EXHIBIT 4.1

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE  BEEN  REGISTERED  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  OR THE
SECURITIES   COMMISSION  OF  ANY  STATE  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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH  EFFECT,  THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE
COMPANY.  THIS  SECURITY AND THE  SECURITIES  ISSUABLE  UPON  CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN  ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

Original Issue Date: August 8, 2006
Original Conversion Price (subject to adjustment herein): $6.00

                                                                $_______________

                   VARIABLE RATE SECURED CONVERTIBLE DEBENTURE

            THIS VARIABLE RATE SECURED CONVERTIBLE  DEBENTURE is one of a series
of duly authorized and validly issued Variable Rate Secured Convertible
Debentures of Able Energy,  Inc., a Delaware  corporation,  having its principal
place of  business  at 198 Green Pond  Road,  Rockaway,  New  Jersey  07866 (the
"Company"),  designated as its Variable Rate Secured Convertible Debenture (this
debenture,  the  "Debenture"  and  collectively  with the other  such  series of
debentures, the "Debentures").

      FOR    VALUE    RECEIVED,    the    Company    promises    to    pay    to
________________________ or its registered assigns (the "Holder"), or shall have
paid pursuant to the terms hereunder,  the principal sum of  $_______________ by
August 8, 2008, or such earlier date as this  Debenture is required or permitted
to be repaid as provided hereunder (the "Maturity Date"), and to pay interest to
the Holder on the aggregate unconverted and then outstanding principal amount of
this  Debenture in accordance  with the  provisions  hereof.  This  Debenture is
subject to the following additional provisions:

      Section 1. Definitions.  For the purposes hereof, in addition to the terms
defined elsewhere in this Debenture, (a) capitalized terms not otherwise defined
herein shall have the meanings set forth in the Purchase  Agreement  and (b) the
following terms shall have the following meanings:


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<PAGE>

            "Alternate  Consideration"  shall  have  the  meaning  set  forth in
      Section 5(e).

            "Bankruptcy  Event"  means  any of the  following  events:  (a)  the
      Company  or any  Significant  Subsidiary  (as such term is defined in Rule
      1-02(w) of Regulation  S-X) thereof  commences a case or other  proceeding
      under any  bankruptcy,  reorganization,  arrangement,  adjustment of debt,
      relief of debtors,  dissolution,  insolvency or liquidation or similar law
      of any jurisdiction relating to the Company or any Significant  Subsidiary
      thereof;  (b) there is  commenced  against the Company or any  Significant
      Subsidiary  thereof  any such  case or  proceeding  that is not  dismissed
      within 60 days after  commencement;  (c) the  Company  or any  Significant
      Subsidiary  thereof is  adjudicated  insolvent or bankrupt or any order of
      relief or other order  approving  any such case or  proceeding is entered;
      (d)  the  Company  or  any  Significant  Subsidiary  thereof  suffers  any
      appointment of any custodian or the like for it or any substantial part of
      its property  that is not  discharged  or stayed  within 60 calendar  days
      after such  appointment;  (e) the  Company or any  Significant  Subsidiary
      thereof makes a general  assignment for the benefit of creditors;  (f) the
      Company  or any  Significant  Subsidiary  thereof  calls a meeting  of its
      creditors  with  a  view  to  arranging  a   composition,   adjustment  or
      restructuring  of  its  debts;  or (g)  the  Company  or  any  Significant
      Subsidiary  thereof, by any act or failure to act, expressly indicates its
      consent to,  approval of or  acquiescence in any of the foregoing or takes
      any  corporate  or other  action for the purpose of  effecting  any of the
      foregoing.

            "Base Conversion  Price" shall have the meaning set forth in Section
      5(b).

            "Business Day" means any day except Saturday,  Sunday, any day which
      shall be a federal  legal holiday in the United States or any day on which
      banking  institutions  in the State of New York are authorized or required
      by law or other governmental action to close.

            "Buy-In" shall have the meaning set forth in Section 4(d)(v).

            "Change of Control  Transaction"  means,  except with respect to the
      Able Energy/All American Transaction, the occurrence after the date hereof
      of any of (i) 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 40% of the voting  securities  of the  Company
      (other than by means of conversion or exercise of the  Debentures  and the
      Securities  issued  together  with the  Debentures),  or (ii) the  Company
      merges into or  consolidates  with any other Person,  or any Person merges
      into or  consolidates  with the Company and,  after giving  effect to such
      transaction,  the  stockholders of the Company  immediately  prior to such
      transaction own less than 60% of the aggregate voting power of the Company
      or the successor entity of such transaction, or (iii) the Company sells or
      transfers all or substantially all of its assets to another Person and the
      stockholders of the Company immediately prior to such transaction own less
      than 60% of the aggregate voting power of the acquiring entity immediately
      after the transaction, or (iv) a replacement at one time or within a three
      year


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<PAGE>

      period of more than  one-half  of the  members of the  Company's  board of
      directors which is not approved by a majority of those individuals who are
      members  of the  board  of  directors  on the  date  hereof  (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
      hereof),  or (v) 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 in clauses (i) through (iv) above.

            "Common  Stock" means the common stock,  par value $0.001 per share,
      of the Company and stock of any other class of securities  into which such
      securities may hereafter be reclassified or changed into.

            "Conversion Date" shall have the meaning set forth in Section 4(a).

            "Conversion Price" shall have the meaning set forth in Section 4(b).

            "Conversion Shares" means, collectively,  the shares of Common Stock
      issuable upon  conversion of this  Debenture in accordance  with the terms
      hereof.

            "Debenture  Register"  shall have the  meaning  set forth in Section
      2(c).

            "Dilutive  Issuance"  shall  have the  meaning  set forth in Section
      5(b).

            "Dilutive  Issuance  Notice"  shall  have the  meaning  set forth in
      Section 5(b).

            "Effectiveness  Period"  shall  have the  meaning  set  forth in the
      Registration Rights Agreement.

            "Equity  Conditions" shall mean, during the period in question,  (i)
      the  Company  shall have duly  honored  all  conversions  and  redemptions
      scheduled  to occur or  occurring  by  virtue  of one or more  Notices  of
      Conversion  of the Holder,  if any,  (ii) the Company  shall have paid all
      liquidated  damages  and other  amounts  owing to the Holder in respect of
      this  Debenture,  (iii) there is an effective  Registration  Statement (if
      required  pursuant  to the  terms of the  Registration  Rights  Agreement)
      pursuant  to which the  Holder is  permitted  to  utilize  the  prospectus
      thereunder  to  resell  all  of  the  shares  issuable   pursuant  to  the
      Transaction  Documents (and the Company believes, in good faith, that such
      effectiveness  will continue  uninterrupted  for the foreseeable  future),
      (iv) the Common Stock is trading on a Trading Market and all of the shares
      issuable  pursuant to the Transaction  Documents are listed for trading on
      such Trading Market (and the Company believes, in good faith, that trading
      of the Common Stock on a Trading  Market will continue  uninterrupted  for
      the foreseeable  future),  (v) there is a sufficient  number of authorized
      but  unissued  and  otherwise  unreserved  shares of Common  Stock for the
      issuance  of  all of  the  shares  issuable  pursuant  to the  Transaction
      Documents, (vi) there is no existing Event of Default or no existing event
      which, with the passage of time or the giving of notice,  would constitute
      an Event of Default, (vii) the issuance of the shares in


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<PAGE>

      question (or, in the case of an Optional or Monthly Redemption, the shares
      issuable  upon  conversion  in full of the Optional or Monthly  Redemption
      Amount) to the  Holder  would not  violate  the  limitations  set forth in
      Section  4(c)(i) and Section  4(c)(ii)  herein,  (viii)  there has been no
      public  announcement of a pending or proposed  Fundamental  Transaction or
      Change of Control  Transaction  that has not been consummated and (ix) the
      Holder is not in possession of any information  that  constitutes,  or may
      constitute, material non-public information.

            "Event of Default" shall have the meaning set forth in Section 8.

            "Exchange  Act"  means  the  Securities  Exchange  Act of  1934,  as
      amended, and the rules and regulations promulgated thereunder.

            "Fundamental  Transaction"  shall  have  the  meaning  set  forth in
      Section 5(e).

            "Immediately  Accretive  Acquisition" is a business combination that
      causes an increase in fully  diluted  earnings per share of the Company as
      shown in the  Company's  Form 10-Q or 10-K next filed  after the  combined
      results  of such  business  combination  are  reflected  in the  Company's
      financial reports for one full fiscal quarter.

            "Interest  Conversion  Rate" means the lesser of (a) the  Conversion
      Price or (b) the 90% of the lesser of (i) the average of the VWAPs for the
      20 consecutive  Trading Days ending on the Trading Day that is immediately
      prior to the applicable  Interest  Payment Date or (ii) the average of the
      VWAPs for the 20  consecutive  Trading Days ending on the Trading Day that
      is immediately prior to the date the applicable Interest Conversion Shares
      are issued and delivered if after the Interest Payment Date.

            "Interest  Conversion  Shares"  shall have the  meaning set forth in
      Section 2(a).

            "Interest Notice Period" shall have the meaning set forth in Section
      2(a).

            "Interest  Payment Date" shall have the meaning set forth in Section
      2(a).

            "Interest  Period"  means,  initially,  the period  beginning on and
      including the Original  Issue Date and ending on and  including  September
      30, 2006 and each successive  period as follows:  the period  beginning on
      October 1 and ending on and including December 31; the period beginning on
      and including  January 1 and ending on and including  March 31; the period
      beginning on and including  April 1 and ending on and  including  June 30;
      and  the  period  beginning  on and  including  July 1 and  ending  on and
      including September 30.

            "Interest  Share Amount" shall have the meaning set forth in Section
      2(a).

            "Late Fees" shall have the meaning set forth in Section 2(d).


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<PAGE>

            "LIBOR"  means,  for each Interest  Period (i) the six-month  London
      Interbank Offered Rate for deposits in U.S. dollars,  as shown on such the
      Trading Day immediately  prior to the beginning of such Interest Period in
      The Wall Street Journal (Eastern Edition) under the caption "Money Rates -
      London  Interbank  Offered  Rates  (LIBOR)";  or (ii) if The  Wall  Street
      Journal  does not  publish  such  rate,  the  offered  one-month  rate for
      deposits in U.S.  dollars which appears on the Reuters Screen LIBO Page as
      of 10:00 a.m.,  New York time,  the Trading Day  immediately  prior to the
      beginning of such  Interest  Period,  provided  that if at least two rates
      appear on the  Reuters  Screen  LIBO  Page on any such  Trading  Day,  the
      "LIBOR" for such day shall be the arithmetic mean of such rates.

