EXHIBIT A

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: March __, 2006
Original Conversion Price (subject to adjustment herein): $_____

$_______________

10% SENIOR SECURED AMORTIZING CONVERTIBLE DEBENTURE
DUE SEPTEMBER _, 2008

THIS 10% Senior Secured Amortizing Convertible Debenture is one of a series of
duly authorized and issued Senior Secured Debentures of Viral Genetics, Inc., a
Delaware corporation, having a principal place of business at 1321 Mountain View
Circle, Azusa, California 91702 (the “Company”), designated as its 10% Senior
Secured Amortizing Convertible Debenture, due September _, 2008 (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 September 1, 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 have the meanings given to such terms in the Purchase Agreement, and (b)
the following terms shall have the following meanings:

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“Alternate Consideration” shall have the meaning set forth in Section 5(d).

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

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

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

“Change of Control Transaction” means 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 51% of the
voting securities of the Company, 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 51% of the
aggregate voting power of the Company or the successor entity of such
transaction, or (iii) the Company sells or transfers its assets, as an entirety
or substantially as an entirety, to another Person and the stockholders of the
Company immediately prior to such transaction own less than 51% of the aggregate
voting power of the acquiring entity immediately after the transaction, (iv) a
replacement at one time 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 above in (i)
through (iv).

“Common Stock” means the common stock, par value $0.0001 per share, of the
Company and stock of any other class of securities into which such securities
may hereafter have been 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 the shares of Common Stock issuable upon conversion of
this Debenture or as payment of interest in accordance with the terms.

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

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“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 given to such term 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 Notice of Conversions of the Holder, if any,
(ii) all liquidated damages and other amounts owing to the Holder in respect of
this Debenture shall have been paid, (iii) there is an effective Registration
Statement 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 the Trading Market and all of the shares issuable pursuant to the
Transaction Documents are listed for trading on a 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 then existing no Event of Default or 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 question to the Holder
would not violate the limitations set forth in Section 4(c)(i) and Section
4(c)(ii) and (viii) no public announcement of a pending or proposed Fundamental
Transaction, Change of Control Transaction or acquisition transaction has
occurred that has not been consummated.

“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.

“Forced Conversion” shall have the meaning set forth in Section 6(c).

“Forced Conversion Notice” shall have the meaning set forth in Section 6(c).

“Forced Conversion Notice Date” shall have the meaning set forth in Section
6(c).

“Fundamental Transaction” shall have the meaning set forth in Section 5(d).

“Interest Conversion Rate” means the lesser of (a) the Conversion Price and (b)
the 90% of the lesser of (i) the average of the 20 VWAPs immediately prior to
the applicable Interest Payment Date or (ii) the average of the 20 VWAPs
immediately prior to the date the applicable interest payment shares are issued
and delivered if more than three Trading Days after the Interest Payment Date.

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“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 Share Amount” shall have the meaning set forth in Section 2(a).

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

“Mandatory Default Amount” shall equal the sum of (i) the greater of: (A) 130%
of the principal amount of this Debenture to be prepaid, plus all accrued and
unpaid interest thereon, or (B) the principal amount of this Debenture to be
prepaid, plus all other accrued and unpaid interest hereon, divided by the
Conversion Price on (x) the date the Mandatory Default Amount is demanded or
otherwise due or (y) the date the Mandatory Default Amount is paid in full,
whichever is less, multiplied by the VWAP on (x) the date the Mandatory Default
Amount is demanded or otherwise due or (y) the date the Mandatory Default Amount
is paid in full, whichever is greater, 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(a)
hereof.

“Monthly Conversion Price” shall have the meaning set forth in Section 6(a)
hereof.

“Monthly Redemption” shall mean the redemption of this Debenture pursuant to
Section 6(a) hereof.

“Monthly Redemption Amount” shall mean, as to a Monthly Redemption, $______1.

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

“Monthly Redemption Notice” shall have the meaning set forth in Section 6(a)
hereof.

“Monthly Redemption Period” shall have the meaning set forth in Section 6(a)
hereof.

“Monthly Redemption Share Amount” shall have the meaning set forth in Section
6(a) hereof.

