction wherein such financing statement or amendment is filed, or (y) as being of an equal or lesser scope or with greater detail;

(b) will keep all its Inventory at, and will not maintain any place of business at any location other than, its address(es) shown on Schedule 3.01 hereto or at such other addresses of which such Debtor shall have given the Secured Party not less than 30 days' prior written notice;

(c) will keep its records concerning the Collateral in such a manner as will enable the Secured Party or its designees to determine at any time the status of the Collateral;

(d) will furnish the Secured Party such information concerning such Debtor, the Collateral and the Account Debtors as the Secured Party may from time to time reasonably request;

(e) will permit the Secured Party and its designees, from time to time, on reasonable notice and at reasonable times and intervals during normal business hours to inspect such Debtor's Inventory and other Goods, and to inspect, audit and make copies of and extracts from all records and other papers in the possession of such Debtor pertaining to the Collateral and the Account Debtors, and will, upon request of the Secured Party during the existence of an Event of Default, deliver to the Secured Party all of such records and papers;

(f) will, upon request of the Secured Party, stamp on its records concerning the Collateral, and add on all Chattel Paper and Instruments constituting a portion of the Collateral, a notation, in form satisfactory to the Secured Party, of the security interest of the Secured Party hereunder;

(g) except for the sale or lease of Inventory in the ordinary course of its business and sales of Equipment which is no longer useful in its business or which is being replaced by similar Equipment, will not sell, lease, assign or create or permit to exist any Lien on any Collateral other than Permitted Liens;

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(h) will at all times keep all of its Inventory and other Goods insured under policies maintained with reputable, financially sound insurance companies against loss, damage, theft and other risks to such extent as is customarily maintained by companies similarly situated, and cause all such policies to provide that loss thereunder shall be payable to the Secured Party as its interest may appear (it being understood that (A) so long as no Event of Default shall be existing, the Secured Party shall deliver any proceeds of such insurance which may be received by it to such Debtor and (B) whenever an Event of Default shall be existing, the Secured Party may apply any proceeds of such insurance which may be received by it toward payment of the Secured Obligations, whether or not due, in such order of application as the Secured Party may determine), and such policies or certificates thereof shall, if the Secured Party so requests, be deposited with or furnished to the Secured Party;

(i) will take such actions as are reasonably necessary to keep its Goods in good repair and condition;

(j) will take such actions as are reasonably necessary to keep its Equipment in good repair and condition and in good working order, ordinary wear and tear excepted;

(k) will promptly pay when due all license fees, registration fees, taxes, assessments and other charges which may be levied upon or assessed against the ownership, operation, possession, maintenance or use of its Equipment and other Goods;

(l) will take all steps reasonably necessary to protect, preserve and maintain all of its rights in the Collateral and will keep all of the tangible Collateral in the United States;

(m)will promptly notify the Secured Party in writing upon acquiring or otherwise obtaining any Collateral after the date hereof consisting of Deposit Accounts, Investment Property, Letter-of-Credit Rights or Electronic Chattel Paper and, upon the request of the Secured Party, will promptly execute such other documents, and do such other acts or things deemed appropriate by the Secured Party to confer upon the Secured Party control (as defined in the UCC) with respect to such Collateral;

(o) promptly notify the Secured Party in writing upon acquiring or otherwise obtaining any Collateral after the date hereof consisting of Documents or Instruments and, upon the request of the Secured Party, will promptly execute such other documents, and do such other acts or things deemed appropriate by the Secured Party to deliver to the Secured Party possession of such Documents which are negotiable and Instruments, and, with respect to nonnegotiable Documents, to have such nonnegotiable Documents issued in the name of the Secured Party;

(p) promptly notify the Secured Party in writing upon incurring or otherwise obtaining a Commercial Tort Claim after the date hereof against any third party, and, upon the request of the Secured Party, will promptly enter into an amendment to this Agreement, and do such other acts or things deemed appropriate by the Secured Party to give the Secured Party a security interest in such Commercial Tort Claim; and

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(q) further agrees to take other action reasonably requested by the Secured Party to insure the attachment, perfection and first priority of, and the ability of the Secured Party to enforce, the security interests in any and all of the Collateral including, without limitation, (i) executing, delivering and, where appropriate, filing financing statements and amendments relating thereto under the UCC, to the extent, if any, that the Debtor’s signature thereon is required therefor, (ii) complying with any provision of any statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of the Secured Party to enforce, the security interests in such Collateral, (iii) obtaining governmental and other third party consents and approvals, including without limitation any consent of any licensor, lessor or other Person obligated on Collateral, (iv) obtaining waivers from mortgagees and landlords in form and substance satisfactory to the Secured Party, and (v) taking all actions required by the UCC in effect from time to time or by other law, as applicable in any relevant UCC jurisdiction, or by other law as applicable in any foreign jurisdiction.

4.03Taxes, Assessments, Charges, and Other Impositions. Debtor shall pay and discharge promptly, on or before the date due, all taxes, assessments, charges, and other impositions imposed by any governmental authority on Debtor, or on the Collateral, relating to the ownership or use of the Collateral, or relating to any sale, lease, license or other disposition of the Collateral; provided, however, Debtor shall not be required to pay or discharge, or to cause to be paid or discharged, any such tax, assessment, charge, or other imposition so long as (a) the validity of such tax, assessment, charge or other imposition is being contested in good faith by Debtor by appropriate proceedings.

