Filed by Automated Filing Services Inc. (604) 609-0244 - Global Energy, Inc. - Exhibit 10.8






NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS
DEBENTURE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THESE SECURITIES HAVE BEEN
SOLD IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. 

GLOBAL ENERGY, INC. 

 

SECURED CONVERTIBLE DEBENTURE

	Issuance Date: December __, 2007 	Original Principal
      Amount:        $1,000,000 
	No. GEYI-1-3 	 


          FOR
VALUE RECEIVED, GLOBAL ENERGY, INC., a Nevada corporation (the
"Company"), hereby promises to pay to the order of YA GLOBAL INVESTMENTS,
L.P. (FORMERLY, CORNELL CAPITAL PARTNERS, L.P.) or registered assigns (the
"Holder") the amount set out above as the Original Principal Amount (as
reduced pursuant to the terms hereof pursuant to redemption, conversion or
otherwise, the "Principal") when due, whether upon the Maturity Date (as
defined below), on any Installment Date with respect to the Installment Amount
due on such Installment Date (each, as defined herein), acceleration, redemption
or otherwise (in each case in accordance with the terms hereof) and to pay
interest ("Interest") on any outstanding Principal at the applicable
Interest Rate from the date set out above as the Issuance Date (the "Issuance
Date") until the same becomes due and payable, whether upon an Interest Date
(as defined below), any Installment Date or the Maturity Date or acceleration,
conversion, redemption or otherwise (in each case in accordance with the terms
hereof). This Secured Convertible Debenture (including all Secured Convertible
Debentures issued in exchange, transfer or replacement hereof, this
"Debenture") is one of an issue of Secured Convertible Debentures issued
pursuant to the Securities Purchase Agreement (collectively, the
"Debentures" and such other Senior Convertible Debentures, the "Other
Debentures"). Certain capitalized terms used herein are defined in Section
17. 

          (1)     
GENERAL TERMS 

                    (a)      Payment
of Principal. On each Installment Date, the Company shall pay to the Holder
an amount equal to the Installment Amount due on such Installment Date in
accordance with Section 3. On the Maturity Date, the Company shall pay to the
Holder an amount in cash representing all outstanding Principal, accrued and
unpaid Interest. The "Maturity Date" shall be October 31, 2010, as may be
extended at the option of the Holder (i) in 




the event that, and for so long as, an Event of Default (as
defined below) shall have occurred and be continuing on the Maturity Date (as
may be extended pursuant to this Section 1) or any event shall have occurred and
be continuing on the Maturity Date (as may be extended pursuant to this Section
1) that with the passage of time and the failure to cure would result in an
Event of Default. Other than as specifically permitted by this Debenture, the
Company may not prepay or redeem any portion of the outstanding Principal
without the prior written consent of the Holder. 

                    (b)     
Interest. Interest shall accrue on the outstanding principal balance
hereof at an annual rate equal to ten percent (10%) (“Interest Rate”).
Interest shall be calculated on the basis of a 365-day year and the actual
number of days elapsed, to the extent permitted by applicable law. Interest
hereunder shall be paid on each Interest Payment Date and on the Maturity Date
(or sooner as provided herein) to the Holder or its assignee in whose name this
Debenture is registered on the records of the Company regarding registration and
transfers of Debentures at the option of the Company in cash, or, provided that
the Equity Conditions are then satisfied converted into Common Stock at the
Company Conversion Price as of the date paid. 

                    (c)     
Security. The Debenture is secured by a security interest in all of the
assets of the Company as evidenced by the security agreement dated July 6, 2007
(the “Security Agreement”). 

          (2)     
EVENTS OF DEFAULT.

                    (a)     
An “Event of Default”, wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body): 

                              (i)      the
Company's failure to pay to the Holder any amount of Principal, Interest, or
other amounts when and as due under this Debenture (including, without
limitation, the Company's failure to pay any redemption payments or amounts
hereunder) or any other Transaction Document; 

                              (ii)     
The Company or any subsidiary of the Company shall commence, or there shall be
commenced against the Company or any subsidiary of the Company under any
applicable bankruptcy or insolvency laws as now or hereafter in effect or any
successor thereto, or the Company or any subsidiary of the Company commences any
other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or any
subsidiary of the Company or there is commenced against the Company or any
subsidiary of the Company any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of 61 days; or the Company or any
subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or the
Company or any subsidiary of the Company suffers any appointment of any
custodian, private or court appointed receiver or the like for it or any
substantial part of its property which continues undischarged or unstayed for a
period of sixty one (61) days; or the Company or any subsidiary of the Company
makes a 

2 




general assignment for the benefit of creditors; or the Company
or any subsidiary of the Company shall fail to pay, or shall state that it is
unable to pay, or shall be unable to pay, its debts generally as they become
due; or the Company or any subsidiary of the Company shall call a meeting of its
creditors with a view to arranging a composition, adjustment or restructuring of
its debts; or the Company or any subsidiary of the Company shall by any act or
failure to act expressly indicate its consent to, approval of or acquiescence in
any of the foregoing; or any corporate or other action is taken by the Company
or any subsidiary of the Company for the purpose of effecting any of the
foregoing; 

                              (iii)     
The Company or any subsidiary of the Company shall default in any of its
obligations under any other debenture or any mortgage, credit agreement or other
facility, indenture agreement, factoring agreement or other instrument under
which there may be issued, or by which there may be secured or evidenced any
indebtedness for borrowed money or money due under any long term leasing or
factoring arrangement of the Company or any subsidiary of the Company in an
amount exceeding $100,000, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such indebtedness becoming
or being declared due and payable prior to the date on which it would otherwise
become due and payable; 

                              (iv)      If
the Common Stock is quoted or listed for trading on any of the following and it
ceases to be so quoted or listed for trading and shall not again be quoted or
listed for trading on any Primary Market within five (5) Trading Days of such
delisting: (a) the American Stock Exchange, (b) New York Stock Exchange, (c) the
Nasdaq Global Market, (d) the Nasdaq Capital Market, or (e) the Nasdaq OTC
Bulletin Board (“OTCBB”) (each, a “Primary Market”); 

                              (v)      The
Company or any subsidiary of the Company shall be a party to any Change of
Control Transaction (as defined in Section 6) unless in connection with such
Change of Control Transaction this Debenture is retired;

                              (vi)     
The Company shall fail to file the Underlying Shares Registration Statement with
the Commission, or the Underlying Shares Registration Statement shall not have
been declared effective by the Commission, in each case within thirty (30) days
of the periods set forth in the Registration Rights Agreement (“Registration
Rights Agreement”) dated July 6, 2007 among the Company and each Buyer
listed on Schedule I attached thereto, or, while the Underlying Shares
Registration Statement is required to be maintained effective pursuant to the
terms of the Investor Registration Rights Agreement, the effectiveness of the
Underlying Shares Registration Statement lapses for any reason (including,
without limitation, the issuance of a stop order) or is unavailable to the
Holder for sale of all of the Holder’s Registrable Securities (as defined in the
Investor Registration Rights Agreement) in accordance with the terms of the
Investor Registration Rights Agreement, and such lapse or unavailability
continues for a period of more than ten (10) consecutive Trading Days or for
more than an aggregate of twenty (20) days in any 365-day period (which need not
be consecutive); 