            "Mandatory  Default  Amount" means the sum of (i) the greater of (A)
      125% of the  outstanding  principal  amount  of this  Debenture,  plus all
      accrued  and unpaid  interest  hereon,  or (B) the  outstanding  principal
      amount of this  Debenture,  plus all accrued and unpaid  interest  hereon,
      divided by the Conversion  Price on the date the Mandatory  Default Amount
      is either (a) demanded (if demand or notice is required to create an Event
      of Default) or otherwise  due or (b) paid in full,  whichever  has a lower
      Conversion Price, multiplied by the VWAP on the date the Mandatory Default
      Amount  is  either  (x)  demanded  or  otherwise  due or (y) paid in full,
      whichever has a higher VWAP, and (ii) all other amounts,  costs,  expenses
      and liquidated damages due in respect of this Debenture.

            "Monthly  Conversion  Period"  shall have the  meaning  set forth in
      Section 6(b) hereof.

            "Monthly  Conversion  Price"  shall  have the  meaning  set forth in
      Section 6(b) hereof.

            "Monthly Redemption" means the redemption of this Debenture pursuant
      to Section 6(b) hereof.

            "Monthly  Redemption  Amount"  means,  as to a  Monthly  Redemption,
      $____(1).

            "Monthly  Redemption  Date" means the 1st of each month,  commencing
      October  1,  2006  and  terminating  upon  the  full  redemption  of  this
      Debenture.

            "Monthly  Redemption  Notice"  shall have the  meaning  set forth in
      Section 6(b) hereof.

            "Monthly  Redemption  Period"  shall have the  meaning  set forth in
      Section 6(b) hereof.

            "Monthly  Redemption  Share Amount" shall have the meaning set forth
      in Section 6(b) hereof.

-------------
(1) 1/20th of the original principal amount of this Debenture.


                                       5
<PAGE>

            "New York Courts" shall have the meaning set forth in Section 9(d).

            "Notice of  Conversion"  shall have the meaning set forth in Section
      4(a).

            "Optional  Redemption"  shall have the  meaning set forth in Section
      6(a).

            "Optional  Redemption  Amount"  means  the  sum of (i)  120%  of the
      principal  amount of the  Debenture  then  outstanding,  (ii)  accrued but
      unpaid interest and (iii) all liquidated  damages and other amounts due in
      respect of the Debenture.

            "Optional  Redemption  Date"  shall  have the  meaning  set forth in
      Section 6(a).

            "Optional  Redemption  Notice"  shall have the  meaning set forth in
      Section 6(a).

            "Optional  Redemption  Notice Date" shall have the meaning set forth
      in Section 6(a).

            "Original  Issue Date"  means the date of the first  issuance of the
      Debentures, regardless of any transfers of any Debenture and regardless of
      the number of instruments which may be issued to evidence such Debentures.

            "Permitted  Indebtedness"  shall mean the  individual and collective
      reference to the following:  (a) Indebtedness existing on the Closing Date
      as described in the Disclosure Schedules to the Purchase Agreement; (b) up
      to, in the aggregate during the term of this Debenture,  $1,500,000 of new
      Indebtedness;  (c)  non-equity  linked  Indebtedness  incurred  solely  in
      connection with any business  combination  provided that such Indebtedness
      does not mature or require  payments  of  principal  prior to the two year
      anniversary of the Original  Issue Date and is made expressly  subordinate
      in right of payment to the  Indebtedness  evidenced by this Debenture,  as
      reflected in a written agreement  acceptable to the Holder and approved by
      the Holder in writing; and (d) a long-term non equity linked loan facility
      of  immediately  available  cash  proceeds of at least  $150,000,000  with
      Windstar Financial Corp. and/or its Affiliates.

            "Permitted Lien" shall mean the individual and collective  reference
      to the following:  (a) Liens for taxes, assessments and other governmental
      charges or levies not yet due or Liens for  taxes,  assessments  and other
      governmental  charges  or  levies  being  contested  in good  faith and by
      appropriate  proceedings  for which  adequate  reserves (in the good faith
      judgment  of the  management  of the  Company)  have been  established  in
      accordance  with GAAP; (b) Liens imposed by law which were incurred in the
      ordinary  course  of  business,  such  as  carriers',  warehousemen's  and
      mechanics'  Liens,  statutory  landlords'  Liens,  and other similar Liens
      arising  in  the  ordinary  course  of  business,  and  (x)  which  do not
      individually or in the aggregate materially detract from the value of such
      property or assets or  materially  impair the use thereof in the operation
      of the business of the Company and its  consolidated  Subsidiaries  or (y)
      which are being contested in good faith by appropriate proceedings,  which
      proceedings  have the effect of preventing  the


                                       6
<PAGE>

      forfeiture  or sale of the  property  or asset  subject to such Lien;  (c)
      Existing  Liens as they exist on the date of the  Purchase  Agreement  and
      which are set forth in the Disclosure Schedules to the Purchase Agreement;
      (d)  Liens  on the  assets  of a  future  Subsidiary  incurred  solely  in
      connection  with  a  Permitted   Indebtedness  under  clause  (c)  of  the
      definition  of Permitted  Indebtedness  provided that such Lien is limited
      only to the assets of the  Subsidiary  to be acquired in  connection  with
      such Permitted  Indebtedness;  and (e) Liens incurred solely in connection
      with a  Permitted  Indebtedness  under  clause  (d) of the  definition  of
      Permitted Indebtedness.

            "Person"  means an individual or  corporation,  partnership,  trust,
      incorporated  or  unincorporated   association,   joint  venture,  limited
      liability  company,  joint  stock  company,  government  (or an  agency or
      subdivision thereof) or other entity of any kind.

            "Pre-Redemption  Conversion Shares" shall have the meaning set forth
      in Section 6(b) hereof.

            "Purchase  Agreement" means the Securities  Purchase Agreement among
      the  Company  and the  original  Holders,  dated as of August 8, 2006,  as
      amended, modified or supplemented from time to time in accordance with its
      terms.

            "Registration   Rights  Agreement"  means  the  Registration  Rights
      Agreement among the Company and the original Holders, dated as of the date
      of the Purchase Agreement, as amended,  modified or supplemented from time
      to time in accordance with its terms.

            "Registration   Statement"  means  a  registration   statement  that
      registers  the resale of all  Conversion  Shares and  Interest  Conversion
      Shares  of the  Holder,  who  shall be named  as a  "selling  stockholder"
      therein, and meets the requirements of the Registration Rights Agreement.

            "Securities  Act" means the Securities Act of 1933, as amended,  and
      the rules and regulations promulgated thereunder.

            "Share  Delivery  Date"  shall have the meaning set forth in Section
      4(d).

            "Shareholder  Approval"  shall  have the  meaning  set  forth in the
      Purchase Agreement.

            "Subsidiary"  shall  have the  meaning  set  forth  in the  Purchase
      Agreement.

            "Trading Day" means a day on which the principal  Trading  Market is
      open for business.

            "Trading  Market" means the following  markets or exchanges on which
      the Common  Stock is listed or quoted for trading on the date in question:
      the  American  Stock


                                       7
<PAGE>

      Exchange, the Nasdaq Capital Market, the Nasdaq National Market or the New
      York Stock Exchange.

            "Transaction  Documents"  shall  have the  meaning  set forth in the
      Purchase Agreement.

            "VWAP" means, for any date, the price determined by the first of the
      following clauses that applies:  (a) if the Common Stock is then listed or
      quoted on a Trading Market, the daily volume weighted average price of the
      Common Stock for such date (or the nearest  preceding date) on the Trading
      Market on which the Common  Stock is then  listed or quoted for trading as
      reported by  Bloomberg  L.P.  (based on a Trading Day from 9:30 a.m.  (New
      York City time) to 4:02 p.m. (New York City time); (b) if the OTC Bulletin
      Board is not a Trading Market,  the volume  weighted  average price of the
      Common  Stock for such  date (or the  nearest  preceding  date) on the OTC
      Bulletin Board;  (c) if the Common Stock is not then quoted for trading on
      the OTC  Bulletin  Board  and if  prices  for the  Common  Stock  are then
      reported in the "Pink Sheets" published by Pink Sheets,  LLC (or a similar
      organization or agency  succeeding to its functions of reporting  prices),
      the most recent bid price per share of the Common  Stock so  reported;  or
      (d) in all other  cases,  the fair market value of a share of Common Stock
      as determined by an  independent  appraiser  selected in good faith by the
      Holder and reasonably acceptable to the Company.

      Section 2. Interest.

            a)  Payment  of  Interest  in Cash or Kind.  The  Company  shall pay
      interest to the Holder on the aggregate  unconverted and then  outstanding
      principal  amount of this  Debenture at the rate per annum equal to, prior
      to the date when (i) all Equity  Conditions  are met and (ii) all  "Equity
      Conditions",   as  that  term  is  defined  under  Variable  Rate  Secured
      Convertible Debenture to be issued as part of the Able Energy/All American
      Transaction Documents are met ("Liquidity Date"), the greater of (y) LIBOR
      for the applicable  Interest  Period plus 6.0% and (z) 12.5%,  and, on and
      after the Liquidity  Date,  LIBOR for the applicable  Interest Period plus
      4.0%,  or such  lesser  rate as shall be the  highest  rate  permitted  by
      applicable  law,  payable  quarterly  on April 1,  July 1,  October  1 and
      January 1, beginning on the first such date after the Original Issue Date,
      on each Monthly  Redemption  Date (as to that principal  amount then being
      redeemed), on each Conversion Date (as to that principal amount then being
      converted),  on each Optional Redemption Date (as to that principal amount
      then being  redeemed)  and on the Maturity  Date (except that, if any such
      date is not a Business  Day,  then such  payment  shall be due on the next
      succeeding  Business Day) (each such date, an "Interest Payment Date"), in
      cash or duly  authorized,  validly issued,  fully paid and  non-assessable
      shares of Common Stock at the Interest  Conversion  Rate (the amount to be
      paid in shares,  the "Interest Share Amount"),  or a combination  thereof;
      provided,  however,  that (i)  payment in shares of Common  Stock may only
      occur if during the 20 Trading Days  immediately  prior to the  applicable
      Interest  Payment  Date (the  "Interest  Notice  Period")  and through and
      including  the date such  shares of Common  Stock are issued to the Holder
      all of the Equity Conditions have been met (unless waived by the Holder in
      writing), (ii) the


                                       8
<PAGE>

      Company shall have given the Holder  notice in accordance  with the notice
      requirements  set forth below and (iii) as to such Interest  Payment Date,
      prior to such  Interest  Notice  Period (but not more than 5 Trading  Days
      prior to the  commencement of such Interest  Notice  Period),  the Company
      shall have  delivered to the Holder's  account with The  Depository  Trust
      Company a number of shares of  Common  Stock to be  applied  against  such
      Interest Share Amount equal to the quotient of (x) the applicable Interest
      Share  Amount  divided by (y) the then  Conversion  Price  (the  "Interest
      Conversion Shares").

