SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the “ Agreement
”), is entered into and made effective as of July 6, 2007, by
and between GLOBAL ENERGY, INC., a Nevada corporation with
its principal place of business located at Migdal Aviv, 7 Abba
Hilel Street, Ramat Gan 52520, Israel (the “ Parent
”), and the each subsidiary of the Parent listed on Schedule
I attached hereto (each a “ Subsidiary ,” and
collectively and together with the Parent, the “
Company ”), in favor of the BUYER(S) (the
“ Secured Party ”) listed on Schedule I attached
to the Securities Purchase Agreement (the “ Securities
Purchase Agreement ”) dated the date hereof
between the Company and the Secured Party.
WHEREAS, The Parent shall issue and sell to the Secured
Party, as provided in the Securities Purchase Agreement, and the
Secured Party shall purchase, secured convertible debentures (the
“ Convertible Debentures ”), which shall be
convertible into shares of the Parent’s common stock, par
value $0.001, in the respective amounts set forth opposite each
Buyer(s) name on Schedule I attached to the Securities Purchase
Agreement;
WHEREAS, to induce the Secured Party to enter into the
transaction contemplated by the Securities Purchase Agreement, the
Convertible Debentures, the Investor Registration Rights Agreement
of even date herewith between the Parent and the Secured Party (the
“ Investor Registration Rights Agreement ”), and
the Irrevocable Transfer Agent Instructions among the Parent, the
Secured Party, the Parent’s transfer agent, and David
Gonzalez, Esq. (the “ Transfer Agent Instructions
”) (collectively referred to as the “ Transaction
Documents ”), each Company hereby grants to the Secured
Party a security interest in and to the pledged property of each
Company identified on Exhibit A hereto (collectively
referred to as the “ Pledged Property ”) to
secure all of the Obligations (as defined below).
NOW, THEREFORE, in consideration of the promises and the
mutual covenants herein contained, and for other good and valuable
consideration, the adequacy and receipt of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1.
DEFINITIONS AND
INTERPRETATIONS
Section
1.1. Recitals .
The
above recitals are true and correct and are incorporated herein, in
their entirety, by this reference.
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Section
1.2. Interpretations
.
Nothing
herein expressed or implied is intended or shall be construed to
confer upon any person other than the Secured Party any right,
remedy or claim under or by reason hereof.
Section
1.3. Obligations Secured .
The
security interest created hereby in the Pledged Property
constitutes continuing collateral security for all of the
obligations of the Parent now existing or hereinafter incurred to
the Buyers, whether oral or written and whether arising before, on
or after the date hereof including, without limitation following
obligations (collectively, the “ Obligations
”):
(a) for
so long as the Convertible Debentures are outstanding, the payment
by the Parent, as and when due and payable (by scheduled maturity,
acceleration, demand or otherwise), of all amounts from time to
time owing by it in respect of the Securities Purchase Agreement,
the Convertible Debentures and the other Transaction Documents;
and
(b)
for so long as the Convertible Debentures are outstanding, the due
performance and observance by the Parent of all of its other
obligations from time to time existing in respect of any of the
Transaction Documents, including without limitation, the
Parent’s obligations with respect to any conversion or
redemption rights of the Secured Party under the Convertible
Debentures.
ARTICLE 2.
PLEDGED PROPERTY;
EVENT OF DEFAULT
Section
2.1. Pledged Property
.
(a) As
collateral security for all of the Obligations, the Company hereby
pledges to the Secured Party, and creates in the Secured Party for
its benefit, a continuing security interest in and to all of the
Pledged Property whether now owned or hereafter acquired.
(b) Without
limiting the generality of the foregoing, as additional security
for the payment and performance of the Obligations, each Company
hereby grants to the Secured Party a continuing security interest
in, and hereby collaterally assigns to the Secured Party, all of
such Company’s right, title and interest in and to each
Deposit Account (as defined below) and in and to any deposits or
other sums at any time credited to each such Deposit Account. In
connection with the foregoing, each Company hereby authorizes and
directs each bank or other depository institution which maintains
any Deposit Account to pay or deliver to the Secured Party upon the
Secured Party’s written demand thereof made at any time after
the occurrence of an Event of Default has occurred all balances in
each Deposit Account with such depository for application to the
Obligations then outstanding.
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(c) Simultaneously
with the execution and delivery of this Agreement, the Company
shall make, execute, acknowledge, file, record and deliver to the
Secured Party any documents reasonably requested by the Secured
Party to perfect its security interest in the Pledged Property.
Simultaneously with the execution and delivery of this Agreement,
the Company shall make, execute, acknowledge and deliver to the
Secured Party such documents and instruments, including, without
limitation, financing statements, certificates, affidavits and
forms as may, in the Secured Party’s reasonable judgment, be
necessary to effectuate, complete or perfect, or to continue and
preserve, the security interest of the Secured Party in the Pledged
Property, and the Secured Party shall hold such documents and
instruments as secured party, subject to the terms and conditions
contained herein.