                              (vii)     
the Company's (A) failure to cure a Conversion Failure by delivery of the
required number of shares of Common Stock within five (5) Business Days after
the applicable Conversion Failure or (B) notice, written or oral, to any holder
of the Debentures, 

3 




including by way of public announcement, at any time, of its
intention not to comply with a request for conversion of any Debentures into
shares of Common Stock that is tendered in accordance with the provisions of the
Debentures, other than pursuant to Section 4(c); 

                              (viii)      The
Company shall fail for any reason to deliver the payment in cash pursuant to a
Buy-In (as defined herein) within three (3) Business Days after such payment is
due;

                              (ix)      The
Company shall fail to observe or perform any other covenant, agreement or
warranty contained in, or otherwise commit any breach or default of any
provision of this Debenture (except as may be covered by Section 2(a)(i) through
2(a)(vii) hereof) or any Transaction Document (as defined in Section 16) which
is not cured within the time prescribed. 

                              (x)      any
Event of Default (as defined in the Other Debentures) occurs with respect to any
Other Debentures. 

                    (b)      During
the time that any portion of this Debenture is outstanding, if any Event of
Default has occurred, the full unpaid Principal amount of this Debenture,
together with interest and other amounts owing in respect thereof, to the date
of acceleration shall become at the Holder's election, immediately due and
payable in cash; provided however, the Holder may request (but shall have no
obligation to request) payment of such amounts in Common Stock of the Company.
Furthermore, in addition to any other remedies, the Holder shall have the right
(but not the obligation) to convert this Debenture at any time after (x) an
Event of Default or (y) the Maturity Date at the Company Conversion Price. The
Holder need not provide and the Company hereby waives any presentment, demand,
protest or other notice of any kind, (other than required notice of conversion)
and the Holder may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Such declaration may be rescinded and
annulled by Holder at any time prior to payment hereunder. No such rescission or
annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.

          (3)     
COMPANY INSTALLMENT CONVERSION OR REDEMPTION.

                    (a)     
General. On each applicable Installment Date, the Company shall pay to
the Holder of this Debenture the Installment Amount due on such date by
converting such Installment Amount into shares of Common Stock of the Company,
provided that there is not then an Equity Conditions Failure, in accordance with
this Section 3 (a "Company Conversion"); provided, however, that the
Company may, at its option following notice to the Holder, redeem such
Installment Amount (a "Company Redemption") or by any combination of a
Company Conversion and a Company Redemption so long as all of the outstanding
applicable Installment Amount shall be converted and/or redeemed by the Company
on the applicable Installment Date, subject to the provisions of this Section 3.
On or prior to the date which is the fifth (5th) Trading Day prior to
each Installment Date (each, an "Installment Notice Due Date"), the
Company shall deliver written notice (each, a "Company Installment
Notice"), to the Holder which Company Installment Notice shall (i) either
(A) confirm that the applicable Installment Amount of the Holder’s Debenture
shall be converted in whole pursuant to a Company Conversion or (B) (1) 

4 




state that the Company elects to redeem, or is required to
redeem in accordance with the provisions of the Debenture, in whole or in part,
the applicable Installment Amount pursuant to a Company Redemption and (2)
specify the portion (including Interest) which the Company elects or is required
to redeem pursuant to a Company Redemption (such amount to be redeemed, the
"Company Redemption Amount") and the portion (including Interest), if
any, that the Company elects to convert pursuant to a Company Conversion (such
amount a "Company Conversion Amount") which amounts when added
together, must equal the applicable Installment Amount and (ii) if the
Installment Amount is to be paid, in whole or in part, pursuant to a Company
Conversion, certify that there is not then an Equity Conditions Failure as of
the date of the Company Installment Notice. Each Company Installment Notice
shall be irrevocable. If the Company does not timely deliver a Company
Installment Notice in accordance with this Section 3, then the Company shall be
deemed to have delivered an irrevocable Company Installment Notice confirming a
Company Conversion and shall be deemed to have certified that there is not then
an Equity Conditions Failure in connection with any such conversion. The Company
Conversion Amount (whether set forth in the Company Installment Notice or by
operation of this Section 3) shall be converted in accordance with Section 3(b)
and the Company Redemption Amount shall be paid in accordance with Section 3(c).


                    (b)     
Mechanics of Company Conversion. Subject to Section 3(d), if the Company
delivers a Company Installment Notice and elects, or is deemed to have elected,
in whole or in part, a Company Conversion in accordance with Section 3(a), then
the applicable Company Conversion Amount, if any, which remains outstanding as
of the applicable Installment Date shall be converted as of the applicable
Installment Date by converting on such Installment Date such Company Conversion
Amount at the Company Conversion Price; provided that the Equity Conditions are
then satisfied (or waived in writing by the Holder) on such Installment Date and
that the Holder Pro Rata Amount of the Installment Volume Limitation is not
exceeded. If the Equity Conditions are not satisfied (or waived in writing by
the Holder) on such Installment Date or the Holder Pro Rata Amount of the
Installment Volume Limitation is exceeded (unless waived in writing by the
Holder), then at the option of the Holder designated in writing to the Company,
the Holder may require the Company to do any one or more of the following: (i)
the Company shall redeem all or any part of the unconverted Company Conversion
Amount designated by the Holder (such designated amount is referred to as the
"Unconverted Redemption Amount") and the Company shall pay to the Holder
within three (3) days of such Installment Date, by wire transfer of immediately
available funds, an amount in cash equal to such Unconverted Redemption Amount,
and/or (ii) the Company Conversion shall be null and void with respect to all or
any part of the unconverted Company Conversion Amount designated by the Holder
and the Holder shall be entitled to all the rights of a holder of this Debenture
with respect to such designated amount of the Company Conversion Amount;
provided, however, that the Conversion Price for such unconverted Company
Conversion Amount shall thereafter be adjusted to equal the lesser of (A) the
Company Conversion Price as in effect on the date on which the Holder voided the
Company Conversion and (B) the Company Conversion Price as in effect on the date
on which the Holder delivers a Conversion Notice relating thereto. If the
Company fails to redeem any Unconverted Redemption Amount by the third
(3rd) day following the applicable Installment Date, then the Holder
shall have all rights under this Debenture (including, without limitation, such
failure constituting an Event of Default). Notwithstanding anything to the
contrary in this Section 3(b), but subject to Section 4(c)(i), until the Company
delivers Common Stock representing the Company Conversion 

5 




Amount to the Holder, the Company Conversion Amount may be
converted by the Holder into Common Stock pursuant to Section 4. In the event
that the Holder elects to convert the Company Conversion Amount prior to the
applicable Installment Date as set forth in the immediately preceding sentence,
the Company Conversion Amount so converted shall be deducted from the
Installment Amounts relating to the applicable Installment Dates as set forth in
the applicable Conversion Notice. 

