8-K










Exhibit 10.1  






YA GLOBAL INVESTMENTS,
L.P. 

101 Hudson Street,
Suite 3700 

Jersey City, NJ 07302  






August 7, 2009 


Global Energy, Inc.

Migdal Aviv

7 Abba Hillel Street

Ramat Gan, 52520

Israel

Attention: Asi Shalgi







Dear Mr. Shalgi: 






        Reference
is made to that certain Securities Purchase Agreement dated July 6, 2007 (the
“Securities Purchase Agreement”) between Global Energy, Inc. (the
“Company”) and YA Global Investments, L.P. (the “Buyer”)
and the secured convertible debentures (collectively, the “Existing
Debentures”) and warrants (the “Warrants”) issued thereunder.
The Company and the Buyer have agreed to make certain modifications to the rights and
obligations of each party under the Securities Purchase Agreement, Existing Debentures,
and related documents and instruments. For the purposes hereof the Securities Purchase
Agreement, the Existing Debentures, the Warrants, along with all security agreement, and
other documents and instruments executed in connection with the forgoing shall be referred
to herein as the “Transaction Documents.” 



        The
parties agree that the table below sets forth the correct amounts outstanding under the
Existing Debentures as of the date listed below: 






	Issuance Date
	Outstanding Principal

Amount
	Accrued and Unpaid Interest

(as of July 16, 2009)
	Total

				
				
				
				 
	July 6, 2007	 	 	$	   360,108	 	$	    69,582	 	$	   429,690	 
	October 23, 2007	 	 	$	 1,500,000	 	$	   207,856	 	$	 1,707,856	 
	December 7, 2007	 	 	$	 1,000,000	 	$	   132,926	 	$	 1,132,296	 
	March 20, 2008	 	 	$	   500,000	 	$	    59,940	 	$	   559,940	 
	May 13, 2008	 	 	$	   500,000	 	$	    56,553	 	$	   556,553	 
	TOTAL 	  	  	$ 	 3,860,108 	  	$ 	 526,857 	  	$ 	 4,386,965 	  




















All capitalized terms not otherwise
defined herein shall have the meaning assigned to them in the Transaction Documents, as
applicable. 



        The
Company is seeking to raise additional financing by issuing common stock (the
“Offering”) pursuant to the terms set forth hereto as Exhibit A
(the “Term Sheet”). This letter shall set forth the agreement between the
parties concerning the Offering and amendments and modifications to the Transaction
Documents. 



1.       Acknowledgements.
The Company hereby acknowledges, confirms and agrees as                follows:  



	 	a. 	The
Company is indebted to the Buyer under the Existing Debentures in the
               principal amount along with all accrued and unpaid interest reflected
above.                Such amounts owed, including without limitation all interest
accruing thereon,                premiums, costs, expenses, and fees (collectively, the
               “Obligations”) now or hereafter payable by the Company to
the                Buyer pursuant to the Transaction Documents are unconditionally owing
by the                Company to the Buyer, without offset, setoff, defense or
counterclaim of any                kind, nature or description whatsoever. 






	 	b. 	That:
(1) each of the Transaction Documents to which it is a party has been
               duly executed and delivered to the Buyer by the Company, and each is in
full                force and effect as of the date hereof, (2) the agreements and
obligations                of the Company contained in such documents and in this
Agreement constitute the                legal, valid and binding obligations of the
Company, enforceable against it in                accordance with their respective terms,
and to the Company’s knowledge, the                Company has no valid defense to
the enforcement of such obligations, (3)                the Buyer is and shall be
entitled to the rights, remedies and benefits provided                for in the
Transaction Documents and applicable law, without offset, setoff,                defense
or counterclaim of any kind, nature or descriptions whatsoever, and (4)                to
the Company’s knowledge, the Company has no claims, actions, cause of
               action, suits, judgments, and demands whatsoever, in law, admiralty or
equity,                against the Buyer or its affiliates, in respect of or in
connection with the                Transaction Documents. 






	 	c. 	The
Buyer has not waived, is not by this Agreement waiving, and has no
               intentions of waiving, any Events of Default which may be continuing on
the date                hereof or any Events of Default which may occur after the date
hereof, and the                Buyer has not agreed to forbear with respect to any of its
rights or remedies                concerning any Events of Default which may have
occurred or are continuing as of                the date hereof or which may occur after
the date hereof. 






	 	d. 	The
Company hereby acknowledges, confirms and agrees that the Buyer has and
               shall continue to have valid, enforceable and perfected first-priority
liens                upon and security interests in the pledged property heretofore
granted to the                Buyer pursuant to the Security Agreement dated July 6, 2007
between the Company                and the Buyer (the “Security Agreement”)
or otherwise granted                to or held by the Buyer. 