Section
2.2. Event of Default
An
“ Event of Default ” shall be deemed to have
occurred under this Agreement upon an Event of Default under and as
defined in the Convertible Debentures.
ARTICLE 3.
ATTORNEY-IN-FACT;
PERFORMANCE
Section
3.1. Secured Party Appointed
Attorney-In-Fact .
Upon
the occurrence and during the continuance of an Event of Default:
(a) the Company hereby appoints the Secured Party as its
attorney-in-fact, with full authority in the place and stead of the
Company and in the name of the Company or otherwise, from time to
time in the Secured Party’s discretion to take any action and
to execute any instrument which the Secured Party may reasonably
deem necessary to accomplish the purposes of this Agreement,
including, without limitation, to receive and collect all
instruments made payable to the Company representing any payments
in respect of the Pledged Property or any part thereof and to give
full discharge for the same; (b) the Secured Party may demand,
collect, receipt for, settle, compromise, adjust, sue for,
foreclose, or realize on the Pledged Property as and when the
Secured Party may determine, and (c) to facilitate collection, the
Secured Party may notify account debtors and obligors on any
Pledged Property to make payments directly to the Secured
Party.
Section
3.2. Secured Party May
Perform .
If the
Company fails to perform any agreement contained herein, the
Secured Party, at its option, may itself perform, or cause
performance of, such agreement, and the expenses of the Secured
Party incurred in connection therewith shall be included in the
Obligations secured hereby and payable by the Company under Section
8.3.
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ARTICLE 4.
REPRESENTATIONS AND
WARRANTIES
Section
4.1. Authorization;
Enforceability .
Each of
the parties hereto represents and warrants that it has taken all
action necessary to authorize the execution, delivery and
performance of this Agreement and the transactions contemplated
hereby; and upon execution and delivery, this Agreement shall
constitute a valid and binding obligation of the respective party,
subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors’ rights or by
the principles governing the availability of equitable
remedies.
Section
4.2. Ownership of Pledged
Property .
The
Company represents and warrants that it is the legal and beneficial
owner of the Pledged Property free and clear of any lien, security
interest, option or other charge or encumbrance (each, a
“Lien”) except for the security interest created by
this Agreement and other Permitted Liens. For purposes of this
Agreement, “Permitted Liens” means: (1) the security
interest created by this Agreement, (2) existing Liens disclosed by
the Company to the Secured Party; (3) inchoate Liens for taxes,
assessments or governmental charges or levies not yet due, as to
which the grace period, if any, related thereto has not yet
expired, or being contested in good faith and by appropriate
proceedings for which adequate reserves have been established in
accordance with GAAP; (4) Liens of carriers, materialmen,
warehousemen, mechanics and landlords and other similar Liens which
secure amounts which are not yet overdue by more than 60 days or
which are being contested in good faith by appropriate proceedings;
(5) licenses, sublicenses, leases or subleases granted to other
Persons not materially interfering with the conduct of the business
of the Company; (6) Liens securing capitalized lease obligations
and purchase money indebtedness incurred solely for the purpose of
financing an acquisition or lease; (7) easements, rights-of-way,
restrictions, encroachments, municipal zoning ordinances and other
similar charges or encumbrances, and minor title deficiencies, in
each case not securing debt and not materially interfering with the
conduct of the business of the Company and not materially
detracting from the value of the property subject thereto; (8)
Liens arising out of the existence of judgments or awards which
judgments or awards do not constitute an Event of Default; (9)
Liens incurred in the ordinary course of business in connection
with workers compensation claims, unemployment insurance, pension
liabilities and social security benefits and Liens securing the
performance of bids, tenders, leases and contracts in the ordinary
course of business, statutory obligations, surety bonds,
performance bonds and other obligations of a like nature (other
than appeal bonds) incurred in the ordinary course of business
(exclusive of obligations in respect of the payment for borrowed
money); (10) Liens in favor of a banking institution arising by
operation of law encumbering deposits (including the right of
set-off) and contractual set-off rights held by such banking
institution and which are within the general parameters customary
in the banking industry and only burdening deposit accounts or
other funds maintained with a creditor depository institution; (11)
usual and customary set-off rights in leases and other contracts;
and (12) escrows in connection with acquisitions and
dispositions.
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ARTICLE 5.
DEFAULT; REMEDIES;
SUBSTITUTE COLLATERAL
Section
5.1 Method of Realizing Upon
the Pledged Property: Other Remedies .