                    (c)      Mechanics
of Company Redemption. If the Company elects a Company Redemption in
accordance with Section 3(a), then the Company Redemption Amount, if any, which
is to be paid to the Holder on the applicable Installment Date shall be redeemed
by the Company on such Installment Date, and the Company shall pay to the Holder
on such Installment Date, by wire transfer of immediately available funds, in an
amount in cash (the "Company Installment Redemption Price") equal to the
Principal portion of the Company Redemption Amount plus accrued and unpaid
Interest. If the Company fails to redeem the Company Redemption Amount on the
applicable Installment Date by payment of the Company Installment Redemption
Price on such date, then at the option of the Holder designated in writing to
the Company (any such designation, "Conversion Notice" for purposes of
this Debenture), the Holder may require the Company to convert all or any part
of the Company Redemption Amount into shares of Common Stock of the Company at
the Company Conversion Price. Conversions required by this Section 3(c) shall be
made in accordance with the provisions of Section 4(b). Notwithstanding anything
to the contrary in this Section 3(c), but subject to Section 4(c)(i), until the
Company Installment Redemption Price (together with any interest thereon) is
paid in full, the Company Redemption Amount (together with any interest thereon)
may be converted, in whole or in part, by the Holder into Common Stock pursuant
to Section 4. In the event the Holder elects to convert all or any portion of
the Company Redemption Amount prior to the applicable Installment Date as set
forth in the immediately preceding sentence, the Company Redemption Amount so
converted shall be deducted from the Installment Amounts relating to the
applicable Installment Dates as set forth in the applicable Conversion Notice.


                    (d)     
Deferred Installment Amount. Notwithstanding any provision of this
Section 3 to the contrary, the Holder may, at its option and in its sole
discretion, deliver a written notice to the Company at least two (2) days prior
to any Installment Notice Due Date electing to have the payment of all or any
portion of an Installment Amount payable on the next Installment Date deferred
to the Maturity Date. Any amount deferred to the Maturity Date pursuant to this
Section 3(d) shall continue to accrue Interest through the Maturity Date. 

                    (e)     
Cancellation of Installment Amount. Notwithstanding any provision of this
Section 3 to the contrary, in the event that the Volume Weighted Average Price
of the Common Stock equals or exceeds the applicable Conversion Price for each
of the five (5) consecutive Trading Days immediately preceding the Installment
Notice Due Date and no Event of Default has occurred then the Installment Amount
payable on such Installment Date shall be deferred to the Maturity Date.
Any amount deferred to the Maturity Date pursuant to this Section 3(e) shall
continue to accrue Interest through the Maturity Date.

                    (f)      Company’s
Additional Cash Redemption. The Company at its option shall have the right
to redeem (“Optional Redemption”) a portion or all amounts outstanding
under this Debenture in addition to any Installment Amount prior to the Maturity


6 




Date provided that as of the date of the Holder’s receipt of a
Redemption Notice (as defined herein) (i) the Closing Bid Price is less than the
Conversion Price, (ii) the Underlying Shares Registration Statement is
effective, and (iii) no Event of Default has occurred. The Company shall pay an
amount equal to the principal amount being redeemed plus a redemption premium
(“Redemption Premium”) equal to twenty percent (20%) of the Principal
amount being redeemed, and accrued Interest, (collectively referred to as the
“Company Additional Redemption Amount”). In order to make a
redemption pursuant to this Section, the Company shall first provide written
notice to the Holder of its intention to make a redemption (the “Redemption
Notice”) setting forth the amount of Principal it desires to redeem. After
receipt of the Redemption Notice the Holder shall have three (3) Business Days
to elect to convert all or any portion of this Debenture, subject to the
limitations set forth in Section 4(b). On the fourth (4th) Business Day after
the Redemption Notice, the Company shall deliver to the Holder the Company
Additional Redemption Amount with respect to the Principal amount redeemed after
giving effect to conversions effected during the three (3) Business Day period.


          (4)     
CONVERSION OF DEBENTURE. This Debenture shall be convertible into shares
of the Company's Common Stock, on the terms and conditions set forth in this
Section 4. 

                    (a)     
Conversion Right. Subject to the provisions of Section 4(c), at any time
or times on or after the Issuance Date, the Holder shall be entitled to convert
any portion of the outstanding and unpaid Conversion Amount (as defined below)
into fully paid and nonassessable shares of Common Stock in accordance with
Section 4(b), at the Conversion Rate (as defined below). The number of shares of
Common Stock issuable upon conversion of any Conversion Amount pursuant to this
Section 4(a) shall be determined by dividing (x) such Conversion Amount by (y)
the Conversion Price (the "Conversion Rate"). The Company shall not issue
any fraction of a share of Common Stock upon any conversion. If the issuance
would result in the issuance of a fraction of a share of Common Stock, the
Company shall round such fraction of a share of Common Stock up to the nearest
whole share. The Company shall pay any and all transfer, stamp and similar taxes
that may be payable with respect to the issuance and delivery of Common Stock
upon conversion of any Conversion Amount.

                              (i)     
"Conversion Amount" means the portion of the Principal and accrued
Interest to be converted, redeemed or otherwise with respect to which this
determination is being made. 

                              (ii)      "Conversion
Price" means, as of any Conversion Date (as defined below) or other date of
determination, $2.20, subject to adjustment as provided herein.

                    (b)     
Mechanics of Conversion. 

                              (i)     
Optional Conversion. To convert any Conversion Amount into shares of
Common Stock on any date (a "Conversion Date"), the Holder shall (A)
transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59
p.m., New York Time, on such date, a copy of an executed notice of conversion in
the form attached hereto as Exhibit I (the "Conversion Notice") to
the Company and (B) if required by Section 4(b)(iv), surrender this Debenture to
a nationally recognized overnight delivery service for delivery to the Company
(or 

7 




an indemnification undertaking reasonably satisfactory to the
Company with respect to this Debenture in the case of its loss, theft or
destruction). On or before the third Business Day following the date of receipt
of a Conversion Notice (the "Share Delivery Date"), the Company shall (X)
if legends are not required to be placed on certificates of Common Stock
pursuant to the Securities Purchase Agreement and provided that the Transfer
Agent is participating in the Depository Trust Company's ("DTC") Fast
Automated Securities Transfer Program, credit such aggregate number of shares of
Common Stock to which the Holder shall be entitled to the Holder's or its
designee's balance account with DTC through its Deposit Withdrawal Agent
Commission system or (Y) if the Transfer Agent is not participating in the DTC
Fast Automated Securities Transfer Program, issue and deliver to the address as
specified in the Conversion Notice, a certificate, registered in the name of the
Holder or its designee, for the number of shares of Common Stock to which the
Holder shall be entitled which certificates shall not bear any restrictive
legends unless required pursuant to Section 2(g) of the Securities Purchase
Agreement. If this Debenture is physically surrendered for conversion and the
outstanding Principal of this Debenture is greater than the Principal portion of
the Conversion Amount being converted, then the Company shall as soon as
practicable and in no event later than three (3) Business Days after receipt of
this Debenture and at its own expense, issue and deliver to the holder a new
Debenture representing the outstanding Principal not converted. The Person or
Persons entitled to receive the shares of Common Stock issuable upon a
conversion of this Debenture shall be treated for all purposes as the record
holder or holders of such shares of Common Stock upon the transmission of a
Conversion Notice.