_____________________________
(1) 1/24th of Principal Amount of this Debenture on Closing.

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“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).

“Original Issue Date” shall mean the date of the first issuance of the
Debentures regardless of the number of transfers of any Debenture and regardless
of the number of instruments which may be issued to evidence such Debenture.

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

“Purchase Agreement” means the Securities Purchase Agreement, dated as of March
_, 2006, to which the Company and the original Holder are parties, as amended,
modified or supplemented from time to time in accordance with its terms.

“Registration Rights Agreement” means the Registration Rights Agreement, dated
as of the date of the Purchase Agreement, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to time in
accordance with its terms.

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

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

“Subsidiary” shall have the meaning given to such term in the Purchase
Agreement.

“Trading Day” means a day on which the Common Stock is traded on a Trading
Market.

“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 Over The
Counter Bulletin Board, the Nasdaq SmallCap Market, the American Stock Exchange,
the New York Stock Exchange or the Nasdaq National Market.

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

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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 of 10% simple interest per annum, payable quarterly
on January 1, April 1, July 1 and October 1, beginning on October 1, 2006, 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 shares of Common Stock at the Interest
Conversion Rate, or a combination of shares and cash (the amount to be paid in
shares, the “Interest Share Amount”); provided, however, (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, unless waived by the Holder in writing,
have been met, and the Company shall have given the Holder notice in accordance
with the notice requirements set forth below and (ii) as to such Interest
Payment Date, prior to the such Interest Notice Period (but not more 5 Trading
Days prior to the commencement of the 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 shares of
Common Stock or cash shall be at the discretion of the Company. Prior to the
commencement of an Interest Notice Period, the Company shall provide the Holder
with 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 may indicate that the election contained in such notice shall continue
for later periods until revised. 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 such election shall occur without penalty or default. 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 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 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 and other amounts which may become due hereunder, has been made.
Payment of interest in shares of Common Stock shall otherwise occur pursuant to
Section 4(d)(ii) and only for purposes of the payment of interest in shares, the
Interest Payment Date shall be deemed the

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Conversion Date. Interest shall cease to accrue with respect to any principal
amount converted, provided that the Company in fact 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 Debentures based on their (or their
predecessor’s) initial purchases of Debentures pursuant to the Purchase
Agreement.

d)      Late Fee. All overdue accrued and unpaid interest to be paid hereunder
shall entail a late fee at the rate of 18% simple interest per annum (or such
lower maximum amount of interest permitted to be charged under applicable law)
(“Late Fees”) which will accrue daily, from the date such interest is due
hereunder through and including the date of payment. Notwithstanding anything to
the contrary contained herein, if on any Interest Payment Date the Company has
elected to pay interest in Common Stock and is not able to pay accrued interest
in the form of Common Stock because it does not then satisfy the conditions for
payment in the form of 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 cash interest
payment, shall deliver, within three Trading Days of each applicable Interest
Payment Date, an amount in cash equal to the product of 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 and the highest 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.

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 made
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 to the Company
for transfer 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

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purposes, whether or not this Debenture is overdue, and neither the Company nor
any such agent shall be affected by notice to the contrary.

Section 4.    Conversion.

a)      Voluntary Conversion. At any time after the Original Issue date and
until this Debenture is no longer outstanding, this Debenture shall be
convertible into shares of Common Stock at the option of the Holder, in whole or
in part at any time and from time to time (subject to the limitations on
conversion set forth in Section 4(c) hereof). The Holder shall effect
conversions by delivering to the Company the form of Notice of Conversion
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 is to 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 provided 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 converted and
the date of such conversions. The Company shall deliver any objection to any
Notice of Conversion within 1 Business Day of receipt of such notice. 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. Notwithstanding anything
herein to the contrary, the Holders right to convert hereunder shall in no way
excuse the Company from having to meet its obligation to pay the outstanding
principal and interest on this Debenture nor shall it limit the Holder’s right
to seek any other remedy against the Company for failing to meet such
obligations. The right to convert this Debenture into Conversion Shares is in
addition to any other rights or remedies the Holder may have hereunder or under
law.