4.04Notice of Lien Proceeding. Debtor shall give Secured Party immediate written notice of the threat by any Person to commence any proceedings on a material portion of the Collateral or any other Lien Proceeding.

4.05Delivery of Certificated Equity Interests. All certificates, agreements or instruments representing or evidencing the pledged Equity Interests, to the extent not previously delivered to the Secured Party, shall promptly upon receipt thereof by any Debtor be delivered to and held by the Secured Party pursuant hereto. All such certificated Collateral shall be in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Secured Party. Security Party shall have the right, at any time after the occurrence and during the continuance of any Event of Default, to exchange certificates representing or evidencing such pledged Equity Interests for certificates of smaller or larger denominations. If any issuer of pledged Equity Intersets is organized in a jurisdiction which does not permit the use of certificates to evidence equity ownership, or if any of such pledged Equity Interests are at any time not evidenced by certificates of ownership, then each applicable Debtor shall, to the extent permitted by applicable law, record such pledge on the equityholder register or the books of the issuer, execute any customary pledge forms or other documents necessary or appropriate to complete the pledge and give the Secured Party the right to transfer such pledged Equity Interests.

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4.06Voting Rights: Distributions: etc. So long as no Event of Default shall have occurred and be continuing, (i) each Debtor shall be entitled to exercise any and all voting and other consensual rights pertaining to the pledged Equity Interests or any part thereof for any purpose not inconsistent with the terms or purposes of this Agreement; provided, however, that no Debtor shall in any event exercise such rights in any manner which may have an adverse effect on the security intended to be provided by this Agreement and (ii) each Debtor shall be entitled to receive and retain any and all distributions with respect to such pledged Equity Interests. Upon the occurrence and during the continuance of any Event of Default, upon written notice from the Secured Party, all rights of each Debtor to receive distributions otherwise permitted hereunder shall cease, and all such rights shall thereupon become vested in the Secured Party. Any distributions which are received by any Debtor in violation of the provisions of this Agreement shall be received in trust for the benefit of the Secured Party, shall be segregated from other funds of such Debtor and shall immediately be paid over to the Secured Party as Collateral in the same form as so received (with any necessary endorsement).

ARTICLE V

NEGATIVE COVENANTS

Debtor covenants and agrees to the following:

5.01Identity. Debtor shall not change Debtor’s name or corporate structure. If Debtor is organized solely under the law of a single state or the United States and as to which the state or the United States mustmaintain a public record showing the organization to have been organized, Debtor shall not organize under the laws of another jurisdiction.

5.02Deposit Accounts. Debtor shall not open or close any Deposit Account, without prior written notice to the Secured Party.

5.03Liens. Debtor shall not create, incur, assume or suffer to exist any Liens upon any Collateral of Debtor other than Permitted Liens.

ARTICLE VI

EVENT OF DEFAULT; ENFORCEMENT OF SECURITY INTEREST

6.01Any one or more of the following events (regardless of the reason therefor) shall constitute an "Event of Default" hereunder:

(a)Any default or event of default shall occur under any of the Debenture or any other Finance Documents, which default shall remain uncured within 10 business days after notification of such default by Secured Party to Debtor.

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(b)Any Debtor shall fail or neglect to perform, keep or observe any provision of this Agreement or any other Finance Document and the same shall remain unremedied for a period of ten (10) business days after notice is given to such Debtor by the Secured Party.

(c)The Secured Party shall fail to have an enforceable first priority lien on and security interest in the Collateral.

(d)Any Debtor files a bankruptcy petition, a bankruptcy petition is filed against any Debtor which remains undismissed or unstayed for 30 consecutive days, or any Debtor makes a general assignment for the benefit of creditors.

6.02Right to Enforce Claim; Secured Party in Possession or Control.

(a)Upon the occurrence of an Event of Default and during the continuance thereof, and in addition to such other rights and remedies as Secured Party may have under other provisions of this Agreement or any other Finance Document, or under common or statutory law, Secured Party may reduce a claim to judgment, foreclose, or otherwise enforce the claim, security interest, or agricultural lien by any available judicial procedure, and if the Collateral is Documents, Secured Party may proceed either as to the Documents or as to the Goods the Documents cover.

(b)If Secured Party has possession of Collateral, (i) reasonable expenses, including the cost of insurance and payment of taxes or other charges, incurred in the custody, preservation, use, or operation of the Collateral are chargeable to Debtor and are secured by the Collateral, (ii) the risk of accidental loss or damage is upon Debtor to the extent of a deficiency in any effective insurance coverage, (iii) Secured Party shall keep the Collateral identifiable, but fungible Collateral may be commingled, and (iv) Secured Party may use or operate the Collateral (A) for the purpose of preserving the Collateral or its value, or (B) as permitted by an order of a court having competent jurisdiction, or (C) for the purpose of transporting the Collateral, or (D) for the purposes of demonstrating the use or operation of the Collateral.