                              (ii)     
Company's Failure to Timely Convert. If within three (3) Trading Days
after the Company's receipt of the facsimile copy of a Conversion Notice the
Company shall fail to issue and deliver a certificate to the Holder or credit
the Holder's balance account with DTC for the number of shares of Common Stock
to which the Holder is entitled upon such holder's conversion of any Conversion
Amount (a "Conversion Failure"), and if on or after such Trading Day the
Holder purchases (in an open market transaction or otherwise) Common Stock to
deliver in satisfaction of a sale by the Holder of Common Stock issuable upon
such conversion that the Holder anticipated receiving from the Company (a
"Buy-In"), then the Company shall, within three (3) Business Days after
the Holder's request and in the Holder's discretion, either (i) pay cash to the
Holder in an amount equal to the Holder's total purchase price (including
brokerage commissions and other out of pocket expenses, if any) for the shares
of Common Stock so purchased (the "Buy-In Price"), at which
point the Company's obligation to deliver such certificate (and to issue such
Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver
to the Holder a certificate or certificates representing such Common Stock and
pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In
Price over the product of (A) such number of shares of Common Stock, times (B)
the Closing Bid Price on the Conversion Date. 

                              (iii)     
Book-Entry. Notwithstanding anything to the contrary set forth herein,
upon conversion of any portion of this Debenture in accordance with the terms
hereof, the Holder shall not be required to physically surrender this Debenture
to the Company unless (A) the full Conversion Amount represented by this
Debenture is being converted or (B) the Holder has provided the Company with
prior written notice (which notice may be included in a Conversion Notice)
requesting reissuance of this Debenture upon physical surrender of this
Debenture. The Holder and the Company shall maintain records showing the
Principal and 

8 




Interest converted and the dates of such conversions or shall
use such other method, reasonably satisfactory to the Holder and the Company, so
as not to require physical surrender of this Debenture upon conversion. 

                    (c)     
Limitations on Conversions. 

                              (i)     
Beneficial Ownership. The Company shall not effect any conversions of
this Debenture and the Holder shall not have the right to convert any portion of
this Debenture or receive shares of Common Stock as payment of interest
hereunder to the extent that after giving effect to such conversion or receipt
of such interest payment, the Holder, together with any affiliate thereof, would
beneficially own (as determined in accordance with Section 13(d) of the Exchange
Act and the rules promulgated thereunder) in excess of 4.99% of the number of
shares of Common Stock outstanding immediately after giving effect to such
conversion or receipt of shares as payment of interest. Since the Holder will
not be obligated to report to the Company the number of shares of Common Stock
it may hold at the time of a conversion hereunder, unless the conversion at
issue would result in the issuance of shares of Common Stock in excess of 4.99%
of the then outstanding shares of Common Stock without regard to any other
shares which may be beneficially owned by the Holder or an affiliate thereof,
the Holder shall have the authority and obligation to determine whether the
restriction contained in this Section will limit any particular conversion
hereunder and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of the
principal amount of this Debenture is convertible shall be the responsibility
and obligation of the Holder. If the Holder has delivered a Conversion Notice
for a principal amount of this Debenture that, without regard to any other
shares that the Holder or its affiliates may beneficially own, would result in
the issuance in excess of the permitted amount hereunder, the Company shall
notify the Holder of this fact and shall honor the conversion for the maximum
principal amount permitted to be converted on such Conversion Date in accordance
with Section 4(a) and, any principal amount tendered for conversion in excess of
the permitted amount hereunder shall remain outstanding under this Debenture.
The provisions of this Section may be waived by a Holder (but only as to itself
and not to any other Holder) upon not less than 65 days prior notice to the
Company. Other Holders shall be unaffected by any such waiver. 

                    (d)     
Other Provisions. 

                              (i)      The
Company shall at all times reserve and keep available out of its authorized
Common Stock the full number of shares of Common Stock issuable upon conversion
of all outstanding amounts under this Debenture; and within three (3) Business
Days following the receipt by the Company of a Holder's notice that such minimum
number of Underlying Shares is not so reserved, the Company shall promptly
reserve a sufficient number of shares of Common Stock to comply with such
requirement. 

                              (ii)      All
calculations under this Section 4 shall be rounded to the nearest $0.0001 or
whole share. 

                              (iii)      The
Company covenants that it will at all times reserve and keep available out of
its authorized and unissued shares of Common Stock solely for the purpose of
issuance upon conversion of this Debenture and payment of interest on this
Debenture, each as 

9 




herein provided, free from preemptive rights or any other
actual contingent purchase rights of persons other than the Holder, not less
than such number of shares of the Common Stock as shall (subject to any
additional requirements of the Company as to reservation of such shares set
forth in this Debenture or in the Transaction Documents) be issuable (taking
into account the adjustments and restrictions set forth herein) upon the
conversion of the outstanding principal amount of this Debenture and payment of
interest hereunder. The Company covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly and validly authorized, issued
and fully paid, nonassessable and, if the Underlying Shares Registration
Statement has been declared effective under the Securities Act, registered for
public sale in accordance with such Underlying Shares Registration Statement.


                              (iv)      Nothing
herein shall limit a Holder's right to pursue actual damages or declare an Event
of Default pursuant to Section 2 herein for the Company 's failure to deliver
certificates representing shares of Common Stock upon conversion within the
period specified herein and such Holder shall have the right to pursue all
remedies available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief, in each case without
the need to post a bond or provide other security. The exercise of any such
rights shall not prohibit the Holder from seeking to enforce damages pursuant to
any other Section hereof or under applicable law.