b)      Conversion Price. The conversion price in effect on any Conversion Date
shall be equal to $_____ [the lower of $0.45 or 65% of the average of the 5 day
VWAP prior to Closing] (subject to adjustment herein)(the “Conversion Price”).

c)      Conversion Limitations.

i.      Omitted.

ii.      Holder’s Restriction on Conversion. The Company shall not effect any
conversion of this Debenture, and the Holder shall not have the right to convert
any portion of this Debenture, pursuant to Section 4(a) or otherwise, to the
extent that after giving effect to such conversion, the Holder (together with
the

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Holder’s Affiliates), as set forth on the applicable Notice of Conversion, would
beneficially own in excess of 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to such conversion. For purposes of
the foregoing sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates shall include the number of shares of Common
Stock issuable upon conversion of this Debenture with respect to which the
determination of such sentence is being made, but shall exclude the number of
shares of Common Stock which would be issuable upon (A) conversion of the
remaining, nonconverted portion of this Debenture beneficially owned by the
Holder or any of its Affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any other Debentures or the Warrants) subject to
a limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the 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 applies, the determination of
whether this Debenture is convertible (in relation to other securities owned by
the Holder) and of which a portion of this Debenture is convertible shall be in
the sole discretion of such Holder. To ensure compliance with this restriction,
the 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, the Holder may
rely on the number of outstanding shares of Common Stock as reflected in (x) the
Company’s most recent Form 10-QSB or Form 10-KSB, as the case may be, (y) a more
recent public announcement by the Company or (z) any other notice by the Company
or the Company’s Transfer Agent approved by the Company setting forth the number
of shares of Common Stock outstanding. Upon the written or oral request of the
Holder, the Company shall within two Trading Days confirm orally and in writing
to the 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 the Holder or its Affiliates since the date as of
which such number of outstanding shares of Common Stock was reported. The
provisions of this Section 4(c) may be waived by the Holder, at the election of
the Holder, upon not less than 61 days’ prior notice to the Company, and the
provisions of this Section 4(c) shall continue to apply until such 61st day (or
such later date, as determined by the Holder, as may be specified in such notice
of waiver). The provisions of this paragraph shall be implemented in a manner
necessary to preserve the intended 4.99% beneficial ownership limitation herein
contained and shall not be modified in a manner

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otherwise than in conformity with the terms of this Section 4(c) to correct this
paragraph (or any portion hereof) which may be defective or inconsistent with
the intended 4.99% beneficial ownership limitation herein contained or to make
changes or supplements necessary or desirable to properly give effect to such
4.99% limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Debenture. The holders of Common Stock of the Company
shall be third party beneficiaries of this Section 4(c) and the Company may not
waive this Section 4(c) without the consent of holders of a majority of its
Common Stock.

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 any Conversion Date, the Company will deliver or cause to be
delivered to the Holder (A) a certificate or certificates representing the
Conversion Shares which shall be free of restrictive legends and trading
restrictions (other than those 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 or wire in the amount of accrued and
unpaid interest (if the Company is required to pay accrued interest in cash).
The Company shall, if available and if allowed under applicable securities laws,
use its best efforts to deliver any certificate or certificates required to be
delivered by the Company under this Section electronically through the
Depository Trust Corporation 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 third Trading Day after a Conversion Date, the
Holder shall be entitled by written notice to the Company at any time on or
before its receipt of such certificate or certificates thereafter, to rescind
such conversion,

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in which event the Company shall immediately return the certificates
representing the principal amount of this Debenture tendered for conversion.

iv.      Obligation Absolute; Partial Liquidated Damages. If the Company fails
for any reason to deliver to the Holder such certificate or certificates
pursuant to Section 4(d)(ii) by the third 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 after 5 Trading Days after such damages
begin to accrue) for each Trading Day after such third Trading Day until such
certificates are delivered. 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 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, 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 any one
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, restraining and or enjoining conversion of all or part of this Debenture
shall have been sought and obtained and the Company, if it is the party seeking
the injunction, posts a surety bond for the benefit of the Holder in the amount
of 150% of the principal amount of this Debenture outstanding, which is subject
to the injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Holder to the extent it obtains judgment. In the absence of an
injunction precluding the same, the Company shall issue Conversion Shares or, if
applicable, cash, upon a properly noticed conversion. Nothing herein shall limit
a Holder’s right to pursue actual damages or declare an Event of Default
pursuant to Section 8 herein 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 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.