2.        The
Offering. The Buyer hereby consents to the Company conducting and
               closing on the Offering in accordance with the terms set forth in the Term
               Sheet, provided however, that such consent shall not be effective until
the                satisfaction, waiver or deferral of each of the following conditions
and written                notice from the Buyer confirming the satisfaction of such
conditions (such date                of notice of satisfaction shall be referred to as
the Effective Date):  



	 	a. 	The
gross proceeds of the Offering are at least $650,000 (“Minimum
               Offering Amount”); 






	 	b. 	The
Company closes on the Minimum Offering Amount on or before September 3,
               2009, unless extended in writing by the Buyer (the “Closing
               Deadline”); 






	 	c. 	The
Company shall have issued and delivered to the Buyer the Amended and
               Restated Debenture (as defined below) in exchange for the surrender of the
               Existing Debentures, to be effective as of the Effective Date; 






	 	d. 	The
Company shall provide a cash flow projection budget (the                “Budget”)
in a form acceptable to the Buyer, which Budget shall                demonstrate that the
proceeds from the Offering will be sufficient to fund the                Company’s
operations for a period of at least 12 months from the Effective                Date; 






	 	e. 	The
Company shall have made cash payments under the Existing Debentures in an
               amount greater than or equal to $50,000 since April 1, 2009, of which
$20,000                has been paid and the remaining $30,000 shall be paid on or prior
to the                Effective Date. The Company may satisfy this condition by paying
the remaining                balance directly out of the proceeds of the Offering; and 






	 	f. 	The
Company shall have received a written notice from YA Global confirming that
               all of the conditions set forth above have been satisfied. 






3.        Agreements
Effective upon Effective Date. The Buyer and the Company                hereby agree
to the following, provided however, that the agreements contained                in this
section shall only become effective upon the Effective Date:  



	 	a. 	Amended
Debenture. On the Effective Date the Company shall issue to the                Buyer
an amended and restated convertible debenture (the “Amended and
               Restated Debenture”) in the form attached hereto as “Exhibit
               B” in the principal amount equal to the outstanding principal
amount                and accrued and unpaid interest under the Existing Debentures as of
the                Effective Date. The Amended and Restated Debenture shall be issued
solely in                exchange for the surrender of the Existing Debentures. When
issued in accordance                with this Agreement, the Amended and Restated
Debenture shall amend, replace,                and supersede each of the Existing
Debentures and consolidate all amounts owed                under such Existing Debentures
and the Buyer shall return the Existing                Debentures to the Company. The
Amended and Restated Debenture shall modify the                Existing Debentures as
follows: s






	 	i. 	Payments.
All payment by the Company under the Existing Debentures will be                suspended
pursuant to the Amended and Restated Debenture for a period of one                year
from the Effective Date. Monthly payments in the amount of $225,000 each
               shall resume on the first day of the month preceding the month in which
the                one-year anniversary of the Effective Date occurs.  















	 	ii. 	Redemption.
The Company shall have the option to redeem up to $3,000,000 of the
               outstanding principal and unpaid interest owed the Existing Debentures at
any                time with 15 days prior written notice to the Buyer at a redemption
price equal                to 115% of the amount being redeemed in accordance with the
Amended and Restated                Debenture.  






	 	iii. 	Conversion
Price. The Conversion Price of the Existing Debentures shall be                reduced to
the effective price of the Common Stock issued in connection with the
               Offering.  