          (5)     
Adjustments to Conversion Price 

                    (a)      Adjustment
of Conversion Price upon Issuance of Common Stock. If the Company, at any
time while this Debenture is outstanding, issues or sells, or in accordance with
this Section 5(a) is deemed to have issued or sold, any shares of Common Stock,
excluding shares of Common Stock deemed to have been issued or sold by the
Company in connection with any Excluded Securities, for a consideration per
share (the “New Issuance Price”) less than a price equal to the
Conversion Price in effect immediately prior to such issue or sale (such price
the "Applicable Price") (the foregoing a "Dilutive Issuance"),
then immediately after such Dilutive Issuance the Conversion Price then in
effect shall be reduced to an amount equal to the New Issuance Price. For
purposes of determining the adjusted Conversion Price under this Section 5(a),
the following shall be applicable: 

                              (i)      Issuance
of Options. If the Company in any manner grants or sells any Options and the
lowest price per share for which one share of Common Stock is issuable upon the
exercise of any such Option or upon conversion or exchange or exercise of any
Convertible Securities issuable upon exercise of such Option is less than the
Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
granting or sale of such Option for such price per share. For purposes of this
Section, the "lowest price per share for which one share of Common Stock is
issuable upon the exercise of any such Option or upon conversion or exchange or
exercise of any Convertible Securities issuable upon exercise of such Option"
shall be equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to any one share of Common
Stock upon granting or sale of the Option, upon exercise of the Option and upon
conversion or exchange or exercise of any Convertible Security issuable upon
exercise of such Option. No further adjustment of the Conversion Price shall be
made upon the actual issuance of such share of Common Stock or of such
Convertible Securities 

10 




upon the exercise of such Options or upon the actual issuance
of such Common Stock upon conversion or exchange or exercise of such Convertible
Securities. 

                              (ii)     
Issuance of Convertible Securities. If the Company in any manner issues
or sells any Convertible Securities and the lowest price per share for which one
share of Common Stock is issuable upon such conversion or exchange or exercise
thereof is less than the Applicable Price, then such share of Common Stock shall
be deemed to be outstanding and to have been issued and sold by the Company at
the time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this Section, the "lowest price per share for
which one share of Common Stock is issuable upon such conversion or exchange or
exercise" shall be equal to the sum of the lowest amounts of consideration (if
any) received or receivable by the Company with respect to any one share of
Common Stock upon the issuance or sale of the Convertible Security and upon the
conversion or exchange or exercise of such Convertible Security. No further
adjustment of the Conversion Price shall be made upon the actual issuance of
such share of Common Stock upon conversion or exchange or exercise of such
Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of the
Conversion Price had been or are to be made pursuant to other provisions of this
Section, no further adjustment of the Conversion Price shall be made by reason
of such issue or sale. 

                              (iii)     
Change in Option Price or Rate of Conversion. If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the issue, conversion, exchange or exercise of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exchangeable or exercisable for Common Stock changes at any time, the Conversion
Price in effect at the time of such change shall be adjusted to the Conversion
Price which would have been in effect at such time had such Options or
Convertible Securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold. For purposes of this Section, if the terms of
any Option or Convertible Security that was outstanding as of the Issuance Date
are changed in the manner described in the immediately preceding sentence, then
such Option or Convertible Security and the Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such change. No adjustment shall be made if such adjustment would
result in an increase of the Conversion Price then in effect. 

                              (iv)     
Calculation of Consideration Received. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options will be deemed to
have been issued for the difference of (x) the aggregate fair market value of
such Options and other securities issued or sold in such integrated transaction,
less (y) the fair market value of the securities other than such Option, issued
or sold in such transaction and the other securities issued or sold in such
integrated transaction will be deemed to have been issued or sold for the
balance of the consideration received by the Company. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed to
be the gross amount raised by the Company; provided, however, that such gross
amount is not greater than 110% of the net amount received by the Company
therefor. If any 

11 




Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of the consideration other
than cash received by the Company will be the fair value of such consideration,
except where such consideration consists of securities, in which case the amount
of consideration received by the Company will be the Closing Bid Price of such
securities on the date of receipt. If any Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount of
consideration therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Options or Convertible Securities, as the case may be. The
fair value of any consideration other than cash or securities will be determined
jointly by the Company and the Holder. If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event requiring
valuation (the "Valuation Event"), the fair value of such consideration
will be determined within five (5) Business Days after the tenth
(10th) day following the Valuation Event by an independent, reputable
appraiser jointly selected by the Company and the Holder. The determination of
such appraiser shall be deemed binding upon all parties absent manifest error
and the fees and expenses of such appraiser shall be borne by the Company. 

                              (v)      Record
Date. If the Company takes a record of the holders of Common Stock for the
purpose of entitling them (A) to receive a dividend or other distribution
payable in Common Stock, Options or in Convertible Securities or (B) to
subscribe for or purchase Common Stock, Options or Convertible Securities, then
such record date will be deemed to be the date of the issue or sale of the
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be. 

                    (b)      Adjustment
of Conversion Price upon Subdivision or Combination of Common Stock.
If the Company, at any time while this Debenture is outstanding, shall (a) pay a
stock dividend or otherwise make a distribution or distributions on shares of
its Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a
larger number of shares, (c) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (d) issue
by reclassification of shares of the Common Stock any shares of capital stock of
the Company, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock outstanding after such
event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification. 

                    (c)     
Purchase Rights. If at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete conversion of this
Debenture 

12 




(without taking into account any limitations or restrictions on
the convertibility of this Debenture) immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights, or, if
no such record is taken, the date as of which the record holders of Common Stock
are to be determined for the grant, issue or sale of such Purchase Rights. 

                    (d)     
Other Events. If any event occurs of the type contemplated by the
provisions of this Section 4 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company's
Board of Directors will make an appropriate adjustment in the Conversion Price
so as to protect the rights of the Holder under this Debenture; provided that no
such adjustment will increase the Conversion Price as otherwise determined
pursuant to this Section 5. 

                    (e)     
Other Corporate Events. In addition to and not in substitution for any
other rights hereunder, prior to the consummation of any Fundamental Transaction
pursuant to which holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for shares of Common
Stock (a "Corporate Event"), the Company shall make appropriate provision
to insure that the Holder will thereafter have the right to receive upon a
conversion of this Debenture, at the Holder's option, (i) in addition to the
shares of Common Stock receivable upon such conversion, such securities or other
assets to which the Holder would have been entitled with respect to such shares
of Common Stock had such shares of Common Stock been held by the Holder upon the
consummation of such Corporate Event (without taking into account any
limitations or restrictions on the convertibility of this Debenture) or (ii) in
lieu of the shares of Common Stock otherwise receivable upon such conversion,
such securities or other assets received by the holders of shares of Common
Stock in connection with the consummation of such Corporate Event in such
amounts as the Holder would have been entitled to receive had this Debenture
initially been issued with conversion rights for the form of such consideration
(as opposed to shares of Common Stock) at a conversion rate for such
consideration commensurate with the Conversion Rate. Provision made pursuant to
the preceding sentence shall be in a form and substance satisfactory to the
Required Holders. The provisions of this Section shall apply similarly and
equally to successive Corporate Events and shall be applied without regard to
any limitations on the conversion or redemption of this Debenture. 