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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 pursuant to Section 4(d)(ii) by the third Trading Day after the
Conversion Date, and if after such third Trading Day the Holder is required by
its brokerage firm to purchase (in an open market transaction or otherwise)
Common Stock to deliver in satisfaction of a sale by such Holder of the
Conversion Shares which the Holder anticipated receiving upon such conversion (a
“Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to
any remedies available to or elected by the Holder) the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
Common Stock so purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that such Holder anticipated receiving from the
conversion at issue multiplied by (2) the actual sale price of the Common Stock
at the time of the sale (including brokerage commissions, if any) giving rise to
such purchase obligation 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 had the Company 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 at the time of the sale
(including brokerage commissions, if any) 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.

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 solely for the purpose of issuance upon
conversion of this Debenture and payment of interest on this Debenture, each as
herein provided, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holder (and the other holders of the
Debentures), not less than such 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 and validly
authorized, issued and fully paid, nonassessable and, if the Registration
Statement is then effective under the Securities Act, registered for public sale
in accordance with such Registration Statement.

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vii.      Fractional Shares. The Holder shall be entitled to receive, in lieu of
fractional shares, one 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 certificate, 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 on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company pursuant to this Debenture, including as interest thereon), (B)
subdivides outstanding shares of Common Stock into a larger number of shares,
(C) combines (including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (D) issues by reclassification
of shares of the Common Stock any shares of capital stock of the Company, then
the Conversion Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding 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, shall offer, sell,
grant any option to purchase or offer, sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce any offer, 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 less than the then Conversion Price (such lower price,
the “Base Conversion Price” and such issuances collectively, a “Dilutive
Issuance”), as adjusted hereunder (if the holder of the Common Stock or Common
Stock Equivalents so issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion, exercise or exchange

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prices or otherwise, or due to warrants, options or rights per share which is
issued in connection with such issuance, be entitled to receive shares of Common
Stock at an effective price per share which is less 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, indicating therein
the applicable issuance price, or of 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, after the date of such Dilutive Issuance the Holder is
entitled to receive a number of Conversion Shares based upon the Base Conversion
Price regardless of whether the Holder accurately refers to the Base Conversion
Price in the Notice of Conversion.

c)      Pro Rata Distributions. If the Company, at any time while this Debenture
is outstanding, shall distribute to all holders of Common Stock (and not to the
holders of the Debenture) evidences of its indebtedness or assets (including
cash and cash dividends) or rights or warrants to subscribe for or purchase any
security, 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 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
one outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall be described in a
statement provided to the Holder of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one 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.

d)      Fundamental Transaction. If, at any time while this Debenture is
outstanding, (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 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

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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 one 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 one 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 paragraph
(d) and insuring that this Debenture (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.

e)      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 treasury shares, if any) issued and outstanding.

f)      Notice to the Holder.

i.      Adjustment to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any 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) on the Common Stock; (B) the Company
shall declare a special nonrecurring cash dividend on or a redemption of

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the Common Stock; (C) the Company shall authorize the granting to all holders of
the Common Stock 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; (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 mailed to the Holder at its last addresses as
it shall appear upon the stock books of the Company, at least 20 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 mail such notice or any defect therein or in the mailing 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
20-day period commencing the date of such notice to the effective date of the
event triggering such notice.

Section 6.      Monthly Redemption and Forced Conversion.

a)      Monthly Redemption. On each Monthly Redemption Date, the Company shall
redeem the Monthly Redemption Amount plus the sum of all liquidated damages and
any other amounts then owing to such Holder in respect of this Debenture (the
“Monthly Redemption”). The Monthly Redemption Amount due on each Monthly
Redemption Date shall be paid in cash; provided, however, as to any Monthly
Redemption Amount paid in cash, the Company shall pay a cash value equal to 105%
of such Monthly Redemption Amount. Additionally, as to any Monthly Redemption
and upon 20 Trading Days’ prior written irrevocable notice (the “Monthly
Redemption Notice” and the 20 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) 80% of the average of the 3 lowest