            b) Company's  Election to Pay Interest in Kind. Subject to the terms
      and conditions  herein,  the decision whether to pay interest hereunder in
      cash or shares of Common Stock shall be at the  discretion of the Company.
      Prior to the commencement of any Interest Notice Period, the Company shall
      deliver to the Holder a written  notice of its  election  to pay  interest
      hereunder on the applicable  Interest Payment Date either in cash,  shares
      of Common Stock or a combination  thereof and the Interest Share Amount as
      to the  applicable  Interest  Payment Date,  provided that the Company may
      indicate in such notice that the  election  contained in such notice shall
      apply to future  Interest  Payment  Dates  until  revised by a  subsequent
      notice. During any Interest Notice Period, the Company's election (whether
      specific to an Interest  Payment Date or continuous)  shall be irrevocable
      as  to  such  Interest  Payment  Date.   Subject  to  the   aforementioned
      conditions,  failure to timely provide such written notice shall be deemed
      an election by the Company to pay the  interest on such  Interest  Payment
      Date in cash.  At any time the Company  delivers a notice to the Holder of
      its  election to pay the interest in shares of Common  Stock,  the Company
      shall timely file a prospectus  supplement pursuant to Rule 424 disclosing
      such election.  The aggregate  number of shares of Common Stock  otherwise
      issuable to the Holder on an Interest Payment Date shall be reduced by the
      number of Interest  Conversion  Shares  previously issued to the Holder in
      connection with such Interest Payment Date.

            c) Interest Calculations.  Interest shall be calculated on the basis
      of a 360-day year,  consisting of twelve thirty  consecutive  calendar day
      periods,  and shall accrue  daily  commencing  on the Original  Issue Date
      until payment in full of the principal sum,  together with all accrued and
      unpaid interest, liquidated damages and other amounts which may become due
      hereunder,  has been made.  Payment of interest in shares of Common  Stock
      (other than the  Interest  Conversion  Shares  issued prior to an Interest
      Notice Period) shall otherwise  occur pursuant to Section  4(d)(ii) herein
      and,  solely for  purposes  of the  payment  of  interest  in shares,  the
      Interest Payment Date shall be deemed the Conversion Date.  Interest shall
      cease to accrue with respect to any principal amount  converted,  provided
      that the Company actually  delivers the Conversion  Shares within the time
      period required by Section  4(d)(ii).  Interest  hereunder will be paid to
      the Person in whose name this  Debenture is  registered  on the records of
      the Company  regarding  registration  and transfers of this Debenture (the
      "Debenture Register"). Except as otherwise provided herein, if at any time
      the Company pays  interest  partially  in cash and  partially in shares of
      Common Stock to the holders of the Debentures,  then such payment shall be
      distributed ratably among the holders of the  then-outstanding  Debentures
      based on their (or their  predecessor's)  initial  purchases of Debentures
      pursuant to the Purchase Agreement.


                                       9
<PAGE>

            d) Late Fee.  All  overdue  accrued  and unpaid  interest to be paid
      hereunder  shall entail a late fee at an interest rate equal to the lesser
      of 18% per annum or the maximum rate  permitted by  applicable  law ("Late
      Fees")  which  shall  accrue  daily  from the date  such  interest  is due
      hereunder   through   and   including   the  date  of   payment  in  full.
      Notwithstanding  anything  to the  contrary  contained  herein,  if on any
      Interest  Payment Date the Company has elected to pay accrued  interest in
      the form of  Common  Stock  but the  Company  is not  able to pay  accrued
      interest in Common Stock  because it fails to satisfy the  conditions  for
      payment  in Common  Stock  set forth  above,  then,  at the  option of the
      Holder,  the Company,  in lieu of delivering either shares of Common Stock
      pursuant  to this  Section 2 or paying the  regularly  scheduled  interest
      payment  in  cash,  shall  deliver,  within  three  Trading  Days  of each
      applicable  Interest  Payment Date, an amount in cash equal to the product
      of (x) the number of shares of Common Stock  otherwise  deliverable to the
      Holder in  connection  with the payment of interest  due on such  Interest
      Payment  Date  multiplied  by (y)  the  average  VWAP  during  the  period
      commencing  on the  Interest  Payment  Date and ending on the  Trading Day
      prior to the date such payment is made. If any Interest  Conversion Shares
      are issued to the Holder in connection  with an Interest  Payment Date and
      are not applied  against an Interest  Share Amount,  then the Holder shall
      promptly return such excess shares to the Company.

            e) Prepayment.  Except as otherwise set forth in this Debenture, the
      Company  may not  prepay  any  portion  of the  principal  amount  of this
      Debenture without the prior written consent of the Holder.

      Section 3. Registration of Transfers and Exchanges.

            a) Different  Denominations.  This Debenture is exchangeable  for an
      equal  aggregate  principal  amount of Debentures of different  authorized
      denominations,  as  requested  by the  Holder  surrendering  the same.  No
      service  charge  will be payable  for such  registration  of  transfer  or
      exchange.

            b)  Investment  Representations.  This  Debenture  has  been  issued
      subject to certain  investment  representations of the original Holder set
      forth in the Purchase  Agreement and may be  transferred or exchanged only
      in compliance with the Purchase Agreement and applicable federal and state
      securities laws and regulations.

            c) Reliance on  Debenture  Register.  Prior to due  presentment  for
      transfer  to the Company of this  Debenture,  the Company and any agent of
      the  Company  may treat the  Person in whose name this  Debenture  is duly
      registered on the  Debenture  Register as the owner hereof for the purpose
      of  receiving  payment  as herein  provided  and for all  other  purposes,
      whether or not this Debenture is overdue,  and neither the Company nor any
      such agent shall be affected by notice to the contrary.


                                       10
<PAGE>

      Section 4. Conversion.

            a) Voluntary  Conversion.  At any time after the Original Issue Date
      until this Debenture is no longer  outstanding,  this  Debenture  shall be
      convertible,  in whole or in part,  into  shares  of  Common  Stock at the
      option of the  Holder,  at any time and from time to time  (subject to the
      conversion limitations set forth in Section 4(c) hereof). The Holder shall
      effect  conversions  by delivering to the Company a Notice of  Conversion,
      the  form  of  which  is  attached   hereto  as  Annex  A  (a  "Notice  of
      Conversion"), specifying therein the principal amount of this Debenture to
      be converted  and the date on which such  conversion  shall be effected (a
      "Conversion  Date").  If no  Conversion  Date is  specified in a Notice of
      Conversion,  the  Conversion  Date  shall be the date that such  Notice of
      Conversion is deemed delivered hereunder. To effect conversions hereunder,
      the Holder shall not be required to physically surrender this Debenture to
      the Company unless the entire  principal amount of this Debenture plus all
      accrued and unpaid  interest  thereon has been so  converted.  Conversions
      hereunder  shall have the effect of  lowering  the  outstanding  principal
      amount of this Debenture in an amount equal to the applicable  conversion.
      The Holder and the Company shall  maintain  records  showing the principal
      amount(s)  converted and the date of such  conversion(s).  The Company may
      deliver an objection to any Notice of Conversion within 2 Business Days of
      delivery  of such  Notice of  Conversion.  In the event of any  dispute or
      discrepancy,   the  records  of  the  Holder  shall  be  controlling   and
      determinative  in the  absence of  manifest  error.  The  Holder,  and any
      assignee by acceptance of this  Debenture,  acknowledge and agree that, by
      reason of the  provisions  of this  paragraph,  following  conversion of a
      portion of this Debenture,  the unpaid and unconverted principal amount of
      this Debenture may be less than the amount stated on the face hereof.

            b)  Conversion   Price.  The  conversion  price  in  effect  on  any
      Conversion  Date shall be equal to $6.00  (subject to  adjustment  herein)
      (the "Conversion Price").

            c) Conversion Limitations.

                  i. Trading Market Limitations. Notwithstanding anything herein
            to the  contrary,  if  the  Company  has  not  obtained  Shareholder
            Approval (as defined  below),  then the Company may not issue,  upon
            conversion  of this  Debenture,  a number of shares of Common  Stock
            which,  when aggregated with any shares of Common Stock issued on or
            after the Original Issue Date and prior to such  Conversion Date (A)
            in connection  with any Debentures  issued  pursuant to the Purchase
            Agreement,  (B) in connection  with any Warrants  issued pursuant to
            the  Purchase  Agreement  and (C) in  connection  with any  warrants
            issued to any registered  broker-dealer  as a fee in connection with
            the issuance of the Securities  pursuant to the Purchase  Agreement,
            would  exceed  19.999%  of the  number of  shares  of  Common  Stock
            outstanding  on the Trading Day  immediately  preceding the Original
            Issue Date (such number of shares,  the  "Issuable  Maximum").  Each
            Holder shall be entitled to a portion of the Issuable  Maximum equal
            to the  quotient  obtained by dividing (x) the  aggregate  principal
            amount of the  Debenture(s)  issued  and sold to such  Holder on the
            Original  Issue Date by (y) the  aggregate  principal  amount of all
            Debentures  issued  and sold by the  Company on the  Original  Issue
            Date. If any Holder shall no longer hold the Debenture(s), then


                                       11
<PAGE>

            such Holder's  remaining  portion of the Issuable  Maximum,  if any,
            shall be allocated pro-rata among the remaining Holders.  If, on any
            Conversion  Date, (1) the applicable  Conversion  Price is such that
            the shares  issuable under this Debenture on such  Conversion  Date,
            together  with the  aggregate  number of shares of Common Stock that
            would  then  be  issuable  upon  conversion  in  full  of  all  then
            outstanding  Debentures,  would exceed the Issuable  Maximum and (2)
            the Company shall not have previously obtained Shareholder Approval,
            then the Company shall issue to the Holder requesting a conversion a
            number of shares of Common  Stock  equal to such  Holder's  pro-rata
            portion (which shall be calculated  pursuant to the terms hereof) of
            the  Issuable  Maximum  and,  with  respect to the  remainder of the
            aggregate principal amount of the Debentures  (including any accrued
            interest)  then  held by such  Holder  for  which  a  conversion  in
            accordance with the applicable  Conversion  Price would result in an
            issuance  of  shares of  Common  Stock in  excess  of such  Holder's
            pro-rata  portion  (which shall be calculated  pursuant to the terms
            hereof)  of the  Issuable  Maximum  (the  "Excess  Principal"),  the
            Company shall be prohibited from  converting  such Excess  Principal
            and shall promptly  notify the Holder of the reason  therefor.  This
            Debenture shall thereafter be unconvertible to such extent until and
            unless  Shareholder  Approval  is  subsequently  obtained,  but this
            Debenture shall otherwise remain in full force and effect.