	 	b. 	Warrants.
The exercise price of the Warrants shall be reduced to the                effective price
of the Common Stock issued in connection with the Offering. The                number of
shares underlying the Warrants shall not be changed, provided that
               warrants or other Common Stock purchase rights are not issued in
connection with                the Offering. If any warrants or other Common Stock
purchase rights are issued                in connection with the Offering then the
Company shall issue new warrants to the                Buyer such that the proportion of
warrant shares to the amount of the                Buyer’s initial investment is
equal to proportion of warrant shares to the                amount of the new investment
in the Offering. Any such new warrants shall have                an exercise price equal
to the price of the Common Stock issued in connection                with the Offering. 






	 	c. 	Rule
144 Tacking Period. The Company represents, warrants, and agrees the
               Amended and Restated Debenture is being issued solely in exchange for the
               Existing Debentures and that for the purposes of Rule 144, the Amended and
               Restated Debenture shall be deemed to have been acquired at the same time
as the                surrendered Existing Debentures, which are the dates referenced
next to each of                the Existing Debentures in the table above, in all cases
is prior to one year                from the date hereof. 






	 	d. 	Buyer’s
Lock up Provision. During any calendar month beginning with                the month
in which the Effective Date occurs and ending with the calendar month
               preceding the month in which the one-year anniversary of the Effective
Date                occurs, except for Excluded Sales (as defined below), the Buyer shall
not sell                shares of Common Stock for gross proceeds (measured by the
quantity of shares                sold multiplied by the sales price) of greater than (a)
$50,000, or (b) 20% of                the aggregate dollar traded volume traded during
the preceding calendar month                (as measured by multiplying the total volume
traded in such month by the average                price during such month according to
Bloomberg LP). For the purposes hereof the                term “Excluded Sales” shall
mean any sales by the Buyer at a price of                five cents ($0.05) or more. 






4.        Representations,
Warranties, and Covenants or General Effect.  



	 	a. 	Budget.
The Company shall not exceed the total expenses listed on the                Budget by
more than 5% in any individual month, or in the aggregate at any time.                The
Company shall provide certified cash flow reports to the Buyer on the                1st and
15th of each month which shall show actual results                for each
period that has elapsed from the date hereof compared to the same                period
in the Budget. Any violation of this covenant shall be deemed an event of
               default under the Amended and Restated Debenture and the Transaction
Documents. 















	 	b. 	Further
Assurances. The Company shall, from and after the execution of                this
agreement, execute and deliver to the Buyer any additional documents,
               instruments, and agreements that the Buyer may require in order to correct
any                document deficiencies, or to vest or perfect the security interest in
the                collateral granted pursuant to the Security Agreement more securely in
the Buyer                and/or to otherwise give effect to the terms and conditions of
this agreement,                and hereby authorize the Buyer to file any financing
statements (including                financing statements with a generic description of
the collateral such as                “all assets”), and take any other normal
and customary steps, the                Buyer deems necessary to perfect or evidence the
Buyer’s security interests                and liens in any such collateral. The
Company shall pledge to the Buyer its                shares of capital stock of Alphakat
– Global Energy GmbH as required                pursuant to the Security Agreement.
The Company shall also make all necessary                filings in Israel required to
perfect and provide notice of the Buyer’s                liens on the assets of
Global Fuel Israel, Ltd. and Global NRG Pacific Ltd. or                provide the Buyer
evidence that all such filings have been made and recorded.                The Buyer
represents that the perfection certificate attached hereto as Exhibit C is true,
complete, and correct as of the date hereof. 






	 	c. 	Effect
of this Agreement. Except as modified pursuant hereto, no other
               changes or modifications to the Transaction Documents are intended or
implied                and in all other respects such documents are hereby specifically
ratified,                restated and confirmed by all parties hereto as of the effective
date hereof. 






	 	d. 	Each
party shall pay all its own costs and expenses regarding the entering of
               this Agreement. There are no other fees, charges or expenses other than as
set                out herein and in the Existing Debentures and ancillary documents. 






[SIGNATURE PAGE IMMEDIATELY TO FOLLOW] 















        IN
WITNESS WHEREOF, this letter agreement is executed and delivered as of the day and
year first above written. 




			GLOBAL ENERGY, INC.