(c)If Secured Party has possession of Collateral or control of Collateral that is Deposit Accounts, Electronic Chattel Paper, Investment Property, or Letter-of-credit rights, then Secured Party (i) may hold as additional security any Proceeds, except money or funds, received from the Collateral, (ii) shall apply money or funds received from the Collateral to reduce the Secured Obligations unless remitted to Debtor, and (iii) may create a security interest in the Collateral.

(d)If Secured Party has possession of Collateral that is Chattel Paper or an Instrument, then as to any such Chattel Paper or Instrument, Secured Party shall not be obligated to take any necessary steps to preserve rights against prior parties.

6.03Collection and Enforcement. After the occurrence of an Event of Default and during the continuance thereof, Secured Party may:

(a)notify any Account Debtor or other Person obligated on Collateral to make payment or otherwise render performance to or for the benefit of Secured Party;

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(b)take any Proceeds to which Secured Party is entitled under Section 9-315 of Article 9 of the UCC;

(c)enforce the obligations of any Debtor or other Person obligated on Collateral and exercise the rights of Debtor with respect to the obligations of the Debtor or other Person obligated on Collateral to make payment or otherwise render performance to Debtor, and with respect to any property that secures the obligations of the Debtor or other Person obligated on the Collateral;

(d)if Secured Party is a Bank and holds a security interest in a Deposit Account maintained with Secured Party, apply the balance of the Deposit Account to the obligation secured by the Deposit Account; and

6.04Possession of Collateral.

(a)After the occurrence of an Event of Default and during the continuance thereof, Secured Party may require Debtor to assemble the Collateral and make the Collateral available to Secured Party at a place designated by Secured Party which is reasonably convenient to Secured Party and Debtor. If Secured Party requires Debtor to assemble the Collateral and make the Collateral available to Secured Party, as described in the preceding sentence, Debtor shall do so promptly, and in any event within ten (10) days after Secured Party gives Debtor a notice requesting Debtor to assemble the Collateral and make the Collateral available to Secured Party at the place designated by Secured Party. Without limiting Secured Party’s right to designate any place which is reasonably convenient to Debtor for making Collateral available to Secured Party, Debtor agrees that any place designated by Secured Party and located within one hundred (100) miles of any place where Debtor stores, uses, sells, leases, licenses, or maintains Collateral in the ordinary course of Debtor’s business shall be conclusively deemed to be a place reasonably convenient to Debtor for making the Collateral available to Secured Party.

(b)After the occurrence of an Event of Default and during the continuance thereof, Secured Party may, pursuant to judicial process, or without judicial process if Secured Party proceeds without breach of peace, (1) take possession of the Collateral and, (2) without removal, render Equipment unusable and dispose of Collateral on Debtor’s premises.

6.05Disposition of Collateral.

(a)After the occurrence of an Event of Default and during the continuance thereof, Secured Party may sell, lease, license, or otherwise dispose of any or all of the Collateral in its present condition or following any commercially reasonable preparation or processing.

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(b)Secured Party may dispose of Collateral by public or private proceedings, by one or more contracts, as a unit or in parcels, and at any time and place and on any terms.

(c)Secured Party may purchase Collateral (1) at a public disposition or (2) if the Collateral is of a kind that is customarily sold on a recognized market or the subject of widely distributed standard price quotations, at a private disposition.

(d)A contract for sale, lease, license, or other disposition includes the warranties relating to title, possession, quiet enjoyment, and the like which by operation of law accompany a voluntary disposition of property of the kind subject to the contract; provided, however, Secured Party may disclaim or modify such warranties (1) in a manner that would be effective to disclaim or modify the warranties in a voluntary disposition of property of the kind subject to the contract of disposition, or (2) by communicating to the purchaser a Record evidencing the contract for disposition and including an express disclaimer or modification of the warranties, and provided further that a Record is sufficient to disclaim such warranties if such Record indicates “There is no warranty relating to title, possession, quiet enjoyment, or the like in this disposition” or uses words of similar import.

(e)Prior to a disposition of Collateral, Secured Party shall give Debtor, and any other parties required to receive notice under Article 9 of the UCC, notification as required under Article 9 of the UCC before a sale, lease, license, or other disposition of Collateral.

6.06Additional Provisions Regarding Sales and Other Dispositions. In the event that Secured Party shall sell or otherwise dispose of the Collateral, or any part thereof in accordance with this Agreement, the following additional provisions shall be applicable to such sale or other disposition:

(a)Such sale or other disposition may be at public or private sale (or at any broker’s board or on any securities exchange) for cash, upon credit or for future delivery as Secured Party shall deem appropriate. Secured Party shall be authorized at any such sale (if Secured Party deems it advisable to do so with regard to any type or item of Collateral) to restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Collateral for their own use (or for their own account for investment, as applicable) and not with a view to the distribution or sale thereof, and upon consummation of any such sale, Secured Party shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of Debtor, and Debtor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal which Debtor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Secured Party shall give Debtor at least ten (10) days’ written notice (which Debtor agrees is reasonable notice) of Secured Party’s intention to make any sale of Collateral owned by Debtor. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as Secured Party may fix and state in the notice of such sale, and Secured Party shall not be obligated to make any sale of any Collateral if Secured Party shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given, and Secured Party may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice to Debtor or anyone else, be made at the time and place to which the same was so adjourned.