                  ii. Holder's Restriction on Conversion.  The Company shall not
            effect any conversion of this Debenture, and a Holder shall not have
            the right to convert  any portion of this  Debenture,  to the extent
            that  after  giving  effect  to  the  conversion  set  forth  on the
            applicable  Notice of  Conversion,  such Holder  (together with such
            Holder's  Affiliates,  and any other  person  or entity  acting as a
            group together with such Holder or any of such Holder's  Affiliates)
            would  beneficially  own  in  excess  of  the  Beneficial  Ownership
            Limitation  (as  defined  below).  For  purposes  of  the  foregoing
            sentence, the number of shares of Common Stock beneficially owned by
            such Holder and its Affiliates shall include the number of shares of
            Common Stock issuable upon conversion of this Debenture with respect
            to which such  determination  is being made,  but shall  exclude the
            number  of  shares  of Common  Stock  which  are  issuable  upon (A)
            conversion of the remaining,  unconverted  principal  amount of this
            Debenture beneficially owned by such Holder or any of its Affiliates
            and (B) exercise or conversion  of the  unexercised  or  unconverted
            portion  of  any  other  securities  of  the  Company  subject  to a
            limitation  on conversion  or exercise  analogous to the  limitation
            contained  herein   (including,   without   limitation,   any  other
            Debentures or the Warrants) beneficially owned by such Holder or any
            of its  Affiliates.  Except as set forth in the preceding  sentence,
            for purposes of this Section 4(c)(ii), beneficial ownership shall be
            calculated in accordance  with Section 13(d) of the Exchange Act and
            the rules and regulations promulgated thereunder. To the extent that
            the  limitation  contained in this  Section  4(c)(ii)  applies,  the
            determination  of whether this Debenture is convertible (in relation
            to  other   securities  owned  by  such  Holder  together  with  any
            Affiliates)  and of which  principal  amount  of this  Debenture  is
            convertible shall be in the sole discretion of


                                       12
<PAGE>

            such Holder,  and the submission of a Notice of Conversion  shall be
            deemed to be such Holder's  determination  of whether this Debenture
            may be  converted  (in  relation to other  securities  owned by such
            Holder together with any  Affiliates) and which principal  amount of
            this  Debenture  is  convertible,  in  each  case  subject  to  such
            aggregate  percentage  limitations.  To ensure  compliance with this
            restriction,  each Holder will be deemed to represent to the Company
            each time it  delivers a Notice of  Conversion  that such  Notice of
            Conversion  has not  violated  the  restrictions  set  forth in this
            paragraph  and the  Company  shall have no  obligation  to verify or
            confirm  the  accuracy  of  such  determination.   In  addition,   a
            determination as to any group status as contemplated  above shall be
            determined in accordance  with Section 13(d) of the Exchange Act and
            the rules and regulations  promulgated  thereunder.  For purposes of
            this Section  4(c)(ii),  in  determining  the number of  outstanding
            shares  of  Common  Stock,  a  Holder  may  rely  on the  number  of
            outstanding  shares of Common  Stock as stated in the most recent of
            the following: (A) the Company's most recent Form 10-Q or Form 10-K,
            as the case may be; (B) a more  recent  public  announcement  by the
            Company; or (C) a more recent notice by the Company or the Company's
            transfer  agent  setting  forth the number of shares of Common Stock
            outstanding.  Upon the  written  or oral  request  of a Holder,  the
            Company shall within two Trading Days confirm  orally and in writing
            to  such   Holder  the  number  of  shares  of  Common   Stock  then
            outstanding. In any case, the number of outstanding shares of Common
            Stock shall be determined  after giving effect to the  conversion or
            exercise of securities of the Company,  including this Debenture, by
            such Holder or its Affiliates since the date as of which such number
            of outstanding shares of Common Stock was reported.  The "Beneficial
            Ownership  Limitation" shall be 4.99% of the number of shares of the
            Common Stock  outstanding  immediately  after  giving  effect to the
            issuance of shares of Common Stock issuable upon  conversion of this
            Debenture held by the Holder.  The Beneficial  Ownership  Limitation
            provisions of this Section 4(c)(ii) may be waived by such Holder, at
            the  election  of such  Holder,  upon not less  than 61 days'  prior
            notice to the Company, to change the Beneficial Ownership Limitation
            to 9.99% of the  number of shares of the  Common  Stock  outstanding
            immediately  after giving effect to the issuance of shares of Common
            Stock upon  conversion of this  Debenture held by the Holder and the
            provisions of this Section  4(c)(ii) shall  continue to apply.  Upon
            such a change by a Holder  of the  Beneficial  Ownership  Limitation
            from such 4.99% limitation to such 9.99% limitation,  the Beneficial
            Ownership  Limitation may not be further waived by such Holder.  The
            provisions of this paragraph shall be construed and implemented in a
            manner  otherwise than in strict  conformity  with the terms of this
            Section  4(c)(ii) to correct this paragraph (or any portion  hereof)
            which may be defective or inconsistent with the intended  Beneficial
            Ownership   Limitation  herein  contained  or  to  make  changes  or
            supplements  necessary or desirable to properly  give effect to such
            limitation.  The limitations contained in this paragraph shall apply
            to a successor holder of this Debenture.


                                       13
<PAGE>

            d) Mechanics of Conversion.

                  i.  Conversion  Shares  Issuable Upon  Conversion of Principal
            Amount.  The  number  of  shares of  Common  Stock  issuable  upon a
            conversion hereunder shall be determined by the quotient obtained by
            dividing (x) the outstanding  principal  amount of this Debenture to
            be converted by (y) the Conversion Price.

                  ii. Delivery of Certificate  Upon  Conversion.  Not later than
            three Trading Days after each  Conversion  Date (the "Share Delivery
            Date"), the Company shall deliver, or cause to be delivered,  to the
            Holder (A) a certificate or certificates representing the Conversion
            Shares  which,  on or after  the  Effective  Date,  shall be free of
            restrictive legends and trading restrictions (other than those which
            may then be required by the  Purchase  Agreement)  representing  the
            number of shares of Common Stock being  acquired upon the conversion
            of this Debenture  (including,  if the Company has given  continuous
            notice pursuant to Section 2(b) for payment of interest in shares of
            Common Stock at least 20 Trading Days prior to the date on which the
            Conversion  Notice is  delivered  to the  Company,  shares of Common
            Stock   representing  the  payment  of  accrued  interest  otherwise
            determined  pursuant to Section 2(a) but assuming  that the Interest
            Payment  Period is the 20 Trading Days period  immediately  prior to
            the date on which the Conversion  Notice is delivered to the Company
            and  excluding  for such  issuance  the  condition  that the Company
            deliver Interest  Conversion Shares as to such interest payment) and
            (B) a bank check in the amount of accrued  and unpaid  interest  (if
            the Company  has  elected or is required to pay accrued  interest in
            cash).  On or after the  Effective  Date,  the Company shall use its
            best efforts to deliver any certificate or certificates  required to
            be  delivered  by the Company  under this  Section 4  electronically
            through the Depository Trust Company or another established clearing
            corporation performing similar functions.

                  iii.  Failure to Deliver  Certificates.  If in the case of any
            Notice  of  Conversion  such  certificate  or  certificates  are not
            delivered  to or as directed by the  applicable  Holder by the fifth
            Trading Day after the Conversion  Date, the Holder shall be entitled
            to elect by written  notice to the  Company at any time on or before
            its receipt of such  certificate  or  certificates,  to rescind such
            Conversion,  in which event the Company shall promptly return to the
            Holder any  original  Debenture  delivered  to the  Company  and the
            Holder  shall   promptly   return  the  Common  Stock   certificates
            representing  the principal  amount of this  Debenture  tendered for
            conversion to the Company.

                  iv.  Obligation  Absolute;  Partial  Liquidated  Damages.  The
            Company's  obligations  to issue and deliver the  Conversion  Shares
            upon  conversion  of this  Debenture  in  accordance  with the terms
            hereof are absolute and unconditional, irrespective of any action or
            inaction  by the Holder to enforce  the same,  any waiver or consent
            with respect to any provision  hereof,  the recovery of any judgment
            against any Person or any action to enforce the same, or any setoff,
            counterclaim,  recoupment,  limitation or termination, or any breach
            or  alleged  breach  by  the  Holder  or  any  other  Person  of any
            obligation to the Company or any


                                       14
<PAGE>

            violation  or  alleged  violation  of law by the Holder or any other
            Person,  and  irrespective  of any other  circumstance  which  might
            otherwise  limit  such  obligation  of the  Company to the Holder in
            connection  with the issuance of such Conversion  Shares;  provided,
            however,  that such  delivery  shall not  operate as a waiver by the
            Company of any such action the Company may have  against the Holder.
            In the event the Holder of this Debenture shall elect to convert any
            or all of the outstanding  principal amount hereof,  the Company may
            not refuse  conversion  based on any claim that the Holder or anyone
            associated  or  affiliated  with the Holder has been  engaged in any
            violation  of law,  agreement  or for any  other  reason,  unless an
            injunction  from a court,  on notice to Holder,  restraining  and or
            enjoining  conversion  of all or part of this  Debenture  shall have
            been sought and  obtained,  and the Company  posts a surety bond for
            the  benefit of the Holder in the amount of 150% of the  outstanding
            principal  amount  of  this  Debenture,  which  is  subject  to  the
            injunction,  which bond shall remain in effect until the  completion
            of arbitration/litigation of the underlying dispute and the proceeds
            of which  shall be payable  to such  Holder to the extent it obtains
            judgment. In the absence of such injunction, the Company shall issue
            Conversion  Shares or, if applicable,  cash, upon a properly noticed
            conversion.  If the  Company  fails for any reason to deliver to the
            Holder such certificate or certificates pursuant to Section 4(d)(ii)
            by the fifth  Trading  Day after the  Conversion  Date,  the Company
            shall pay to such Holder, in cash, as liquidated  damages and not as
            a penalty,  for each $1000 of principal amount being converted,  $10
            per  Trading  Day  (increasing  to $20 per  Trading Day on the tenth
            Trading Day after such liquidated  damages begin to accrue) for each
            Trading Day after such fifth Trading Day until such certificates are
            delivered.  Nothing  herein  shall limit a Holder's  right to pursue
            actual damages or declare an Event of Default  pursuant to Section 8
            hereof for the Company's failure to deliver Conversion Shares within
            the period  specified herein and such Holder shall have the right to
            pursue all remedies  available to it hereunder,  at law or in equity
            including,  without  limitation,  a decree of  specific  performance
            and/or injunctive  relief. 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.  Notwithstanding
            anything  herein to the  contrary,  as to any delays in  performance
            caused  solely and  directly by a Force  Majeure,  the Trading  Days
            during which such delay is occurring shall be tolled  hereunder with
            respect to liquidated  damages,  provided that the Company has used,
            and  continues  to use,  best  efforts  to perform  its  obligations
            notwithstanding such Force Majeure.