By: /s/ Asi Shlagi
——————————————

Asi Shlagi
Chief Executive Officer







			YA GLOBAL INVESTMENTS, L.P.



By:   Yorkville Advisors, LLC
Its:   Investment Manager

By: /s/ 
——————————————

Name:
Title:





















EXHIBIT A 



TERM SHEET 






AMENDMENT OUTLINE 





	

	GLOBAL ENERGY INC. 

	













Theamendment of YA Global
Investments, L.P. (the “Investor”) will be confirmed and finalized subject to
the satisfaction of each of the following terms and conditions:  






	Minimum Raise: 		Global Energy Inc ("GEYI" or the "Company") will raise a minimum of $650,000 in
                  new capital by the issuance of common stock of the Company or bridge
loans                   ("Financing"). 






	Reset Prices: 		The existing conversion price and warrant strike prices on the Investor's
                  convertible debentures and warrants will be reset to the issue price on
the common                   stock issued in the Follow-on Financing (the "Reset Price").
No new warrants or                   shares will be issued to the Investor as part of the
reset, except that if any                   warrants or other rights are issued in
connection with the Financing, the Company                   will issue new warrants or
similar rights to the Investor in the same proportion                   and at the same
price. 







	Repayments: 		All payments by the Company under the Debentures will be suspended for a period of
                  12 months from the close of the Financing, after which the Company
shall make full                   payment of the outstanding Debenture and accrued
interest amounts in accordance                   with the terms of Debentures. 






	 		The Investor
shall receive a payment of at least $50,000 in the aggregate either
                  from the proceeds of the sale of the Ethiopia business, or the
Financing, or a                   combination of the two. 






	Conversions: 		In
the first 12 months following the Financing if the quoted share price of the
                  Company is 5 cents or less the Investor shall be restricted from
selling shares of                   common stock in excess of the greater of (a) $50,000
per calendar month, or (b)                   20% of the aggregate dollar trading volume
of all shares traded during the                   preceding calendar month. 






	Redemption: 		The
Company shall have the option to redeem up to $3,000,000 of the outstanding
                  Debenture in cash on at least 15 days prior written notice to the
Investor. The                   Redemption premium shall be 15% and shall be paid upon
Redemption of any portion                   of the Debenture. 






	Budget/Burn: 		The
Company shall provide a budget indicating that the proceeds of the Financing
                  will sustain the Company for at least 12 months. 






	Expiry: 		The
terms herein will expire at 5p.m. on April 8, 2009. 






	Non-Binding: 		These
terms are for discussion purposes only, non-binding on the parties, and
subject to change. If final terms are reached they will be documents by
formal definitive documents setting forth the final agreed upon terms.  





SIGNATURE PAGE TO FOLLOW
GLOBAL
ENERGY, INC.  















			


By: /s/ Shalgi Asi
——————————————

Name: Shalgi Asi
Title:   President







			YA GLOBAL INVESTMENTS, L.P.
By: Yorkville Advisors, LLC
Its: Investment Manager








			


By: /s/ Gerald Eicke
——————————————

Name: Gerald Eicke
Title:   Managing Member
















EXHIBIT B 



FORM OF AMENDED AND
RESTATED DEBENTURE 




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.  



AMENDED AND RESTATED
SECURED CONVERTIBLE DEBENTURE 


		
		
		
		
		
	Issuance Date:  ______ __, 2009	Original Principal Amount: $4,___,___
	No. GEYI-1-6






This Amended and Restated Secured
Convertible Debenture (including all secured convertible debentures issued in exchange,
transfer or replacement hereof, this “Debenture”) is being issued
pursuant to that certain letter agreement dated July __, 2009 (the “Letter
Agreement”) solely in exchange for the Existing Debentures (as defined in the
Letter Agreement) and shall amend, replace, and supersede the Existing Debentures. The
Existing Debentures were acquired by the Holder, and fully paid for by the Holder, more
than one year prior to the Issuance Date of this Debenture. 



        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 Debenture is issued in exchange for the secured
convertible debentures issued pursuant to the Securities Purchase Agreement (the
“Existing Debentures”). Certain capitalized terms used herein are defined
in Section 17. 