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Closing Bid Prices during the ten trading days 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
ten Trading Day period)(the price calculated during the 5 Trading Day period
immediately prior to the Monthly Redemption Date, the “Monthly Conversion Price”
and such period, the “Monthly Conversion Period”); provided, however, that the
Company may not pay the Monthly Redemption Amount in Conversion Shares unless,
(i) 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, unless waived in writing by the Holder, have been satisfied,
and (ii) . as to such Monthly Redemption, prior to such Monthly Redemption
Period (but not more 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 then
Conversion Price (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 and all amounts owing thereon 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 Conversion Shares issuable in payment of
the Monthly Redemption 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 to 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 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 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, if applicable.

b)      Redemption Procedure. The payment of cash and/or issuance of Common
Stock (other than the Pre-Redemption Conversion Shares), as the case may be,
pursuant to a Monthly Redemption shall be made on the Monthly Redemption Date.
The aggregate number of Conversion Shares otherwise issuable to the Holder
pursuant to a Monthly Redemption on a Monthly Redemption Date shall be reduced
by the number of

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Pre-Redemption Conversion Shares issued to the Holder in connection with such
Monthly Redemption (adjusted appropriately for any such shares applied to
conversion during the Monthly Redemption Period). If any portion of the cash
payment for a Monthly Redemption shall not be paid by the Company by the
respective due date, interest shall accrue thereon at the rate of 18% per annum
(or the maximum rate permitted by applicable law, whichever is less) until the
payment of the Monthly Redemption Amount, plus all amounts owing thereon, is
paid in full. Alternatively, if any portion of the Monthly Redemption Amount
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,
notwithstanding anything herein contained to the contrary. 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.

c)      Forced Conversion. Notwithstanding anything herein to the contrary, if
after the Effective Date, each of the Closing Prices for any 20 Trading Days out
of 30 consecutive Trading Days (such 30 day period commencing only after the
later of the Effective Date, such period the “Threshold Period”)) exceeds 200%
of the then Conversion Price, the Company may, within 1 Trading Day of the end
of any such Threshold Period, deliver a notice to the Holder (a “Forced
Conversion Notice” and the date such notice is received by the Holder, the
“Forced Conversion Notice Date”) to cause the Holder to immediately convert all
or part of the then outstanding principal amount of Debentures pursuant to
Section 4. The Company may only effect a Forced Conversion Notice if (i) all of
the Equity Conditions are met through the applicable Threshold Period until the
date of the applicable Forced Conversion and through and including the date such
shares of Common Stock are issued to the Holder, and (ii) the average daily
trading volume of the Common Stock for the 20 consecutive Trading Days prior to
the delivery of the Forced Conversion Notice is above 300,000 shares. In
addition, only up to 25% of the Debentures may be force converted 60 days after
the Effective Date, up to 75% after 120 of the Effective Date, and up to 100%
after 150 days of the Effective Date. Any Forced Conversion shall be applied
ratably to all Holders based on their initial purchases of Debentures pursuant
to the Purchase Agreement. For purposes of clarification, a Forced Conversion
shall be subject to all of the provisions of Section 4, including, without
limitation, the provision requiring payment of liquidated damages and
limitations on conversions.

d)      Optional Redemption Right. Commencing six months after the Effective
Date and notwithstanding anything to the contrary contained in this Debenture,
so long as the Equity Conditions are met, the Company shall have the right,
exercisable on not less than twenty (20) Trading Days prior written notice to
the Holder of the Debentures, to prepay in part or in full the Debenture in
accordance with this Section 6. Any notice of prepayment hereunder (an “Optional
Prepayment”) shall be delivered to the Holders of the Debentures and shall state
(1) that the Company is exercising its right to prepay the Debentures issued on
the Original Issue Date and (2) the date of prepayment (the