                    (f)      Whenever
the Conversion Price is adjusted pursuant to Section 5 hereof, the Company shall
promptly mail to the Holder a notice setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment. 

                    (g)     
In case of any (1) merger or consolidation of the Company or any subsidiary of
the Company with or into another Person, or (2) sale by the Company or any
subsidiary of the Company of more than one-half of the assets of the Company in
one or a series of related transactions, a Holder shall have the right to (A)
exercise any rights under Section 2(b), (B) convert the aggregate amount of this
Debenture then outstanding into the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common Stock
following such merger, consolidation or sale, and such Holder shall be entitled
upon such event or series of related events to receive such amount of
securities, cash and 

13 




property as the shares of Common Stock into which such
aggregate principal amount of this Debenture could have been converted
immediately prior to such merger, consolidation or sales would have been
entitled, or (C) in the case of a merger or consolidation, require the surviving
entity to issue to the Holder a convertible Debenture with a principal amount
equal to the aggregate principal amount of this Debenture then held by such
Holder, plus all accrued and unpaid interest and other amounts owing thereon,
which such newly issued convertible Debenture shall have terms identical
(including with respect to conversion) to the terms of this Debenture, and shall
be entitled to all of the rights and privileges of the Holder of this Debenture
set forth herein and the agreements pursuant to which this Debentures were
issued. In the case of clause (C), the conversion price applicable for the newly
issued shares of convertible preferred stock or convertible Debentures shall be
based upon the amount of securities, cash and property that each share of Common
Stock would receive in such transaction and the Conversion Price in effect
immediately prior to the effectiveness or closing date for such transaction. The
terms of any such merger, sale or consolidation shall include such terms so as
to continue to give the Holder the right to receive the securities, cash and
property set forth in this Section upon any conversion or redemption following
such event. This provision shall similarly apply to successive such events. 

          (6)     
REISSUANCE OF THIS DEBENTURE. 

                    (a)      Transfer.
If this Debenture is to be transferred, the Holder shall surrender this
Debenture to the Company, whereupon the Company will, subject to the
satisfaction of the transfer provisions of the Securities Purchase Agreement,
forthwith issue and deliver upon the order of the Holder a new Debenture (in
accordance with Section 6(d)), registered in the name of the registered
transferee or assignee, representing the outstanding Principal being transferred
by the Holder and, if less then the entire outstanding Principal is being
transferred, a new Debenture (in accordance with Section 6(d)) to the Holder
representing the outstanding Principal not being transferred. The Holder and any
assignee, by acceptance of this Debenture, acknowledge and agree that, by reason
of the provisions of Section 4(b)(iii) following conversion or redemption of any
portion of this Debenture, the outstanding Principal represented by this
Debenture may be less than the Principal stated on the face of this Debenture.


                    (b)      Lost,
Stolen or Mutilated Debenture. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Debenture, and, in the case of loss, theft or destruction, of
any indemnification undertaking by the Holder to the Company in customary form
and, in the case of mutilation, upon surrender and cancellation of this
Debenture, the Company shall execute and deliver to the Holder a new Debenture
(in accordance with Section 6(d)) representing the outstanding Principal. 

                    (c)     
Debenture Exchangeable for Different Denominations. This Debenture is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Debenture or Debentures (in accordance with Section 6(d))
representing in the aggregate the outstanding Principal of this Debenture, and
each such new Debenture will represent such portion of such outstanding
Principal as is designated by the Holder at the time of such surrender. 

14 




                    (d)     
Issuance of New Debentures. Whenever the Company is required to issue a
new Debenture pursuant to the terms of this Debenture, such new Debenture (i)
shall be of like tenor with this Debenture, (ii) shall represent, as indicated
on the face of such new Debenture, the Principal remaining outstanding (or in
the case of a new Debenture being issued pursuant to Section 6(a) or Section
6(c), the Principal designated by the Holder which, when added to the principal
represented by the other new Debentures issued in connection with such issuance,
does not exceed the Principal remaining outstanding under this Debenture
immediately prior to such issuance of new Debentures), (iii) shall have an
issuance date, as indicated on the face of such new Debenture, which is the same
as the Issuance Date of this Debenture, (iv) shall have the same rights and
conditions as this Debenture, and (v) shall represent accrued and unpaid
Interest from the Issuance Date. 

          (7)      NOTICES.
Any notices, consents, waivers or other communications required or permitted to
be given under the terms hereof 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 confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
(1) Trading Day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be: 

	If to the Company, to: 	Migdal Aviv 
	  	7 Abba Hilel Street 
	  	Ramat Gan, 52520 
	  	Israel 
	  	Telephone:      011 972 77 202
      5444 
	  	Facsimile:        
      011 972 77 202 5445 
	  	 
	With a copy to: 	Clark Wilson LLP 
	  	800 – 885 West Georgia Street
  
	  	Vancouver, BC Canada 
	  	V6M 3R9 
	  	Attention: Bernard Pinsky 
	  	Telephone:      604.687.5700
    
	  	Facsimile:        
      604.687.6314 
	  	 
	  	 
	If to the Holder: 	YA Global Investments, L.P.

	  	101 Hudson Street, Suite 3700
  
	  	Jersey City, NJ 07303 
	  	Attention: Mark Angelo 
	  	Telephone:      (201) 985-8300
    


15 





	With a copy to: 	David Gonzalez, Esq. 
	  	101 Hudson Street – Suite 3700
  
	  	Jersey City, NJ 07302 
	  	Telephone:      (201) 985-8300
    
	  	Facsimile:       
       (201) 985-8266 


          or
at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) Business Days prior to the effectiveness of such
change. Written confirmation of receipt (i) given by the recipient of such
notice, consent, waiver or other communication, (ii) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (iii) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively. 

          (8)      Except
as expressly provided herein, no provision of this Debenture shall alter or
impair the obligations of the Company, which are absolute and unconditional, to
pay the principal of, interest and other charges (if any) on, this Debenture at
the time, place, and rate, and in the coin or currency, herein prescribed. This
Debenture is a direct obligation of the Company. As long as this Debenture is
outstanding, the Company shall not and shall cause their subsidiaries not to,
without the consent of the Holder, (i) amend its certificate of incorporation,
bylaws or other charter documents so as to adversely affect any rights of the
Holder; (ii) repay, repurchase or offer to repay, repurchase or otherwise
acquire shares of its Common Stock or other equity securities other than as to
the Underlying Shares to the extent permitted or required under the Transaction
Documents; or (iii) enter into any agreement with respect to any of the
foregoing.

          (9)     
This Debenture shall not entitle the Holder to any of the rights of a
stockholder of the Company, including without limitation, the right to vote, to
receive dividends and other distributions, or to receive any notice of, or to
attend, meetings of stockholders or any other proceedings of the Company, unless
and to the extent converted into shares of Common Stock in accordance with the
terms hereof. 