                  v.  Compensation  for  Buy-In on  Failure  to  Timely  Deliver
            Certificates  Upon  Conversion.  In  addition  to any  other  rights
            available  to the  Holder,  if the  Company  fails for any reason to
            deliver to the Holder such  certificate or certificates by the Share
            Delivery Date pursuant to Section 4(d)(ii),  and if after such Share
            Delivery  Date the  Holder  is  required  by its  brokerage  firm to
            purchase  (in an open market  transaction  or  otherwise)  shares of
            Common Stock to deliver in  satisfaction of a sale by such Holder of
            the Conversion  Shares which the


                                       15
<PAGE>

            Holder was entitled to receive upon the conversion  relating to such
            Share Delivery Date (a "Buy-In"),  then the Company shall (A) pay in
            cash to the Holder (in addition to any other  remedies  available to
            or elected by the Holder) the amount by which (x) the Holder's total
            purchase price (including any brokerage  commissions) for the Common
            Stock so  purchased  exceeds  (y) the  product of (1) the  aggregate
            number of shares of Common  Stock that such  Holder was  entitled to
            receive from the  conversion  at issue  multiplied by (2) the actual
            sale  price at which the sell  order  giving  rise to such  purchase
            obligation was executed  (including any brokerage  commissions)  and
            (B) at the option of the Holder,  either  reissue  (if  surrendered)
            this Debenture in a principal  amount equal to the principal  amount
            of the  attempted  conversion or deliver to the Holder the number of
            shares of Common  Stock that would have been  issued if the  Company
            had timely  complied  with its delivery  requirements  under Section
            4(d)(ii). For example, if the Holder purchases Common Stock having a
            total purchase price of $11,000 to cover a Buy-In with respect to an
            attempted  conversion  of this  Debenture  with respect to which the
            actual sale price of the Conversion  Shares (including any brokerage
            commissions)  giving rise to such purchase obligation was a total of
            $10,000 under clause (A) of the immediately preceding sentence,  the
            Company shall be required to pay the Holder $1,000. The Holder shall
            provide the Company written notice indicating the amounts payable to
            the  Holder in  respect  of the  Buy-In  and,  upon  request  of the
            Company,  evidence of the amount of such loss.  Nothing herein shall
            limit a Holder's right to pursue any other remedies  available to it
            hereunder,  at law or in equity  including,  without  limitation,  a
            decree of specific performance and/or injunctive relief with respect
            to the Company's failure to timely deliver certificates representing
            shares of Common Stock upon conversion of this Debenture as required
            pursuant to the terms hereof.

                  vi.  Reservation  of  Shares  Issuable  Upon  Conversion.  The
            Company  covenants  that it  will  at all  times  reserve  and  keep
            available out of its authorized and unissued  shares of Common Stock
            for the sole 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  (and the other  holders of
            the  Debentures),  not less than such aggregate  number of shares of
            the Common Stock as shall  (subject to the terms and  conditions set
            forth in the Purchase  Agreement)  be issuable  (taking into account
            the adjustments  and  restrictions of Section 5) 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
            authorized, validly issued, fully paid and nonassessable and, if the
            Registration  Statement is then effective  under the Securities Act,
            shall  be  registered  for  public  sale  in  accordance  with  such
            Registration Statement.

                  vii.  Fractional  Shares.  Upon  a  conversion  hereunder  the
            Company   shall  not  be  required   to  issue  stock   certificates
            representing  fractions  of  shares  of


                                       16
<PAGE>

            Common Stock, but may if otherwise permitted, make a cash payment in
            respect of any final  fraction  of a share based on the VWAP at such
            time. If the Company  elects not, or is unable,  to make such a cash
            payment,  the Holder  shall be entitled  to receive,  in lieu of the
            final fraction of a share, 1 whole share of Common Stock.

                  viii.  Transfer Taxes. The issuance of certificates for shares
            of the Common Stock on  conversion of this  Debenture  shall be made
            without  charge to the Holder  hereof for any  documentary  stamp or
            similar  taxes  that  may be  payable  in  respect  of the  issue or
            delivery of such  certificates,  provided that the Company shall not
            be  required  to pay any tax that may be  payable  in respect of any
            transfer   involved  in  the  issuance  and  delivery  of  any  such
            certificate  upon conversion in a name other than that of the Holder
            of this Debenture so converted and the Company shall not be required
            to issue or deliver such certificates  unless or until the person or
            persons  requesting  the  issuance  thereof  shall  have paid to the
            Company  the  amount of such tax or shall  have  established  to the
            satisfaction of the Company that such tax has been paid.

      Section 5. Certain Adjustments.

            a) Stock  Dividends  and Stock Splits.  If the Company,  at any time
      while  this  Debenture  is  outstanding:  (A)  pays a  stock  dividend  or
      otherwise  makes a  distribution  or  distributions  payable  in shares of
      Common  Stock on shares of Common  Stock or any Common  Stock  Equivalents
      (which,  for  avoidance  of doubt,  shall not include any shares of Common
      Stock issued by the Company upon conversion of, or payment of interest on,
      this Debenture);  (B) subdivides outstanding shares of Common Stock into a
      larger number of shares; (C) combines (including by way of a reverse stock
      split) outstanding shares of Common Stock into a smaller number of shares;
      or (D) issues, in the event of a 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 any treasury shares of the
      Company)  outstanding  immediately  before  such  event  and of which  the
      denominator  shall be the  number of shares  of Common  Stock  outstanding
      immediately 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.

            b)  Subsequent  Equity  Sales.  If the  Company  or  any  Subsidiary
      thereof,  as applicable,  at any time while this Debenture is outstanding,
      sells or grants  any  option to  purchase  or sells or grants any right to
      reprice its securities,  or otherwise  disposes of or issues (or announces
      any sale, grant or any option to purchase or other disposition) any Common
      Stock or Common Stock  Equivalents  entitling any Person to acquire shares
      of Common  Stock at an  effective  price per share  that is lower than the
      then Conversion Price (such lower price,  the "Base Conversion  Price" and
      such issuances collectively,  a "Dilutive Issuance") (if the holder of the
      Common Stock or Common Stock Equivalents


                                       17
<PAGE>

            so issued shall at any time,  whether by operation of purchase price
      adjustments, reset provisions,  floating conversion,  exercise or exchange
      prices or otherwise, or due to warrants, options or rights per share which
      are issued in connection with such issuance, be entitled to receive shares
      of Common  Stock at an  effective  price per share  that is lower than the
      Conversion  Price, such issuance shall be deemed to have occurred for less
      than the Conversion Price on such date of the Dilutive Issuance), then the
      Conversion Price shall be reduced to equal the Base Conversion Price. Such
      adjustment  shall be made  whenever  such  Common  Stock or  Common  Stock
      Equivalents are issued.  Notwithstanding the foregoing, no adjustment will
      be made under this  Section  5(b) in  respect of an Exempt  Issuance.  The
      Company shall notify the Holder in writing, no later than the Business Day
      following  the issuance of any Common  Stock or Common  Stock  Equivalents
      subject to this Section 5(b),  indicating therein the applicable  issuance
      price, or applicable  reset price,  exchange price,  conversion  price and
      other pricing terms (such notice,  the "Dilutive  Issuance  Notice").  For
      purposes of clarification,  whether or not the Company provides a Dilutive
      Issuance  Notice pursuant to this Section 5(b), upon the occurrence of any
      Dilutive  Issuance,  the  Holder  is  entitled  to  receive  a  number  of
      Conversion  Shares  based upon the Base  Conversion  Price on or after the
      date  of  such  Dilutive  Issuance,   regardless  of  whether  the  Holder
      accurately   refers  to  the  Base  Conversion  Price  in  the  Notice  of
      Conversion.

            c) Subsequent  Rights Offerings.  If the Company,  at any time while
      the Debenture is outstanding,  shall issue rights,  options or warrants to
      all  holders  of  Common  Stock  (and not to  Holders)  entitling  them to
      subscribe for or purchase shares of Common Stock at a price per share that
      is lower  than the VWAP on the  record  date  referenced  below,  then the
      Conversion   Price  shall  be  multiplied  by  a  fraction  of  which  the
      denominator  shall be the number of shares of the Common Stock outstanding
      on the date of  issuance  of such  rights or  warrants  plus the number of
      additional  shares of Common Stock offered for  subscription  or purchase,
      and of which the  numerator  shall be the  number of shares of the  Common
      Stock  outstanding on the date of issuance of such rights or warrants plus
      the  number of  shares  which the  aggregate  offering  price of the total
      number of shares so offered  (assuming  delivery to the Company in full of
      all  consideration  payable  upon  exercise  of such  rights,  options  or
      warrants)  would  purchase  at such VWAP.  Such  adjustment  shall be made
      whenever  such rights or warrants are issued,  and shall become  effective
      immediately  after the record date for the  determination  of stockholders
      entitled to receive such rights, options or warrants.

            d) Pro Rata  Distributions.  If the Company,  at any time while this
      Debenture is outstanding,  distributes to all holders of Common Stock (and
      not to the Holders)  evidences of its  indebtedness  or assets  (including
      cash and cash  dividends)  or  rights  or  warrants  to  subscribe  for or
      purchase any security (other than the Common Stock, which shall be subject
      to Section  5(b)),  then in each such case the  Conversion  Price shall be
      adjusted by multiplying such Conversion Price in effect  immediately prior
      to the record date fixed for  determination  of  stockholders  entitled to
      receive such  distribution by a fraction of which the denominator shall be
      the VWAP determined as of the record date


                                       18
<PAGE>

      mentioned  above,  and of which the  numerator  shall be such VWAP on such
      record  date less the then fair  market  value at such  record date of the
      portion  of  such  assets  or  evidence  of  indebtedness  so  distributed
      applicable to 1 outstanding share of the Common Stock as determined by the
      Board of  Directors  of the  Company  in good  faith.  In either  case the
      adjustments  shall be  described  in a statement  delivered  to the Holder
      describing  the  portion  of  assets  or  evidences  of   indebtedness  so
      distributed or such  subscription  rights  applicable to 1 share of Common
      Stock.  Such  adjustment  shall be made whenever any such  distribution is
      made  and  shall  become  effective  immediately  after  the  record  date
      mentioned above.

