Document:

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.

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    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.

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

    

    (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.

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

    

    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:

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

       

    

    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.

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

       

    

    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. 

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

       

    

    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. 

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    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
              

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    

    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:  	
            
	 	
              
                

              

              Name: Douglas H. Leighton

            
	 	
              Title:
                Director

            

    
      
        
        

      

      
        18SECURITY
      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

     

    1.01 Article 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.

     

    1.02 Schedules 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,
      and including
      any amendments, supplements and replacements to such Schedules and Exhibits
      from time to time.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    1.03 Defined
      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.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    “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

     

    2.01 Security
      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

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (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.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    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.

     

    2.02 Perfection
      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.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (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.

     

    2.03 Perfection
      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.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    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:

     

    3.01 Debtor’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

     

    3.02 Permitted
      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.

     

    3.03 Authorization
      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).

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    3.04 Tangible
      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. 

     

    3.05 Deposit
      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. 

     

    3.06 Leases.
      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.

     

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

     

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

    

    ARTICLE
      IV

     

    AFFIRMATIVE
      COVENANTS

     

    Debtor
      covenants and agrees to the following:

     

    4.01 Account
      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. 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    4.02 Additional
      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;

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (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

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (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.

     

    4.03 Taxes,
      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.

     

    4.04 Notice
      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.

     

    4.05 Delivery
      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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    4.06 Voting
      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:

     

    5.01 Identity.
      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 must maintain
      a public record showing the organization to have been organized, Debtor shall
      not organize under the laws of another jurisdiction.

     

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

     

    5.03 Liens.
      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

     

    6.01 Any
      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.

    

    6.02 Right
      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.

     

    6.03 Collection
      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

     

    6.04 Possession
      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.

     

    6.05 Disposition
      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.

     

    6.06 Additional
      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.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (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

     

    7.01 Power
      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

     

    8.01 Remedies
      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

       

    

    9.01 Each
      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.

     

    9.02 No
      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.

     

    9.03 This
      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.

     

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

     

    9.05 Secured
      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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    9.06 Notices.
      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

     

    9.07 Term.
      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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    9.08 Further
      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.

     

    9.09 Amendments,
      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 fully paid
      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.

     

    9.10 Entire
      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.

     

    9.11 No
      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.

     

    9.12 Governing
      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.

     

    9.13 DISPUTES
      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.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    9.14 Severability.
      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.

     

    9.15 Counterparts.
      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.

     

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

     

    [SIGNATURE
      PAGE FOLLOWS]

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    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

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