    (1)        GENERAL
TERMS 



		    (a)        Interest,
Installment Payments, Maturity. Interest shall accrue on the           outstanding
principal balance hereof at an annual rate equal to twelve percent           (12%) (“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. 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
the terms and conditions of this Debenture. On the           Maturity Date, the Company
shall pay to the Holder an amount in cash           representing all outstanding
Principal and accrued and unpaid Interest. The           “Maturity Date” shall
be October 31, 2010. The Maturity Date           may be extended at the option of the
Holder 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.           Unless otherwise set forth in this
Debenture all payments received by the Holder           hereunder shall be applied
towards amounts outstanding under this Debenture in           the sole discretion of the
Holder.  







		    (b)        Security.
The Company agrees and acknowledges that its obligations under           this Debenture
shall be secured by the pledge of certain assets of the Company           and its
subsidiaries granted pursuant to the Security Agreement dated July 6,           2007 in
favor of the Holder (the “Security Agreement”) and that           the
obligations under this Debenture are hereinafter expressly included as part           of
the “Obligations” as such term is defined and used in 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 sixty one (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 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;  







2







		    (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)        The
Common Stock shall cease to be quoted or listed for trading on a Primary           Market
for a period of five (5) consecutive Trading Days;  







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







		    (vii)        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;  







		    (viii)        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 which is not cured within
the time           prescribed.  







3







		    (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 that the Company has failed to cure such Event of
          Default within five (5) Business Days after the occurrence of the Event of
          Default, except with respect to an Event of Default under Section
          2(a)(iv)-(vii), which shall not have any additional cure period. Furthermore,
in           addition to any other remedies, the Holder shall have the right (but not the
          obligation) to convert this Debenture at the Company Conversion Price at any
          time after (x) an Event of Default, provided Company has failed to cure such
          Event of Default within five (5) Business Days after occurrence of the Event of
          Default, or (y) the Maturity Date. 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). Holder may enforce any and all of
          its rights and remedies hereunder and all other remedies available to it under
          applicable law. Holder’s notice of exercise of its rights hereunder 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 perform 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) 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).  







4







		    (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 by the Holder) on such Installment Date and that the
          Installment Volume Limitation is not exceeded (unless waiver by the Holder). If
          the Equity Conditions are not satisfied (or waived in writing by the Holder) on
          such Installment Date or the Installment Volume Limitation is exceeded (unless
          waived 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) Business Days of Company’s
          receipt of Holder’s notice, 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.. If
the           Company fails to redeem any Unconverted Redemption Amount by the third
          (3rd) Business Day following receipt of notice from Holder
          instructing Company to repay such Unconverted Redemption Amount, then the
Holder           shall have all rights under this Debenture (including, without
limitation, such           failure constituting an Event of Default).  







		    (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 repaid
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, an amount in cash (the “Company Installment Redemption           Price”)
equal to the Company Redemption Amount. 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), 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.  







5







		    (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, elect 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)        Company’s
Additional Cash Redemption. The Company at its option shall have the right
to redeem (“Optional Redemption”) up to $3,000,000 of
outstanding Principal amount under the Debenture (less any amounts that have
been repaid, converted, or redeemed after the date Issuance Date of this
Debenture) in addition to any Installment Amount prior to the Maturity Date by
providing the Holder with at least five (5) days’ prior written notice and
provided that no Event of Default has occurred and is continuing on the
Redemption Notice date. The Company shall pay an amount equal to the Principal
amount being redeemed plus a redemption premium (“Redemption
Premium”) equal to fifteen percent (15%) of the Principal amount being
redeemed, together with accrued Interest (which shall not be subject to the
Redemption Premium), (collectively referred to as the “Company
Additional Redemption Amount”). In order to make an Optional
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
and the date of such redemption (which shall be at least 5 days from the date
of the Redemption Notice). After receipt of the Redemption Notice the Holder
shall have the right to elect to convert only the portion of this Debenture
that is outstanding and is not included in the Redemption Notice, and subject
to the limitations set forth in Section 4(c). On the redemption date set forth
in the Redemption Notice the Company shall deliver to the Holder the Company
Additional Redemption Amount. Notwithstanding anything to the contrary, failure
by the Company to pay the Company Additional Redemption Amount on the date due
shall be considered an Event of Default without any further passage of time or
cure period, and the Company acknowledges that the Holder may suffer additional
damages as a result of not being permitted to convert the amounts subject to
such redemption.  