            e) Fundamental Transaction.  If, at any time while this Debenture is
      outstanding,  other than the Able Energy/All American Transaction, (A) the
      Company  effects any merger or  consolidation  of the Company with or into
      another Person,  (B) the Company effects any sale of all or  substantially
      all of its assets in one transaction or a series of related  transactions,
      (C) any tender offer or exchange  offer (whether by the Company or another
      Person)  is  completed  pursuant  to which  holders  of  Common  Stock are
      permitted to tender or exchange their shares for other securities, cash or
      property,  or (D) the Company effects any  reclassification  of the Common
      Stock or any compulsory share exchange  pursuant to which the Common Stock
      is effectively  converted into or exchanged for other securities,  cash or
      property (in any such case, a "Fundamental  Transaction"),  then, upon any
      subsequent  conversion of this Debenture,  the Holder shall have the right
      to receive,  for each Conversion  Share that would have been issuable upon
      such conversion  immediately  prior to the occurrence of such  Fundamental
      Transaction,  the same kind and amount of securities,  cash or property as
      it would  have  been  entitled  to  receive  upon the  occurrence  of such
      Fundamental  Transaction  if  it  had  been,  immediately  prior  to  such
      Fundamental  Transaction,  the  holder  of 1 share of  Common  Stock  (the
      "Alternate  Consideration").  For  purposes  of any such  conversion,  the
      determination of the Conversion  Price shall be appropriately  adjusted to
      apply to such  Alternate  Consideration  based on the amount of  Alternate
      Consideration  issuable  in  respect  of 1 share of  Common  Stock in such
      Fundamental  Transaction,  and the Company shall  apportion the Conversion
      Price among the Alternate  Consideration in a reasonable manner reflecting
      the  relative   value  of  any  different   components  of  the  Alternate
      Consideration.  If holders of Common  Stock are given any choice as to the
      securities,  cash or property to be received in a Fundamental Transaction,
      then the  Holder  shall  be given  the  same  choice  as to the  Alternate
      Consideration it receives upon any conversion of this Debenture  following
      such  Fundamental  Transaction.  To the extent necessary to effectuate the
      foregoing provisions,  any successor to the Company or surviving entity in
      such  Fundamental  Transaction  shall issue to the Holder a new  debenture
      consistent with the foregoing provisions and evidencing the Holder's right
      to convert such debenture into Alternate  Consideration.  The terms of any
      agreement  pursuant to which a Fundamental  Transaction  is effected shall
      include terms  requiring any such successor or surviving  entity to comply
      with the  provisions of this Section 5(e) and insuring that this Debenture
      (or any such  replacement  security)  will be similarly  adjusted upon any
      subsequent transaction analogous to a Fundamental Transaction.


                                       19
<PAGE>

            f) Calculations. All calculations under this Section 5 shall be made
      to the nearest cent or the nearest 1/100th of a share, as the case may be.
      For  purposes  of this  Section  5, the  number of shares of Common  Stock
      deemed to be issued and outstanding as of a given date shall be the sum of
      the number of shares of Common Stock (excluding any treasury shares of the
      Company) issued and outstanding.

            g) Notice to the Holder.

                  i.  Adjustment to Conversion  Price.  Whenever the  Conversion
            Price is adjusted  pursuant to any  provision of this Section 5, the
            Company shall  promptly  mail to each Holder a notice  setting forth
            the Conversion Price after such adjustment and setting forth a brief
            statement of the facts  requiring  such  adjustment.  If the Company
            issues a variable rate security,  despite the prohibition thereon in
            the Purchase  Agreement,  the Company shall be deemed to have issued
            Common  Stock or Common  Stock  Equivalents  at the lowest  possible
            conversion  or  exercise  price  at  which  such  securities  may be
            converted or exercised  in the case of a Variable  Rate  Transaction
            (as defined in the Purchase Agreement).

                  ii. Notice to Allow  Conversion by Holder.  If (A) the Company
            shall  declare a dividend  (or any other  distribution  in  whatever
            form) on the Common  Stock,  (B) the Company shall declare a special
            nonrecurring  cash  dividend on or a redemption of the Common Stock,
            (C) the Company  shall  authorize the granting to all holders of the
            Common Stock of rights or warrants to subscribe  for or purchase any
            shares  of  capital  stock of any  class or of any  rights,  (D) the
            approval of any  stockholders  of the  Company  shall be required in
            connection  with  any  reclassification  of the  Common  Stock,  any
            consolidation or merger to which the Company is a party, any sale or
            transfer of all or  substantially  all of the assets of the Company,
            of any  compulsory  share  exchange  whereby  the  Common  Stock  is
            converted into other securities, cash or property or (E) the Company
            shall   authorize   the   voluntary  or   involuntary   dissolution,
            liquidation  or winding up of the affairs of the Company,  then,  in
            each case,  the  Company  shall  cause to be filed at each office or
            agency  maintained for the purpose of conversion of this  Debenture,
            and shall cause to be delivered to the Holder at its last address as
            it shall appear upon the  Debenture  Register,  at least 10 calendar
            days prior to the applicable  record or effective  date  hereinafter
            specified,  a notice stating (x) the date on which a record is to be
            taken for the purpose of such  dividend,  distribution,  redemption,
            rights or warrants,  or if a record is not to be taken,  the date as
            of which the holders of the Common Stock of record to be entitled to
            such dividend, distributions,  redemption, rights or warrants are to
            be  determined  or (y) the  date  on  which  such  reclassification,
            consolidation,  merger, sale, transfer or share exchange is expected
            to  become  effective  or  close,  and the  date as of  which  it is
            expected  that  holders  of the  Common  Stock  of  record  shall be
            entitled  to  exchange   their   shares  of  the  Common  Stock  for
            securities,   cash  or  other   property   deliverable   upon   such
            reclassification,  consolidation,  merger,  sale,  transfer or share
            exchange,  provided  that the failure to deliver  such notice or any
            defect


                                       20
<PAGE>

            therein or in the delivery  thereof shall not affect the validity of
            the corporate  action  required to be specified in such notice.  The
            Holder is  entitled  to  convert  this  Debenture  during the 10-day
            period  commencing on the date of such notice  through the effective
            date of the event triggering such notice.

      Section 6. Redemption.

            a)  Optional  Redemption  at  Election  of  Company.  Subject to the
      provisions of this Section 6, at any time after (i) the Company shall have
      obtained  Shareholder Approval and it shall have been deemed effective and
      (ii) the Able  Energy/All  American  Transaction  and the Able  Energy/All
      American  Transaction   Documents  shall  have  been  consummated  and  be
      effective,  the Company  may deliver a notice to the Holder (an  "Optional
      Redemption Notice" and the date such notice is deemed delivered hereunder,
      the  "Optional  Redemption  Notice Date") of its  irrevocable  election to
      redeem  some or all of the  then  outstanding  Debentures  for  cash in an
      amount  equal to the  Optional  Redemption  Amount on the 20th Trading Day
      following the Optional  Redemption  Notice Date (such date,  the "Optional
      Redemption  Date" and such  redemption,  the "Optional  Redemption").  The
      Optional  Redemption Amount is payable in full on the Optional  Redemption
      Date.  The  Company  may only  effect an  Optional  Redemption  if on each
      Trading Day during the period commencing on the Optional Redemption Notice
      Date through to the Optional Redemption Date and through and including the
      date payment of the Optional  Redemption  Amount is actually made, each of
      the Equity Conditions shall have been met. If any of the Equity Conditions
      shall cease to be  satisfied at any time during the 20 Trading Day period,
      then the Holder may elect to nullify  the  Optional  Redemption  Notice by
      notice to the Company  within 3 Trading  Days after the first day on which
      any  such  Equity  Condition  has not  been met  (provided  that if,  by a
      provision of the Transaction Documents, the Company is obligated to notify
      the Holder of the non-existence of an Equity Condition, such notice period
      shall be extended to the third  Trading Day after  proper  notice from the
      Company) in which case the  Optional  Redemption  Notice shall be null and
      void, ab initio.  The Company  covenants and agrees that it will honor all
      Notices of  Conversion  tendered from the time of delivery of the Optional
      Redemption  Notice  through the date all amounts owing thereon are due and
      paid in full.  Notwithstanding  anything  herein to the  contrary,  in the
      event an Optional  Redemption is being  undertaken  in  connection  with a
      financing that would  otherwise  result in an adjustment to the Conversion
      Price  pursuant to Section  5(b) and the Company  arranges  for the direct
      redemption  of all or part of this  Debenture  out of the  closing of such
      Dilutive Issuance, the Conversion Price as to the principal amount of this
      Debenture  subject to an Optional  Redemption  shall not be adjusted as to
      such Dilutive Issuance on or before the Optional Redemption Date, provided
      that in the event the Optional Redemption Amount is not paid in full on or
      before  the  Optional  Redemption  Date,  the  Conversion  Price  shall be
      immediately adjusted to the lower price pursuant to Section 5(b).

            b) Monthly Redemption.  On each Monthly Redemption Date, the Company
      shall  redeem  the  Monthly  Redemption  Amount  plus  accrued  but unpaid
      interest,


                                       21
<PAGE>

      liquidated  damages  and any other  amounts  then owing to such  Holder in
      respect  of  this  Debenture  (the  "Monthly  Redemption").   The  Monthly
      Redemption Amount payable on each Monthly Redemption Date shall be paid in
      cash; provided,  however, as to any Monthly Redemption and upon 25 Trading
      Days' prior written  irrevocable  notice (the "Monthly  Redemption Notice"
      and the 25 Trading Day period immediately following the Monthly Redemption
      Notice,  the "Monthly  Redemption  Period"),  in lieu of a cash redemption
      payment the  Company may elect to pay all or part of a Monthly  Redemption
      Amount in  Conversion  Shares (such dollar  amount to be paid on a Monthly
      Redemption  Date in  Conversion  Shares,  the  "Monthly  Redemption  Share
      Amount")  based on a conversion  price equal to the lesser of (i) the then
      Conversion  Price  and (ii) 90% of the  average  of the  VWAPs  for the 20
      consecutive  Trading  Days ending on the  Trading Day that is  immediately
      prior to the applicable Monthly Redemption Date (subject to adjustment for
      any stock dividend,  stock split, stock combination or other similar event
      affecting  the Common  Stock during such 20 Trading Day period) (the price
      calculated  during the 20  Trading  Day  period  immediately  prior to the
      Monthly  Redemption  Date,  the  "Monthly  Conversion  Price"  and such 20
      Trading Day period, the "Monthly Conversion Period");  provided,  further,
      that the Company may not pay the Monthly  Redemption  Amount in Conversion
      Shares  unless (y) from the date the Holder  receives  the duly  delivered
      Monthly  Redemption  Notice  through  and  until  the  date  such  Monthly
      Redemption is paid in full,  the Equity  Conditions  have been  satisfied,
      unless  waived  in  writing  by the  Holder,  and (z) as to  such  Monthly
      Redemption,  prior to such Monthly  Redemption Period (but not more than 5
      Trading Days prior to the commencement of the Monthly Redemption  Period),
      the  Company  shall  have  delivered  to the  Holder's  account  with  The
      Depository  Trust Company a number of shares of Common Stock to be applied
      against such Monthly  Redemption Share Amount equal to the quotient of (x)
      the applicable  Monthly  Redemption Share Amount divided by (y) the lesser
      of (1) the then  Conversion  Price and (2) 90% of the average of the VWAPs
      for the 20 consecutive  Trading Days ending  immediately  prior to the 5th
      Trading Day prior to the  commencement  of the Monthly  Redemption  Period
      (the "Pre-Redemption Conversion Shares"). The Holder may convert, pursuant
      to Section  4(a),  any  principal  amount of this  Debenture  subject to a
      Monthly  Redemption  at any  time  prior  to the  date  that  the  Monthly
      Redemption  Amount,  plus accrued but unpaid interest,  liquidated damages
      and any other  amounts  then owing to the Holder are due and paid in full.
      Unless  otherwise  indicated  by the  Holder in the  applicable  Notice of
      Conversion,  any principal  amount of this Debenture  converted during the
      applicable Monthly Redemption Period until the date the Monthly Redemption
      Amount is paid in full  shall be first  applied  to the  principal  amount
      subject to the Monthly  Redemption  Amount payable in cash and then to the
      Monthly  Redemption  Share Amount.  Any principal amount of this Debenture
      converted during the applicable Monthly Redemption Period in excess of the
      Monthly  Redemption  Amount  shall be applied  against the last  principal
      amount of this Debenture  scheduled to be redeemed  hereunder,  in reverse
      time  order  from  the  Maturity  Date;  provided,  however,  if any  such
      conversion  is  applied  against  such  Monthly   Redemption  Amount,  the
      Pre-Redemption  Conversion  Shares,  if any were issued in connection with
      such Monthly  Redemption or were not already applied to such  conversions,
      shall be first applied against such conversion.  The Company covenants and
      agrees that it will honor all Notice of