          (10)      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. Without the Holder’s consent, the Company will not and will not
permit any of their subsidiaries to, directly or indirectly, enter into, create,
incur, assume or suffer to exist any indebtedness of any kind, on or with
respect to any of its property or assets now owned or hereafter acquired or any
interest therein or any income or profits there from that is senior in any
respect to the obligations of the Company under this Debenture. 

          (11)     
This Debenture shall be governed by and construed in accordance with the laws of
the State of New Jersey, without giving effect to conflicts of laws thereof.
Each of the parties consents to the jurisdiction of the Superior Courts of the
State of New Jersey sitting in 

16 




Hudson County, New Jersey and the U.S. District Court for the
District of New Jersey sitting in Newark, New Jersey in connection with any
dispute arising under this Debenture and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
conveniens to the bringing of any such proceeding in such jurisdictions.

          (12)      If
the Company fails to strictly comply with the terms of this Debenture, then the
Company shall reimburse the Holder promptly for all fees, costs and expenses,
including, without limitation, attorneys’ fees and expenses incurred by the
Holder in any action in connection with this Debenture, including, without
limitation, those incurred: (i) during any workout, attempted workout, and/or in
connection with the rendering of legal advice as to the Holder’s rights,
remedies and obligations, (ii) collecting any sums which become due to the
Holder, (iii) defending or prosecuting any proceeding or any counterclaim to any
proceeding or appeal; or (iv) the protection, preservation or enforcement of any
rights or remedies of the Holder. 

          (13)      Any
waiver by the Holder of a breach of any provision of this Debenture shall not
operate as or be construed to be a waiver of any other breach of such provision
or of any breach of any other provision of this Debenture. The failure of the
Holder to insist upon strict adherence to any term of this Debenture on one or
more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Debenture. Any waiver must be in writing. 

          (14)     
If any provision of this Debenture is invalid, illegal or unenforceable, the
balance of this Debenture shall remain in effect, and if any provision is
inapplicable to any person or circumstance, it shall nevertheless remain
applicable to all other persons and circumstances. If it shall be found that any
interest or other amount deemed interest due hereunder shall violate applicable
laws governing usury, the applicable rate of interest due hereunder shall
automatically be lowered to equal the maximum permitted rate of interest. The
Company covenants (to the extent that it may lawfully do so) that it shall not
at any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on this Debenture as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted. 

          (15)      Whenever
any payment or other obligation hereunder shall be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day.


          (16)      THE
PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF
THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION


17 




DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT. 

          (17)     
CERTAIN DEFINITIONS For purposes of this Debenture, the following terms
shall have the following meanings: 

                    (a)     
“Approved Stock Plan” means a stock option plan that has been approved by
the Board of Directors of the Company, pursuant to which the Company’s
securities may be issued only to any employee, officer, or director for services
provided to the Company. 

                    (b)     
"Bloomberg" means Bloomberg Financial Markets. 

                    (c)      “Business
Day” means any day except Saturday, Sunday and any day which shall be a
federal legal holiday in the United States or a day on which banking
institutions are authorized or required by law or other government action to
close. 

                    (d)     
“Change of Control Transaction” means the occurrence of (a) an
acquisition after the date hereof by an individual or legal entity or “group”
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of fifty percent
(50%) of the voting securities of the Company (except that the acquisition of
voting securities by the Holder or any other current holder of convertible
securities of the Company shall not constitute a Change of Control Transaction
for purposes hereof), (b) a replacement at one time or over time of more than
one-half of the members of the board of directors of the Company which is not
approved by a majority of those individuals who are members of the board of
directors on the date of such change (or by those individuals who are serving as
members of the board of directors on any date whose nomination to the board of
directors was approved by a majority of the members of the board of directors
who are members on the date of such change), (c) the merger, consolidation or
sale of fifty percent (50%) or more of the assets of the Company or any
subsidiary of the Company in one or a series of related transactions with or
into another entity that is not a related entity to the Company, provided
however in the event the Company seeks to consummate a merger, consolidation or
sale of fifty percent (50%) or more of the assets of the Company or any
subsidiary of the Company in one or a series of related transactions with or
into another entity that is a related entity to the Company the Company shall
obtain the prior written consent of the Holder, or (d) the execution by the
Company of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (a), (b) or (c). 

                    (e)     
“Closing Bid Price” means the price per share in the last reported trade
of the Common Stock on a Primary Market or on the exchange which the Common
Stock is then listed as quoted by Bloomberg. 

                    (f)      “Convertible
Securities” means any stock or securities (other than Options) directly or
indirectly convertible into or exercisable or exchangeable for Common Stock.


18 




                    (g)     
“Commission” means the Securities and Exchange Commission. 

                    (h)      “Common
Stock” means the common stock, par value $.001, of the Company and stock of
any other class into which such shares may hereafter be changed or reclassified.


                    (i)     
"Company Conversion Price" means, the lower of (i) the applicable
Conversion Price and (ii) that price which shall be computed as ninety five
percent (95%) of the lowest Volume Weighted Average Price of the Common Stock
during the fifteen (15) consecutive Trading Days immediately preceding the
applicable Installment Date. All such determinations to be appropriately
adjusted for any stock split, stock dividend, stock combination or other similar
transaction. 

                    (j)      "Equity
Conditions" means that each of the following conditions is satisfied: (i) on
each day during the period beginning two (2) weeks prior to the applicable date
of determination and ending on and including the applicable date of
determination (the "Equity Conditions Measuring Period"), either (x) the
Underlying Shares Registration Statement filed pursuant to the Registration
Rights Agreement shall be effective and available for the resale of all
applicable shares of Common Stock to be issued in connection with the event
requiring determination or (y) all applicable shares of Common Stock to be
issued in connection with the event requiring determination shall be eligible
for sale without restriction and without the need for registration under any
applicable federal or state securities laws; (ii) on each day during the Equity
Conditions Measuring Period, the Common Stock is designated for quotation on the
Principal Market and shall not have been suspended from trading on such exchange
or market nor shall delisting or suspension by such exchange or market been
threatened or pending either (A) in writing by such exchange or market or (B) by
falling below the then effective minimum listing maintenance requirements of
such exchange or market; (iii) during the Equity Conditions Measuring Period,
the Company shall have delivered Conversion Shares upon conversion of the
Debentures to the Holder on a timely basis as set forth in Section 4(b)(ii)
hereof; (iv) any applicable shares of Common Stock to be issued in connection
with the event requiring determination may be issued in full without violating
Section 4(c) hereof and the rules or regulations of the Primary Market; (v)
during the Equity Conditions Measuring Period, there shall not have occurred
either (A) an Event of Default or (B) an event that with the passage of time or
giving of notice would constitute an Event of Default; and (vii) the Company
shall have no knowledge of any fact that would cause (x) the Registration
Statements required pursuant to the Registration Rights Agreement not to be
effective and available for the resale of all applicable shares of Common Stock
to be issued in connection with the event requiring determination or (y) any
applicable shares of Common Stock to be issued in connection with the event
requiring determination not to be eligible for sale without restriction and
without the need for registration under any applicable federal or state
securities laws. 