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(b)In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by Secured Party until the sale price is paid by the purchaser or purchasers thereof, but Secured Party shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for Collateral so sold and, in case of any such failure, such of the Collateral may be sold again upon notice to Debtor as set forth in this Section.

(c)At any public sale, Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of redemption, stay or appraisal on the part of Debtor (all said rights being also hereby waived and released to the extent permitted by law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to Secured Party from Debtor as a credit against the purchase price, and Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to Debtor therefor.

(d)For purposes of any sale of Collateral in accordance with this Agreement, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof. Secured Party shall be free to carry out such sale pursuant to such agreement, and Debtor shall not be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after Secured Party shall have entered into such an agreement, all Events of Default shall have been remedied and the Secured Obligations paid in full.

(e)Upon any sale of Collateral by Secured Party (including a sale pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of Secured Party or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral being sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to Secured Party or such officer or be answerable in any way for the misapplication thereof.

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ARTICLE VII

7.01Power of Attorney; Collections by Secured Party.

(a)Upon the occurrence of an Event of Default, Debtor covenants and agrees to appoint Secured Party as Debtor’s attorney-in-fact, with power of substitution, which appointment is irrevocable and coupled with an interest, to do each of the following in the name of Debtor or in the name of Secured Party or otherwise, for the use and benefit of Secured Party, but at the cost and expense of Debtor, and with or without notice to Debtor: (i) notify the Account Debtors and insurers to make payments directly to Secured Party, and to take control of the cash and non-cash Proceeds of any Collateral or insurance; (ii) renew, extend or compromise any of the Collateral or deal with the same as Secured Party may deem advisable; (iii) release, exchange, substitute, or surrender all or any part of the Collateral; (iv) remove from Debtor’s places of business all Collateral Records without cost or expense to Secured Party; (v) make such use of Debtor’s places of business as may be reasonably necessary to administer, control and collect the Collateral; (vi) repair, alter or supply Goods, if any, necessary to fulfill in whole or in part the purchase order or similar order of any Account Debtor; (vii) demand, collect, give receipt for, and give renewals, extensions, discharges and releases of any of the Collateral; (viii) institute and prosecute legal and equitable proceedings to enforce collection of, or realize upon, any of the Collateral; (ix) settle, renew, extend, compromise, compound, exchange or adjust claims with respect to any of the Collateral or any legal proceedings brought with respect thereto; (x) indorse the name of Debtor upon any item of payment relating to the Collateral or upon any proof of claim in bankruptcy against any Collateral; and (xi) institute and prosecute legal and equitable proceedings to reclaim any of the Goods sold to any Account Debtor obligated on an Account at a time when such Account Debtor was insolvent. Secured Party agrees that it shall not exercise any power or authority granted under this power of attorney unless an Event of Default has occurred and is continuing.

(b)NONE OF SECURED PARTY OR ITS AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO DEBTOR FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.

ARTICLE VIII

GENERAL PROVISIONS

8.01Remedies Cumulative. Upon the occurrence and during the continuance of any Event of Default, and in addition to such other rights and remedies as Secured Party may have under other provisions of this Agreement or any other Finance Document, Secured Party may exercise any one or more of its rights and remedies under common or statutory law. No failure or delay on the part of Secured Party in exercising any right, power or privilege hereunder or under any other Finance Document and no course of dealing between Debtor or any other Obligor or other Person and Secured Party shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Finance Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies which Secured Party would otherwise have and may be exercised simultaneously. No notice to or demand on Debtor in any case shall entitle Debtor or any other obligor or any other Person to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of Secured Party to any other or further action in any circumstances without notice or demand.

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ARTICLE IX

MISCELLANEOUS

9.01Each of the Debtors agrees to pay all expenses, including reasonable attorney's fees and charges (including time charges of attorneys who are employees of Secured Party) paid or incurred by Secured Party in endeavoring to collect the Secured Obligations of such Debtor, or any part thereof, and in enforcing this Agreement against such Debtor, and such obligations will themselves be Secured Obligations.

9.02No delay on the part of Secured Party in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by Secured Party of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy.

9.03This Security Agreement shall remain in full force and effect until all Secured Obligations have been paid in full. If at any time all or any part of any payment theretofore applied by the Secured Party to any of the Secured Obligations is or must be rescinded or returned by the Secured Party for any reason whatsoever (including the insolvency, bankruptcy or reorganization of any Debtor), such Secured Obligations shall, for the purposes of this Agreement, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by the Secured Party, and this Agreement shall continue to be effective or be reinstated, as the case may be, as to such Secured Obligations, all as though such application by the Secured Party had not been made.

9.04The rights and privileges of Secured Party hereunder shall inure to the benefit of its successors and assigns.

9.05Secured Party’s Rights to Release Obligors; etc. Secured Party may take or release other security, may release any party primarily or secondarily liable for any Secured Obligations or other indebtedness to Secured Party, may grant extensions, renewals or indulgences with respect to such Secured Obligations or other indebtedness and may apply any other security therefor held by Secured Party to the satisfaction of such Secured Obligations or other indebtedness, all without prejudice to any of Secured Party’s rights under this Agreement.