                                       22
<PAGE>

      Conversions tendered up until such amounts are paid in full. The Company's
      determination to pay a Monthly  Redemption in cash, shares of Common Stock
      or a combination thereof shall be applied ratably to all of the holders of
      the then outstanding  Debentures  based on their (or their  predecessor's)
      initial purchases of Debentures pursuant to the Purchase Agreement. At any
      time the  Company  delivers a notice to the Holder of its  election to pay
      the Monthly Redemption Amount in shares of Common Stock, the Company shall
      file  a  prospectus  supplement  pursuant  to  Rule  424  disclosing  such
      election.

            c) Redemption  Procedure.  The payment of cash or issuance of Common
      Stock (other than the Pre-Redemption  Conversion  Shares),  as applicable,
      pursuant  to an  Optional  or  Monthly  Redemption  shall  be  made on the
      Optional or Monthly  Redemption Date, as applicable.  The aggregate number
      of Conversion Shares issued to the Holder pursuant to a Monthly Redemption
      shall be reduced by the number of Pre-Redemption  Conversion Shares issued
      to the Holder in connection with the Monthly Redemption less the number of
      Pre-Redemption  Conversion  Shares  applied to  conversions  of the Holder
      during the 20 Trading  Days  immediately  prior to the Monthly  Conversion
      Date.  If any  portion of the  payment  pursuant to an Optional or Monthly
      Redemption,  as  applicable,  shall  not be  paid  by the  Company  by the
      applicable  due date,  interest  shall accrue thereon until such amount is
      paid in full at an  interest  rate equal to the lesser of 18% per annum or
      the maximum rate  permitted by applicable  law.  Notwithstanding  anything
      herein  contained  to the  contrary,  if any  portion of the  Optional  or
      Monthly Redemption Amount, as applicable,  remains unpaid after such date,
      the Holder may elect,  by written  notice to the Company given at any time
      thereafter, to invalidate ab initio such redemption,  and, with respect to
      the Company's failure to honor the Optional Redemption,  the Company shall
      have  no   further   right   to   exercise   such   Optional   Redemption.
      Notwithstanding  anything to the contrary in this Section 6, the Company's
      determination  to redeem in cash or its elections under Section 6(b) shall
      be applied  ratably among the Holders of Debentures.  The Holder may elect
      to convert the outstanding  principal amount of the Debenture  pursuant to
      Section 4 prior to actual  payment in cash for any  redemption  under this
      Section 6 by the delivery of a Notice of Conversion to the Company. If any
      Pre-Redemption  Conversion  Shares are issued to the Holder in  connection
      with a Monthly  Redemption and are not applied  against either the Monthly
      Redemption  Amount or against  voluntary  conversions  during the  Monthly
      Redemption,  then the Holder shall  promptly  return such excess shares to
      the Company.

      Section 7. Negative  Covenants.  As long as any portion of this  Debenture
remains  outstanding,  the  Company  shall not,  and shall not permit any of its
Subsidiaries to, directly or indirectly:

            a) other than Permitted  Indebtedness,  enter into,  create,  incur,
      assume,  guarantee or suffer to exist any  indebtedness for borrowed money
      of any kind, including but not limited to, a guarantee, 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 therefrom;


                                       23
<PAGE>

            b) other than Permitted Liens, enter into, create,  incur, assume or
      suffer to exist any Liens 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 therefrom;

            c) amend its charter documents,  including without  limitation,  the
      certificate of incorporation and bylaws, in any manner that materially and
      adversely affects any rights of the Holder;

            d) repay,  repurchase  or offer to repay,  repurchase  or  otherwise
      acquire  more than a de minimis  number of shares of its  Common  Stock or
      Common Stock  Equivalents  other than as to (a) the  Conversion  Shares or
      Warrant  Shares as permitted or required under the  Transaction  Documents
      and (b)  repurchases  of  Common  Stock or  Common  Stock  Equivalents  of
      departing  officers  and  directors  of the  Company,  provided  that such
      repurchases shall not exceed an aggregate of $100,000 for all officers and
      directors during the term of this Debenture);

            e) enter into any agreement with respect to any of the foregoing; or

            f) pay cash dividends or distributions  on any equity  securities of
      the Company.

      Section 8. Events of Default.

            a)  "Event of  Default"  means,  wherever  used  herein,  any of the
      following  events  (whatever  the reason for such event and  whether  such
      event 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. any default in the payment of (A) the  principal  amount of
            any Debenture or (B) interest,  liquidated damages and other amounts
            owing  to a Holder  on any  Debenture,  as and  when the same  shall
            become due and payable (whether on a Conversion Date or the Maturity
            Date or by acceleration or otherwise)  which default,  solely in the
            case of an interest payment or other default under clause (B) above,
            is not cured within 5 Trading Days;

                  ii. the  Company  shall  fail to observe or perform  any other
            covenant or  agreement  contained  in the  Debentures  (other than a
            breach by the Company of its obligations to deliver shares of Common
            Stock to the Holder upon  conversion,  which  breach is addressed in
            clause (xi) below) which failure is not cured,  if possible to cure,
            within the earlier to occur of (A) 10 Trading  Days after  notice of
            such  failure  sent by the Holder or by any other  Holder and (B) 20
            Trading  Days after the  Company  has become or should  have  become
            aware of such failure;


                                       24
<PAGE>

                  iii. a material  default or event of default  (subject  to any
            grace or cure period provided in the applicable agreement,  document
            or  instrument)  shall  occur  under  (A)  any  of  the  Transaction
            Documents or (B) any other material  agreement,  lease,  document or
            instrument to which the Company or any  Subsidiary is obligated (and
            not covered by clause (vi) below);

                  iv. any representation or warranty made in this Debenture, any
            other Transaction  Documents,  any written statement pursuant hereto
            or thereto or any other report,  financial  statement or certificate
            made or  delivered to the Holder or any other Holder shall be untrue
            or  incorrect  in any  material  respect as of the date when made or
            deemed made;

                  v. the Company or any Significant  Subsidiary shall be subject
            to a Bankruptcy Event;

                  vi. the Company or any Subsidiary  shall default on any of its
            obligations under 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 that (a) involves an
            obligation  greater than  $600,000,  whether such  indebtedness  now
            exists  or shall  hereafter  be  created,  and (b)  results  in such
            indebtedness becoming or being declared due and payable prior to the
            date on which it would otherwise become due and payable;

                  vii.  the Common  Stock shall not be  eligible  for listing or
            quotation for trading on a Trading  Market and shall not be eligible
            to resume  listing or  quotation  for  trading  thereon  within five
            Trading Days;

                  viii.  the  Company  shall be a party to any Change of Control
            Transaction  or  Fundamental  Transaction  or shall agree to sell or
            dispose of all or in excess of 40% of its assets in one  transaction
            or a series of related transactions  (whether or not such sale would
            constitute a Change of Control Transaction);

                  ix. a  Registration  Statement  shall not have  been  declared
            effective by the  Commission  on or prior to the 180th  calendar day
            after the Closing Date;

                  x. if,  during the  Effectiveness  Period  (as  defined in the
            Registration Rights Agreement),  either (a) the effectiveness of the
            Registration Statement lapses for any reason or (b) the Holder shall
            not be permitted to resell Registrable Securities (as defined in the
            Registration Rights Agreement) under the Registration  Statement for
            a  period  of  more  than  20   consecutive   Trading   Days  or  40
            non-consecutive Trading Days (except that, if in connection with the
            acquisition of Able Energy/All American Transaction, 120 consecutive
            or  non-consecutive  Trading  Days)  during  any  12  month  period;
            provided, however, that


                                       25
<PAGE>

            if the Company is negotiating a merger,  consolidation,  acquisition
            or sale  of all or  substantially  all of its  assets  or a  similar
            transaction  and, in the written  opinion of counsel to the Company,
            the  Registration  Statement  would be  required  to be  amended  to
            include  information  concerning such pending  transaction(s) or the
            parties  thereto  which  information  is not available or may not be
            publicly  disclosed at the time,  the Company  shall be permitted an
            additional  20  consecutive  Trading Days during any 12 month period
            pursuant to this Section 8(a)(x);

                  xi.  the  Company   shall  fail  for  any  reason  to  deliver
            certificates  to a Holder  prior to the  fifth  Trading  Day after a
            Conversion  Date  pursuant  to  Section  4(d) or the  Company  shall
            provide at any time notice to the Holder, including by way of public
            announcement,  of the Company's  intention to not honor requests for
            conversions of any Debentures in accordance with the terms hereof;

                  xii. any Person shall  breach any  agreement  delivered to the
            initial  Holders  pursuant  to Section  2.2(a)(iv)  of the  Purchase
            Agreement;

                  xiii.  the Company and the Holder  shall have entered into and
            consummated  the Able Energy/All  American  Transaction and the Able
            Energy/All American Transaction  Documents on or before December 31,
            2006; or

                  xiv.  any monetary  judgment,  writ or similar  final  process
            shall be entered or filed against the Company, any Subsidiary or any
            of their respective property or other assets for more than $250,000,
            and such  judgment,  writ or  similar  final  process  shall  remain
            unvacated, unbonded or unstayed for a period of 45 calendar days.