If any
Event of Default shall have occurred and be continuing:
(a) The
Secured Party may exercise in respect of the Pledged Property, in
addition to any other rights and remedies provided for herein or
otherwise available to it, all of the rights and remedies of a
secured party upon default under the Uniform Commercial Code
(whether or not the Uniform Commercial Code applies to the affected
Pledged Property), and also may (i) take absolute control of the
Pledged Property, including, without limitation, transfer into the
Secured Party's name or into the name of its nominee or nominees
(to the extent the Secured Party has not theretofore done so) and
thereafter receive, for the benefit of the Secured Party, all
payments made thereon, give all consents, waivers and ratifications
in respect thereof and otherwise act with respect thereto as though
it were the outright owner thereof, (ii) require the Company to
assemble all or part of the Pledged Property as directed by the
Secured Party and make it available to the Secured Party at a place
or places to be designated by the Secured Party that is reasonably
convenient to both parties, and the Secured Party may enter into
and occupy any premises owned or leased by the Company where the
Pledged Property or any part thereof is located or assembled for a
reasonable period in order to effectuate the Secured Party's rights
and remedies hereunder or under law, without obligation to the
Company in respect of such occupation, and (iii) without notice
except as specified below and without any obligation to prepare or
process the Pledged Property for sale, (A) sell the Pledged
Property or any part thereof in one or more parcels at public or
private sale, at any of the Secured Party's offices or elsewhere,
for cash, on credit or for future delivery, and at such price or
prices and upon such other terms as the Secured Party may deem
commercially reasonable and/or (B) lease, license or dispose of the
Pledged Property or any part thereof upon such terms as the Secured
Party may deem commercially reasonable. The Company agrees that, to
the extent notice of sale or any other disposition of the Pledged
Property shall be required by law, at least ten (10) days' notice
to the Company of the time and place of any public sale or the time
after which any private sale or other disposition of the Pledged
Property is to be made shall constitute reasonable notification.
The Secured Party shall not be obligated to make any sale or other
disposition of any Pledged Property regardless of notice of sale
having been given. The Secured Party may adjourn any public or
private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. The
Company hereby waives any claims against the Secured Party arising
by reason of the fact that the price at which the Pledged Property
may have been sold at a private sale was less than the price which
might have been obtained at a public sale or was less than the
aggregate amount of the Obligations, even if the Secured Party
accepts the first offer received and does not offer such Pledged
Property to more than one offeree, and waives all rights that the
Company may have to require that all or any part of such Pledged
Property be marshaled upon any sale (public or private) thereof.
The Company hereby acknowledges that (i) any such sale of the
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Pledged Property by the Secured Party may be
made without warranty, (ii) the Secured Party may specifically
disclaim any warranties of title, possession, quiet enjoyment or
the like, and (iii) such actions set forth in clauses (i) and (ii)
above shall not adversely affect the commercial reasonableness of
any such sale of Pledged Property.
(b)
Any cash held by the Secured Party as Pledged Property and all cash
proceeds received by the Secured Party in respect of any sale of or
collection from, or other realization upon, all or any part of the
Pledged Property shall be applied (after payment of any amounts
payable to the Secured Party pursuant to Section 8.3 hereof) by the
Secured Party against, all or any part of the Obligations in such
order as the Secured Party shall elect, consistent with the
provisions of the Securities Purchase Agreement. Any surplus of
such cash or cash proceeds held by the Secured Party and remaining
after the indefeasible payment in full in cash of all of the
Obligations shall be paid over to whomsoever shall be lawfully
entitled to receive the same or as a court of competent
jurisdiction shall direct.
(c)
In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the
Secured Party is legally entitled, the Company shall be liable for
the deficiency, together with interest thereon at the rate
specified in the Convertible Debentures for interest on overdue
principal thereof or such other rate as shall be fixed by
applicable law, together with the costs of collection and the
reasonable fees, costs, expenses and other client charges of any
attorneys employed by the Secured Party to collect such
deficiency.
(d) The
Company hereby acknowledges that if the Secured Party complies with
any applicable state, provincial, or federal law requirements in
connection with a disposition of the Pledged Property, such
compliance will not adversely affect the commercial reasonableness
of any sale or other disposition of the Pledged Property.
(e) The
Secured Party shall not be required to marshal any present or
future collateral security (including, but not limited to, this
Agreement and the Pledged Property) for, or other assurances of
payment of, the Obligations or any of them or to resort to such
collateral security or other assurances of payment in any
particular order, and all of the Secured Party's rights hereunder
and in respect of such collateral security and other assurances of
payment shall be cumulative and in addition to all other rights,
however existing or arising. To the extent that the Company
lawfully may, the Company hereby agrees that it will not invoke any
law relating to the marshaling of collateral which might cause
delay in or impede the enforcement of the Secured Party's rights
under this Agreement or under any other instrument creating or
evidencing any of the Obligations or under which any of the
Obligations is outstanding or by which any of the Obligations is
secured or payment thereof is otherwise assured, and, to the extent
that it lawfully may, the Company hereby irrevocably waives the
benefits of all such laws.
Section
5.2 Dutie
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