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9.06Notices. 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 delivery, 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, so long as it is properly addressed. The addresses and facsimile numbers for such communications shall be:

If to any Debtor:

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 Secured Party:

Dutchess Capital Management, LLC

Douglas Leighton

50 Commonwealth Ave, Suite 2

Boston, MA 02116

Telephone: (617) 301-4700

Facsimile: (617) 249-0947

9.07Term. The term of this Agreement shall commence with the date of this Agreement and shall continue in full force and effect and be binding upon Debtor until all Secured Obligations of Debtor to Secured Party shall have been fully paid and satisfied and Secured Party shall have given Debtor written notice of the termination of this Agreement (excluding provisions that by their terms survive termination of other provisions of this Agreement or survive the termination of the security interest created under this Agreement). Secured Party shall not be obligated to give Debtor written notice of termination of this Agreement, or to terminate any financing statements or other Lien Notices, until all Secured Obligations of Debtor to Secured Party shall have been fully paid and satisfied and there is no commitment on the part of Secured Party to make an advance, incur an obligation or otherwise give value, and Debtor shall have given Secured Party a written demand requesting the termination of this Agreement and any financing statements at which time Secured Party shall execute and deliver such documents, at Debtor’s expense, as are necessary to release Secured Party’s liens in the Collateral. Notwithstanding anything to the contrary in this Agreement or any other Finance Documents, this Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any amount received by Secured Party in respect of the Secured Obligations is rescinded or must otherwise be restored or returned by Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of Debtor or upon the appointment of any intervenor or conservator of, or trustee or similar official for, Debtor or any substantial part of Debtor’s assets, or otherwise, all as though such payments had not been made.

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9.08Further Assurances. Debtor shall execute and deliver to Secured Party such further assurances and take such other further actions as Secured Party may from time to time request to further the intent and purpose of this Agreement and to maintain and protect the rights and remedies intended to be created in favor of Secured Party under this Agreement.

9.09Amendments, Waivers and Consents; Successors and Assigns. Neither this Agreement nor any other Finance Document nor any of the terms hereof or thereof may be amended, modified, changed, waived, discharged or terminated, nor shall any consent be given, unless such amendment, modification, change, waiver, discharge, termination or consent is in writing signed by Secured Party and Debtor. This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until the Secured Obligations have been fullypaid and satisfied and this Agreement has been terminated, (ii) be binding upon Debtor and its successors and assigns, and (iii) inure, together with the rights and remedies of Secured Party hereunder, to the benefit of Secured Party and Secured Party’s successors, transferees and assigns. This Agreement may not be assigned by Debtor without prior written consent of Secured Party, which consent may be withheld in Secured Party’s sole discretion.

9.10Entire Agreement. This Agreement and any other Finance Documents are a complete and exclusive expression of all the terms of the matters expressed therein, and all prior agreements, statements, and representations, whether written or oral, which relate thereto in any way are hereby superseded and shall be given no force and effect. No promise, inducement, or representation has been made to Debtor which relates in any way to the matters expressed in this Agreement and in any other Finance Documents, other than what is expressly stated herein and in such Finance Documents.

9.11No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event of any ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

9.12Governing Law. This Agreement and all related instruments and documents and the rights and obligations of the parties hereunder and thereunder shall, in all respects, be governed by, and construed in accordance with, the internal laws of the Commonwealth of Massachusetts, without regard to conflicts of law principles, regardless of the location of the Collateral, excepting, however, that the Uniform Commercial Code (or decisional law) of a jurisdiction other than the Commonwealth of Massachusetts may provide the method of perfection, the effect of perfection or non-perfection, or the priority of liens and security interests created under this Agreement.

9.13DISPUTES SUBJECT TO ARBITRATION. The parties to this Agreement will submit all disputes arising under it to arbitration in Boston, Massachusetts before a single arbitrator of the American Arbitration Association (“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 agreement will challenge the jurisdiction or venue provisions as provided in this section. Nothing in this section shall limit the Secured Party’s right to obtain an injunction for a breach of this Agreement from a court of law.

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9.14Severability. Any provision of this Agreement, or of any other Finance Document, that is prohibited by, or unenforceable under, the laws of any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability, without invalidating the remaining provisions of this Agreement, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, Debtor hereby waives any provision of law which renders any provision of this Agreement or any other Finance Document prohibited or unenforceable in any respect.

9.15Counterparts. This Agreement may be executed in counterparts and each shall be effective as an original, and a photocopy, facsimile or telecopy of this executed Agreement shall be effective as an original. In making proof of this Agreement, it shall not be necessary to produce more than one counterpart, photocopy, facsimile, or telecopy of this executed Agreement.

9.16Time. Time is of the essence of this Agreement.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, and intending to be legally bound hereby, each Debtor has executed this Agreement as of the date first above written.

DEBTOR: MARMION INDUSTRIES CORP.
By:	/s/ Wilbert Marmion
	Name: Wilbert Marmion Title:   President

MARMION INVESTMENTS, INC.
By:	/s/ Wilbert Marmion
	Name: Wilbert Marmion Title:   President

SECURED PARTY: DUTCHESS PRIVATE EQUITIES FUND, LTD
By:	/s/ Douglas H. Leighton
	Name: Douglas H. Leighton Title:   Director

EX-10.5

WARRANT

THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE TRANSFERRED UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, A "NO-ACTION" LETTER FROM THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION” OR THE “SEC”) WITH RESPECT TO SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

Marmion Industries Corp.