            b) Remedies Upon Event of Default.  If any Event of Default  occurs,
      the  outstanding  principal  amount of this  Debenture,  plus  accrued but
      unpaid  interest,  liquidated  damages and other  amounts owing in respect
      thereof through the date of  acceleration,  shall become,  at the Holder's
      election,  immediately  due and payable in cash at the  Mandatory  Default
      Amount.  Commencing  5 days after the  occurrence  of any Event of Default
      that results in the eventual acceleration of this Debenture,  the interest
      rate on this  Debenture  shall  accrue at an  interest  rate  equal to the
      lesser of 18% per annum or the maximum  rate  permitted  under  applicable
      law. Upon the payment in full of the Mandatory Default Amount,  the Holder
      shall promptly  surrender this Debenture to or as directed by the Company.
      In connection with such acceleration described herein, the Holder need not
      provide, and the Company hereby waives, any presentment,  demand,  protest
      or other notice of any kind,  and the Holder may  immediately  and without
      expiration  of any grace  period  enforce  any and all of its  rights  and
      remedies hereunder and all other remedies available to it under applicable
      law. Such acceleration may be rescinded and annulled by Holder at any time
      prior to  payment  hereunder  and the  Holder  shall  have all rights as a
      holder of the Debenture  until such time,  if any, as the Holder


                                       26
<PAGE>

      receives full payment pursuant to this Section 8(b). No such rescission or
      annulment shall affect any subsequent Event of Default or impair any right
      consequent thereon.

      Section 9. Miscellaneous.

            a)  Notices.   Any  and  all  notices  or  other  communications  or
      deliveries  to be provided  by the Holder  hereunder,  including,  without
      limitation,  any Notice of  Conversion,  shall be in writing and delivered
      personally,  by facsimile,  or sent by a nationally  recognized  overnight
      courier service, addressed to the Company, at the address set forth above,
      facsimile number (973) 586-9866, Attn: Christopher P. Westad or such other
      facsimile number or address as the Company may specify for such purpose by
      notice to the Holder  delivered in accordance with this Section 9. Any and
      all notices or other  communications  or  deliveries to be provided by the
      Company  hereunder  shall  be in  writing  and  delivered  personally,  by
      facsimile,  or sent by a nationally  recognized  overnight courier service
      addressed to each Holder at the facsimile number or address of such Holder
      appearing on the books of the Company,  or if no such facsimile  number or
      address  appears,  at the principal  place of business of the Holder.  Any
      notice or other  communication  or  deliveries  hereunder  shall be deemed
      given and  effective on the earliest of (i) the date of  transmission,  if
      such notice or  communication  is delivered via facsimile at the facsimile
      number  specified  in this  Section  9 prior to 5:30  p.m.  (New York City
      time),  (ii) the date immediately  following the date of transmission,  if
      such notice or  communication  is delivered via facsimile at the facsimile
      number  specified in this Section 9 between 5:30 p.m. (New York City time)
      and 11:59 p.m. (New York City time) on any date, (iii) the second Business
      Day  following  the  date of  mailing,  if sent by  nationally  recognized
      overnight  courier  service,  or (iv) upon actual  receipt by the party to
      whom such notice is required to be given.

            b) Absolute  Obligation.  Except as expressly  provided  herein,  no
      provision of this  Debenture  shall alter or impair the  obligation of the
      Company,  which is absolute and  unconditional,  to pay the  principal of,
      liquidated damages and accrued interest, as applicable,  on this Debenture
      at the  time,  place,  and  rate,  and in the  coin  or  currency,  herein
      prescribed.  This  Debenture is a direct debt  obligation  of the Company.
      This Debenture ranks pari passu with all other Debentures now or hereafter
      issued under the terms set forth herein.

            c)  Lost  or  Mutilated  Debenture.   If  this  Debenture  shall  be
      mutilated,  lost,  stolen or  destroyed,  the  Company  shall  execute and
      deliver,  in exchange  and  substitution  for and upon  cancellation  of a
      mutilated  Debenture,  or in lieu of or in substitution for a lost, stolen
      or destroyed  Debenture,  a new Debenture for the principal amount of this
      Debenture so mutilated,  lost, stolen or destroyed,  but only upon receipt
      of evidence of such loss,  theft or destruction of such Debenture,  and of
      the ownership hereof, reasonably satisfactory to the Company.

            d)  Governing  Law.  All  questions   concerning  the  construction,
      validity,  enforcement  and  interpretation  of this  Debenture  shall  be
      governed by and  construed  and


                                       27
<PAGE>

      enforced in  accordance  with the internal  laws of the State of New York,
      without regard to the  principles of conflict of laws thereof.  Each party
      agrees  that  all  legal   proceedings   concerning  the   interpretation,
      enforcement  and defense of the  transactions  contemplated  by any of the
      Transaction  Documents  (whether  brought  against  a party  hereto or its
      respective Affiliates,  directors,  officers,  shareholders,  employees or
      agents) shall be commenced in the state and federal  courts sitting in the
      City of New York, Borough of Manhattan (the "New York Courts"). Each party
      hereto hereby irrevocably submits to the exclusive jurisdiction of the New
      York Courts for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction  contemplated  hereby or discussed herein
      (including  with  respect  to the  enforcement  of any of the  Transaction
      Documents), and hereby irrevocably waives, and agrees not to assert in any
      suit, action or proceeding, any claim that it is not personally subject to
      the  jurisdiction  of such New York  Courts,  or such New York  Courts are
      improper or  inconvenient  venue for such  proceeding.  Each party  hereby
      irrevocably  waives  personal  service of process and  consents to process
      being  served in any such  suit,  action or  proceeding  by mailing a copy
      thereof via  registered  or  certified  mail or overnight  delivery  (with
      evidence of  delivery)  to such party at the address in effect for notices
      to it under this  Debenture and agrees that such service shall  constitute
      good and  sufficient  service  of  process  and  notice  thereof.  Nothing
      contained  herein  shall be  deemed to limit in any way any right to serve
      process in any other manner permitted by applicable law. Each party hereto
      hereby  irrevocably  waives, to the fullest extent permitted by applicable
      law,  any and all right to trial by jury in any legal  proceeding  arising
      out of or  relating to this  Debenture  or the  transactions  contemplated
      hereby.  If either party shall commence an action or proceeding to enforce
      any provisions of this Debenture, then the prevailing party in such action
      or  proceeding  shall be  reimbursed  by the other party for its attorneys
      fees  and  other  costs  and  expenses  incurred  in  the   investigation,
      preparation and prosecution of such action or proceeding.

            e) Waiver.  Any  waiver by the  Company or 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  Company or 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 by the  Company or the
      Holder must be in writing.

            f)  Severability.  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 violates the applicable law governing usury,
      the  applicable  rate of interest due  hereunder  shall  automatically  be
      lowered to equal the maximum rate of interest  permitted under  applicable
      law. 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


                                       28
<PAGE>

      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.

            g) Next  Business  Day.  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.

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

            i) Assumption.  Any successor to the Company or any surviving entity
      in a Fundamental  Transaction shall (i) assume,  prior to such Fundamental
      Transaction,  all of the  obligations  of the Company under this Debenture
      and the other Transaction Documents pursuant to written agreements in form
      and  substance  satisfactory  to  the  Holder  (such  approval  not  to be
      unreasonably  withheld  or  delayed)  and (ii)  issue to the  Holder a new
      debenture  of such  successor  entity  evidenced  by a written  instrument
      substantially similar in form and substance to this Debenture,  including,
      without  limitation,  having a principal amount and interest rate equal to
      the principal  amount and the interest  rate of this  Debenture and having
      similar  ranking to this  Debenture,  which shall be  satisfactory  to the
      Holder (any such approval not to be unreasonably withheld or delayed). The
      provisions  of this  Section  9(i) shall  apply  similarly  and equally to
      successive Fundamental Transactions and shall be applied without regard to
      any limitations of this Debenture.

            j) Security  Interest.  The  obligations  of the Company  under this
      Debenture  are  secured  by all of the  assets  of  the  Company  and  its
      Subsidiaries  pursuant to that certain Security  Agreement entered into in
      connection with the Purchase Agreement.

                              *********************


                                       29
<PAGE>

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

                                   ABLE ENERGY, INC.

                                   By:__________________________________________
                                      Name:
                                      Title:


                                       30
<PAGE>

                                     ANNEX A

                              NOTICE OF CONVERSION

      The undersigned hereby elects to convert principal under the Variable Rate
Convertible  Debenture  of  Able  Energy,  Inc.,  a  Delaware  corporation  (the
"Company"),  due on August __,  2007 , into  shares of common  stock,  par value
$0.001  per  share  (the  "Common  Stock"),  of  the  Company  according  to the
conditions  hereof,  as of the date written below. If shares are to be issued in
the name of a person other than the  undersigned,  the undersigned  will pay all
transfer  taxes  payable with respect  thereto and is  delivering  herewith such
certificates  and opinions as reasonably  requested by the Company in accordance
therewith.  No fee will be charged to the holder for any conversion,  except for
such transfer taxes, if any.

      By the delivery of this Notice of Conversion  the  undersigned  represents
and  warrants to the Company  that its  ownership  of the Common  Stock does not
exceed the amounts  determined in accordance  with Section 13(d) of the Exchange
Act, specified under Section 4 of this Debenture.

      The undersigned agrees to comply with the prospectus delivery requirements
under the  applicable  securities  laws in  connection  with any transfer of the
aforesaid shares of Common Stock.

Conversion calculations:
                             Date to Effect Conversion:

                             Principal Amount of Debenture to be Converted:

                             Payment of Interest in Common Stock __ yes  __ no
                                   If yes, $_____ of Interest Accrued on Account
                                   of Conversion at Issue.

                             Number of shares of Common  Stock to be issued:

                             Signature:

                             Name:

                             Address:


                                       31
<PAGE>

                                   Schedule 1

                               CONVERSION SCHEDULE

The Variable Rate  Convertible  Debentures  due August 8, 2007, in the aggregate
principal  amount of  $____________  issued by Able  Energy,  Inc.,  a  Delaware
corporation.  This Conversion Schedule reflects conversions made under Section 4
of the above referenced Debenture.

                                     Dated:

======================------------------====================-------------------

                                             Aggregate
                                             Principal
                                               Amount
                                             Remaining
  Date of Conversion                       Subsequent to
 (or for first entry,      Amount of         Conversion
 Original Issue Date)     Conversion         (or original       Company Attest
                                              Principal
                                               Amount)
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