    (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.  







6







		    (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, [$0.02]1, 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 electronic mail (with confirmation of           receipt), or otherwise
deliver, for confirmed 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 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 Trading 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) Trading 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 or electronic 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 the 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.  







	
 




	
1 Insert
price of common stock issued pursuant to the Offering.  















7







		    (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 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, Sales. 







		    (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.  







8







		    (ii)        Lock
Up. During any calendar month beginning with the month of 2 ______ 2009
and ending with, and including, the           month of 3 _______ 2010,
except for Excluded Sales (as           defined below), the Buyer shall not sell shares
of Common Stock for gross           proceeds (measured by the quantity of shares sold
multiplied by the sales price)           of greater than (a) $50,000, or (b) 20% of the
aggregate dollar traded volume           traded during the preceding calendar month (as
measured by multiplying the total           volume traded in such month by the average
price during such month according to           Bloomberg LP). For the purposes hereof the
term “Excluded Sales” shall           mean any sales by the Buyer at a price of
five cents ($0.05) or more.  







		    (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 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.  







	
 





	
2 Insert
Month of the Effective Date  






3 Insert Month 12 months
from the Effective Date. For purpose of clarity, if the           Effective Date was
August 15, 2009, the first month would be August 2009 and the           last month would
be July 2010.  



9








    (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 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.  







10







		    (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
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.  







11







		    (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 (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.  







12







		    (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 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.  







13







    (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.  







		    (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.  







14







    (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 3 5913952 




	 	
Facsimile:	
011 +972 9 955 0454 






	With a copy to: 	Pearl Cohen Zedek Latzer LLP. 




	 	
1500
Broadway, 12th Floor 




	 	
New
York, NY10036 




	 	
Attention:
Doron Latzer, Esq., Managing Partner 




	 	
Telephone:
+1 (646) 878-0800 




	 	
Facsimile:
+1 (646) 878-0801 







	If to the Holder:	YA Global Investments, L.P. 




	 	
101
Hudson Street, Suite 3700 




	 	
Jersey
City, NJ  07302 




	 	Attention:	Mark Angelo 




	 	Telephone:	(201) 985-8300 






	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. 



15







    (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 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.  



16







    (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
          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.  







17







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







		    (g)        “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.  







		    (h)        “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 shall be           appropriately adjusted for
any stock split, stock dividend, stock combination or           other similar
transaction.  







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







18








		    (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 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.  







		    (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)        “Installment
Amount” means with respect to any Installment           Date, the lesser of (A)
$225,000 and (B) the total amount outstanding 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 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 or in exchange
for the Debenture, 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.  







19







		    (o)        “Installment
Date” means 4 ________ 1, 2010,           and continuing on
the first Business Day of each successive calendar month           thereafter.  







		    (p)        “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.  







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







		    (r)        “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.  







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







		    (t)        “Primary
Market” means any of (a) the NYSE Amex (b) the New           York Stock
Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq Capital           Market, or (e)
the Nasdaq OTC Bulletin Board;  







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







		    (v)        “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.  







		    (w)        “Trading
Day” shall mean any day during which the Primary           Market for the Common
Stock is open for business.  







		    (x)        “Transaction
Documents” means the Letter Agreement, the           Securities Purchase
Agreement and 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.  







	
 




	
4 Insert
Month that is 12 months from the month of the Effective Date. For example           if
the Effective Date is August 15, 2009, the date entered would be July 1,           2010.  









20







		    (y)        “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.  









		    (z)        “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.  







		    (aa)        “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 during regular trading hours.  







		    (bb)        “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. 



			COMPANY:
GLOBAL ENERGY, INC.



By: /s/ Asi Shalgi
——————————————

Asi Shalgi
Chief Executive Officer






22







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-1-6 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:   	















EXHIBIT C 



FORM OF PERFECTION
CERTIFICATE