WARRANT NO. MARCH 2007 101

Dated: March 22, 2007

Marmion Industries Corp., a corporation organized under the laws of the State of Nevada (the “Company”), hereby certifies that, for value received from Dutchess Private Equities Fund, Ltd., a Cayman Island exempted company (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company up to a total of one hundred million (100,000,000) shares of the common stock, $0.001 par value per share (the “Common Stock”), of the Company (the “Warrant Shares”), at an exercise price equal to one and one-half cent ($.015) per share (the “Exercise Price”). This Warrant may be exercised on a cashless basis anytime after issuance through and including the fifth (5th) anniversary of its original issuance as noted above (the “Expiration Date”), subject to the following terms and conditions:

1.Registration of Warrant. The Company shall, from time to time and whenever requested by the Holder, register this Warrant in conformity with records to be maintained by the Company for such purpose (the “Warrant Register”) in the name of the Holder. The Company shall treat the registered Holder of this Warrant as the absolute owner hereof for any and all purposes, including the exercise hereof or any distribution to the Holder, and the Company shall not be affected by notice to the contrary.

2.Registration of Transfers and Exchanges.

(a)The Company or the transfer agent shall enter or record the transfer of all or any portion of this Warrant in the Warrant Register, upon surrender of this Warrant to the Company at the office specified herein or pursuant to Section 11 hereof. Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant hereinafter referred to as a “New Warrant”), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance of such transferee of all of the rights and obligations of a holder of a Warrant.

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(b)This Warrant is exchangeable, upon the surrender hereof by the Holder to the office of the Company specified herein or pursuant to Section 3(b) hereof for one or more New Warrants, evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder. Any such New Warrant shall be dated as of the date of such exchange.

3.Duration and Exercise of Warrants.

(a)This Warrant shall be exercisable by the registered Holder on any business day before 5:00 P.M., Boston time, at any time and from time to time on or after the date hereof to and including the Expiration Date. At 5:00 P.M., Boston time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value. Prior to the Expiration Date, the Company may not call or otherwise redeem this Warrant without the prior written consent of the Holder, which consent shall be given or withheld at the sole and absolute discretion of the Holder.

(b)Subject to Section 2(b), Section 6 and Section 10 hereof, upon: (x) surrender of this Warrant, together with the Form of Election to Purchase attached hereto duly completed and signed, to the Company at its address for notice set forth in Section 11 hereof; and (y) payment of the Exercise Price multiplied by the number of Warrant Shares that the Holder intends to purchase hereunder, in the manner provided hereunder, all as specified by the Holder in the Form of Election to Purchase, the Company shall promptly (but in no event later than five (5) business days after the Date of Exercise (as defined below)) issue or cause to be issued and cause to be delivered to the Holder in such name(s) as the Holder may designate, a certificate for the Warrant Shares issuable upon such exercise and free of restrictive legends unless (i) a registration statement covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder is not then effective or the Warrant Shares are not freely transferable without volume restrictions pursuant to Rule 144(k) promulgated under the Securities Act then the Warrant Shares will bear a Securities Act restrictive legend, or (ii) this Warrant shall have been issued pursuant to a written agreement between the original Holder and the Company, as required by such agreement. Any person so designated by the Holder to receive Warrant Shares shall be deemed to have become holder of record of such Warrant Shares as of the Date of Exercise of this Warrant. A “Date of Exercise” means the date on which the Company shall have received (I) this Warrant (or any New Warrant, as applicable), together with the Form of Election to Purchase attached hereto (or attached to such New Warrant) appropriately completed and duly signed; and (II) payment of the Exercise Price for the number of Warrant Shares so indicated by the holder hereof to be purchased.

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(c)This Warrant shall be exercisable in its entirety or, from time to time, for a portion of the number of Warrant Shares. If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares for which no exercise has been evidenced by this Warrant. Subject to the limitations set forth under Section 9(c) below, in the event the Common Stock representing the Warrant Shares is not delivered per the written instructions of the Holder within five (5) business days after the Notice of Election and Warrant is received by the Company (the “Delivery Date”), then the Company shall pay to Holder in cash two percent (2.0%) of the dollar value of the Warrant Shares to be issued per each day after the Delivery Date that the Warrant Shares are not delivered. The Company acknowledges that its failure to deliver the Warrant Shares by the Delivery Date will cause the Holder to suffer damages in an amount that will be difficult to ascertain. Accordingly, the parties hereto agree that it is appropriate to include in this Warrant this provision for liquidated damages. The parties hereto acknowledge and agree that the liquidated damages provision set forth in this section represents the parties’ good faith effort to quantify such damages and therefore agree that the form and amount of such liquidated damages are reasonable and will not constitute a penalty. Notwithstanding the foregoing, the payment of liquidated damages shall not relieve the Company from its obligations to deliver the Common Stock pursuant to the terms of this Warrant. The Company shall make any payments incurred under this Section 3 in immediately available funds by the 5^th day of the month following the date such payment is accrued. Nothing herein shall limit Holder’s right to pursue actual damages or cancel the Notice of Election for the Company’s failure to issue and deliver Common Stock to the Holder within seven (7) business days following the Delivery Date.