                    (k)      "Equity
Conditions Failure" means that on any applicable date the Equity Conditions
have not been satisfied (or waived in writing by the Holder). 

                    (l)     
“Exchange Act” means the Securities Exchange Act of 1934, as amended.


19 




                    (m)      “Excluded
Securities” means, (a) shares issued or deemed to have been issued by the
Company pursuant to an Approved Stock Plan (b) shares of Common Stock issued or
deemed to be issued by the Company upon the conversion, exchange or exercise of
any right, option, obligation or security outstanding on the date prior to date
of the Securities Purchase Agreement, provided that the terms of such right,
option, obligation or security are not amended or otherwise modified on or after
the date of the Securities Purchase Agreement, and provided that the conversion
price, exchange price, exercise price or other purchase price is not reduced,
adjusted or otherwise modified and the number of shares of Common Stock issued
or issuable is not increased (whether by operation of, or in accordance with,
the relevant governing documents or otherwise) on or after the date of the
Securities Purchase Agreement, (c) shares issued in connection with any
acquisition by the Company, whether through an acquisition of stock or a merger
of any business, assets or technologies, leasing arrangement or any other
transaction the primary purpose of which is not to raise equity capital, and (d)
the shares of Common Stock issued or deemed to be issued by the Company upon
conversion of this Debenture. 

                    (n)      "Holder
Pro Rata Amount" means a fraction (i) the numerator of which is the Original
Principal Amount of this Debenture on the Issuance Date and (ii) the denominator
of which is the aggregate Purchase Price (as defined in the Securities Purchase
Agreement). 

                    (o)     
"Installment Amount" means with respect to any Installment Date, the
lesser of (A) the product of (i) $300,000, multiplied by (ii) Holder Pro Rata
Amount and (B) the Principal amount under this Debenture as of such Installment
Date, as any such Installment Amount may be reduced pursuant to the terms of
this Debenture, whether upon conversion, redemption or otherwise, together with,
in each case the sum of any accrued and unpaid Interest with respect to such
Principal amount. In the event the Holder shall sell or otherwise transfer any
portion of this Debenture, the transferee shall be allocated a pro rata portion
of the each unpaid Installment Amount hereunder. In the event that the Holder is
the holder of more than one Debenture of this series of Secured Convertible
Debentures issued pursuant to the Securities Purchase Agreement, then the Holder
shall have the right to allocate the any Installment Amount due to it among the
Debentures as it sees fit and shall notify the Company of such allocation.

                    (p)      "Installment
Date" means the first Business Day on or after July 31, 2008, and continuing
on the first Business Day of each successive calendar month thereafter.

                    (q)      "Installment
Volume Limitation" means 15% of the aggregate dollar trading volume (as
reported on Bloomberg) of the Common Stock on the Principal Market over the
forty (40) consecutive Trading Day period ending on the Trading Day immediately
preceding the applicable Installment Notice Date. 

                    (r)     
“Interest Payment Date” shall mean the first Business Day on or after
each of: January 31, 2008, April 30, 2008, July 31, 2008, October 31, 2008,
January 31, 2009, April 30, 2009, July 31, 2009, October 31, 2009, January 31,
2010, and April 30, 2010.

                    (s)      “Options”
means any rights, warrants or options to subscribe for or purchase shares of
Common Stock or Convertible Securities. 

20 




                    (t)     
“Original Issue Date” means the date of the first issuance of this
Debenture regardless of the number of transfers and regardless of the number of
instruments, which may be issued to evidence such Debenture. 

                    (u)      “Person”
means a corporation, an association, a partnership, organization, a business, an
individual, a government or political subdivision thereof or a governmental
agency. 

                    (v)     
“Securities Act” means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder. 

                    (w)      “Securities
Purchase Agreement” means the Securities Purchase Agreement dated July 6,
2007 by and among the Company and the Buyers listed on Schedule I attached
thereto.

                    (x)     
“Trading Day” means a day on which the shares of Common Stock are quoted
on the OTCBB or quoted or traded on such Primary Market on which the shares of
Common Stock are then quoted or listed; provided, that in the event that the
shares of Common Stock are not listed or quoted, then Trading Day shall mean a
Business Day. 

                    (y)     
“Transaction Documents” means the Securities Purchase Agreement or any
other agreement delivered in connection with the Securities Purchase Agreement,
including, without limitation, the Security Agreement, the Irrevocable Transfer
Agent Instructions, and the Registration Rights Agreement. 

                    (z)     
“Underlying Shares” means the shares of Common Stock issuable upon
conversion of this Debenture or as payment of interest in accordance with the
terms hereof. 

                    (aa)     
“Underlying Shares Registration Statement” means a registration statement
meeting the requirements set forth in the Registration Rights Agreement,
covering among other things the resale of the Underlying Shares and naming the
Holder as a “selling stockholder” thereunder. 

                    (bb)      "Volume
Weighted Average Price" means, for any security as of any date, the daily
dollar volume-weighted average price for such security on the Primary Market as
reported by Bloomberg through its “Historical Prices – Px Table with Average
Daily Volume” functions, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg, the average of the highest closing bid
price and the lowest closing ask price of any of the market makers for such
security as reported in the "pink sheets" by Pink Sheets LLC.

                    (cc)      "Warrants"
has the meaning ascribed to such term in the Securities Purchase Agreement, and
shall include all warrants issued in exchange therefor or replacement thereof.


[Signature Page Follows] 

21 




          IN
WITNESS WHEREOF, the Company has caused this Secured Convertible Debenture
to be duly executed by a duly authorized officer as of the date set forth above.


 




 

 

EXHIBIT I 
CONVERSION NOTICE



(To be executed by the Holder in order to Convert the
Debenture) 

 

TO: 

          The
undersigned hereby irrevocably elects to convert $
_________________________________________________ of the principal amount of
Debenture No.GEYI-1-3 into Shares of Common Stock of GLOBAL ENERGY, INC.,
according to the conditions stated therein, as of the Conversion Date written
below. 

	Conversion Date: 	  
	 	 
	Conversion Amount to be converted: 	$ 
	 	 
	Conversion Price: 	$ 
	 	 
	Number of shares of Common 	  
	Stock to be issued: 	  
	 	 
	Amount of Debenture 	  
	Unconverted: 	$ 


Please issue the shares of Common Stock in the following
name and to the following address:

 Issue to: 

 

 

	Authorized Signature: 	 
	 	 
	Name: 	 
	 	 
	Title: 	 
	 	 
	Broker DTC Participant Code: 	 
	 	 
	Account Number: