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 1 Interest.

(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 2 Method of Payment.

Section 2.1 Repayment 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 3 Conversion.
 
Section 3.1 Conversion 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 3.2 Conversion 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 convert the 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 5th 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 5th 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 3.3 Fractional 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 3.4 Taxes 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 3.5 Company 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 3.6 Restrictions 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 only be sold pursuant to registration under or an
exemption from the Securities Act.
 
Section 3.7 Stock 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 4 Mergers.
 
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 6 Defaults and Remedies.
 
Section 6.1 Events 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 6.2 Remedies.

(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 6.3 Acceleration. 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 6.4 Seniority. 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 6.5 Cost 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 7 Registered Debentures.
 
Section 7.1 Record 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 7.2 Worn 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 8 Notice.

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 9 Time.

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 10 No Assignment.

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

Article 11 Rules 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 12 Governing 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 13 Disputes 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 15  Holder 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 17 Integration.

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 18 Failure 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 19 Representations 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 20 Acknowledgements 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  

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Name: Wilbert Marmion
  Title:    Chief Executive Officer               By /s/ Ellen Raidl  

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Name: Ellen Raidl
  Title:  Treasurer         DUTCHESS PRIVATE EQUITIES FUND, LTD.              
By: /s/ Douglas H. Leighton  

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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: 617-301-4700  Fax: 617-249-0947

        DUTCHESS PRIVATE EQUITIES FUND, LTD.,  
   
   
  By:    

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Name: Douglas H. Leighton
 
Title: Director

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