4.Registration Rights. During the term of this Warrant, the Company agrees to use its best efforts to file a registration statement with the SEC covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder on or before April 16, 2007 (unless the Warrant Shares are otherwise freely transferable without volume restrictions pursuant to Rule 144(k) or Rule 144A promulgated under the Securities Act). The registration rights granted to the Holder pursuant to this Section shall continue until all of the Holder's Warrant Shares have been sold in accordance with an effective registration statement or upon the Expiration Date, or as otherwise provided in the Debenture Registration Rights Agreement entered into between the Company and the original Holder as of the original issuance date hereof. The Company will pay all registration expenses in connection therewith.

5. Payment of Taxes. Upon the exercise of this Warrant, the Company will pay all documentary stamp taxes attributable to the issuance of Warrant Shares; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

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6.Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and indemnity, if requested, satisfactory to it. Applicants for a New Warrant under such circumstances shall comply with such other reasonable regulations and procedures and pay such other reasonable charges as the Company may prescribe.

7.Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 8 hereof). The Company covenants that all Warrant Shares that shall be so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. If the Company does not have a sufficient amount of Common Stock authorized to reserve for the Warrant Shares, it shall, as soon as reasonably practicable, use its best efforts to increase the number of its authorized shares such that the Company will have a sufficient amount of Common Stock authorized to reserve for the Warrant Shares.

8.Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 8. Upon each such adjustment of the Exercise Price pursuant to this Section 8, the Holder shall thereafter but prior to the Expiration Date be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of Warrant Shares obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment.

(a)An adjustment shall be made, if the Company, at any time while this Warrant is outstanding (i) pays a stock dividend (except scheduled dividends paid on outstanding preferred stock as of the date hereof which contain a stated dividend rate) or otherwise make distribution(s) on shares of its Common Stock or on any other class of capital stock and not the Common Stock payable in shares of Common Stock; (ii) subdivides outstanding shares of Common Stock into a larger number of shares; or (iii) combines outstanding shares of Common Stock into a smaller number of shares. If either (i), (ii) or (iii) above occurs, the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination, and shall apply to successive subdivisions and combinations.

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(b)In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another entity, the sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then the Holder shall have the right thereafter to exercise this Warrant only into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange, and the Holder shall be entitled upon such event to receive such amount of securities or property equal to the amount of Warrant Shares such Holder would have been entitled to had such Holder exercised this Warrant immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange. The terms of any such consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the Holder the right to receive the securities or property set forth in this Section 8(b) upon any exercise following any such reclassification, consolidation, merger, sale, transfer or share exchange.

(c) At any time while this Warrant is outstanding, if the Company distributes to all holders of Common Stock (and not to holders of this Warrant) evidence of its indebtedness or assets or rights or warrants to subscribe for or purchase any security (excluding those referred to in Section 8(a), Section 8(b) and Section 8(d) hereof), then in each such case the Exercise Price shall be determined by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Exercise Price determined as of the record date mentioned above, and of which the numerator shall be such Exercise Price on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Company's independent certified public accountants that regularly examines the financial statements of the Company (the “Appraiser”).

(d)If, at any time while this Warrant is outstanding, the Company shall issue or cause to be issued rights or warrants to acquire or otherwise sell or distribute shares of Common Stock for a consideration per share less than the lower of the Exercise Price then in effect and the then fair market value of the Common Stock, then, forthwith upon such issue or sale, the Exercise Price shall be reduced to the price (calculated to the nearest one hundredth of a cent) determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, the numerator of which shall be the sum of (i) the number of shares of Common Stock outstanding immediately prior to such issuance, and (ii) the number of shares of Common Stock which the aggregate consideration received (or to be received, assuming exercise or conversion in full of such rights, warrants and convertible securities) for the issuance of such additional shares of Common Stock would purchase at the Exercise Price, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately after the issuance of such additional shares; provided, however, 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, (v0 as a result of the exercise of Warrants or conversion of Debentures which are granted or issued pursuant to that certain Subscription Agreement dated as of March 22, 2007 pursuant to which this Warrant was issued (the “Subscription Agreement”), (v) the payment of any interest on the Debenture issued pursuant to the Subscription 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. Such adjustment shall be made successively whenever such an issuance is made.

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(e)For the purposes of this Section 8, the following clauses shall also be applicable:

(i) Record Date. In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock or in securities convertible or exchangeable into shares of Common Stock, or (B) to subscribe for or purchase Common Stock or securities convertible or exchangeable into shares of Common Stock, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

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(ii) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

(f)All calculations under this Section 8 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.

(g)Whenever the Exercise Price is adjusted pursuant to Section 8(c) hereof, the Holder, after receipt of the determination by the Appraiser, shall have the right to select an additional appraiser (which shall be a nationally recognized accounting firm), in which case the adjustment shall be equal to the average of the adjustments recommended by each of the Appraiser and such additional appraiser appointed under this Section 8(g). The Holder shall promptly mail or cause to be mailed to the Company, a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Such adjustment shall become effective immediately after the record date mentioned above, if:

(i)the Company shall declare a dividend (or any other distribution) on its Common Stock;

(ii)the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock;

(iii)the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights;

(iv)the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or

(v)the Company shall authorize the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the Company shall cause to be mailed to the Holder at their last addresses as they shall appear upon the Warrant Register, at least thirty (30) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.

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9.Payment of Exercise Price. The Holder, at its sole election, may pay the Exercise Price in one of the following manners:

(a)Cash Exercise. The Holder shall deliver immediately available funds; or

(b)Cashless Exercise. If at any time after one year from the date of issuance of this Warrant there is no effective Registration Statement registering the resale of the Warrant Shares by the Holder at such time, this Warrant may also be exercised at such time by means of a cashless exercise. In such event, the Holder shall surrender this Warrant to the Company, together with a notice of cashless exercise, and the Company shall issue to the Holder the number of Warrant Shares determined as follows:

X = Y (A-B)/A

where:

X = the number of Warrant Shares to be issued to the Holder.

Y = the number of Warrant Shares with respect to which this Warrant is being exercised.

A = the average closing bid price of the Common Stock for the ten (10) trading days immediately prior to the Date of Exercise on which the Common Stock actually trades.

B = the Exercise Price.

For purposes of Rule 144 of the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have been commenced, on the issue date.

(c)Notwithstanding anything in this Warrant to the contrary, the Holder is limited in the amount of this Warrant it may exercise. In no event shall the Holder be entitled to exercise any amount of this Warrant in excess of that amount upon exercise of which the sum of (1) the number of shares of Common Stock beneficially owned (as such term is defined under Section 13(d) and Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) by the Holder, and (2) the number of Warrant Shares issuable upon the exercise of any Warrants then owned by Holder, would result in beneficial ownership by the Holder of more than four and ninety-nine one hundredths percent (4.99%) of the outstanding shares of Common Stock of the Company, as determined in accordance with Rule13d-1(j) of the Exchange Act. Furthermore, the Company shall not process any exercise that would result in beneficial ownership by the Holder of more than four and ninety-nine one hundredths percent (4.99%) of the outstanding shares of Common Stock of the Company.

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10.Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. The number of full Warrant Shares which shall be issuable upon the exercise of this Warrant shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of this Warrant so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 10, be issuable on the exercise of this Warrant, the Company shall pay an amount in cash equal to the Exercise Price multiplied by such fraction.

11.Notices. Any and all notices or other communications or deliveries hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 5:00 p.m. Boston time on a business day, (ii) the business day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section later than 5:00 p.m. Boston time on any date and earlier than 11:59 p.m. Boston time on such date, (iii) the business day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The addresses 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

12.Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further action. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register.

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13.Miscellaneous.

(a)This Warrant shall be binding on and inure to the benefit of the parties hereto. This Warrant may be amended only in writing signed by the Company and the Holder.

(b)Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or cause under this Warrant. This Warrant shall inure to the sole and exclusive benefit of the Company and the Holder.

(c)This Warrant shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Massachusetts without regard to the principles of conflicts of law thereof.

(d)The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

(e)In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

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

(g)Any capitalized term used but not defined in this Warrant shall have the meaning ascribed to it in the Transaction Documents (as such term is defined in that certain Debenture Registration Rights Agreement, of even date herewith, by and between the Company and the Holder).

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

(i) This Warrant and the obligations of the Company hereunder shall not be assignable by the Company.

(j)Notwithstanding anything in this Warrant 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 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 Party 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.

14. Disputes Under This Agreement.

All disputes arising under this Warrant 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 hereto will 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 hereto will challenge the jurisdiction or venue provisions provided in this Section 14. Nothing in this Section 14 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 this Section 14 fully adjudicates the dispute.

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.

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

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EXHIBIT A

FORM OF ELECTION TO PURCHASE

Marmion Industries Corp.

9103 Emmott Road, Building 6, Suite A

Houston, Texas 77040

Re: Intention to Exercise Right to Purchase Shares of Common Stock Under the Warrant

Gentlemen:

In accordance with the Warrant enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase _________________shares of Common Stock, $0.001 par value per share, of Marmion Industries Corp. and, if such Holder is not utilizing the cashless exercise provisions set forth in the Warrant, encloses herewith $________ in cash, certified or official bank check(s), which sum represents the aggregate Exercise Price for the number of shares of Common Stock to which this Form of Election to Purchase relates, together with any applicable taxes payable by the undersigned pursuant to the Warrant. Any capitalized terms used but not defined in this Form of Election to Purchase shall have the meaning ascribed to them in the accompanying Warrant.

The undersigned requests that certificates for the shares of Common Stock issuable upon this exercise be issued in the name of:

(Please insert SS# or FEIN #)

(Please print name and address)

If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant evidencing the right to purchase the shares of Common Stock not issuable pursuant to the exercise evidenced hereby be issued in the name of and delivered to:

(Please print name and address)

Dated: _____________, _____	Name of Holder:
	Signed:
	Print Name: Title:

(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)

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