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“Optional Prepayment Notice”). On the date fixed for prepayment (the “Optional
Prepayment Date”), the Company shall make payment of the Optional Prepayment
Amount (as defined below) to the Holder. If the Company exercises its right to
prepay the Debenture, the Company shall make payment to the Holder of an amount
in cash equal to 120% multiplied by the sum of the then outstanding principal
amount of this Debenture plus any amounts owed to the Holder (“Optional
Prepayment Amounts”). The Holder shall at all times prior to the Optional
Prepayment Date maintain the right to convert all or any portion of the
Debenture and any portion of Debenture so converted after receipt of an Optional
Prepayment Notice and prior to the Optional Prepayment Date set forth in such
notice and payment of the aggregate Optional Prepayment Amount shall be deducted
from the principal amount of Debenture which is otherwise subject to prepayment
pursuant to such notice. If the Company delivers an Optional Prepayment Notice
and fails to pay the Optional Prepayment Amount due to the Holder of the
Debenture on the Optional Prepayment Date, then the Company shall forfeit its
right to prepay the Debenture pursuant to such Optional Prepayment Notice and
shall thereafter forfeit its right to Optional Prepayment.

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

a)      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
except in the ordinary course of business in an amount in the aggregate not to
exceed $25,000 and indebtedness incurred for purchase or lease of fixtures and
equipment in an aggregate amount not to exceed $8,000,000;

b)      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, except for
capital leases and purchase money security interests established on the
acquisition of fixtures and equipment;

c)      amend its certificate of incorporation, bylaws or other charter
documents so as to materially and adversely affect 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 the Conversion Shares to the extent permitted or
required under the Transaction Documents or as otherwise permitted by the
Transaction Documents;

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.

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Section 8.      Events of Default.

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

i.      any default in the payment of (A) the principal amount of any Debenture,
or (B) interest (including Late Fees) on, or liquidated damages in respect of,
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 3 Trading Days;

ii.      the Company shall fail to observe or perform any other covenant or
agreement contained in this Debenture or any other Debenture (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) 5
Trading Days after notice of such default sent by the Holder or by any other
Holder and (B) 10 Trading Days after the Company shall become or should have
become aware of such failure;

iii.      a default or event of default (subject to any grace or cure period
provided for 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 bound
after an opportunity to cure of 5 trading days;;

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

v.      (i) the Company or any of its Subsidiaries shall commence a case, as
debtor, a case under any applicable bankruptcy or insolvency laws as now or
hereafter in effect or any successor thereto, or the Company or any Subsidiary
commences any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction whether now or hereafter in effect relating to the
Company or any Subsidiary thereof or (ii) there is commenced a case against the
Company or any Subsidiary thereof, under any applicable bankruptcy or insolvency
laws, as now or hereafter in effect or any successor thereto

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which remains undismissed for a period of 60 days; or (iii) the Company or any
Subsidiary thereof is adjudicated by a court of competent jurisdiction insolvent
or bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or (iv) the Company or any Subsidiary thereof suffers any
appointment of any custodian or the like for it or any substantial part of its
property which continues undischarged or unstayed for a period of 60 days; or
(v) the Company or any Subsidiary thereof makes a general assignment for the
benefit of creditors; or (vi) the Company shall fail to pay, or shall state that
it is unable to pay, or shall be unable to pay, its debts generally as they
become due; or (vii) the Company or any Subsidiary thereof shall call a meeting
of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (viii) the Company or any Subsidiary thereof
shall by any act or failure to act expressly indicate its consent to, approval
of or acquiescence in any of the foregoing; or (ix) any corporate or other
action is taken by the Company or any Subsidiary thereof for the purpose of
effecting any of the foregoing;

vi.      the Company or any Subsidiary shall default in 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 of the Company in
an amount exceeding $150,000, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such indebtedness becoming
or being declared due and payable prior to the date on which it would otherwise
become due and payable;

vii.      the Common Stock shall not be eligible for quotation on or quoted for
trading on a Trading Market and shall not again be eligible for and quoted or
listed for trading thereon within five Trading Days;

viii.       a Registration Statement shall not have been declared effective by
the Commission on or prior to the 130th calendar day after the Closing Date;

ix.      if, during the Effectiveness Period (as defined in the Registration
Rights Agreement), the effectiveness of the Registration Statement lapses for
any reason or the Holder shall not be permitted to resell Registrable Securities
(as defined in the Registration Rights Agreement) under the Registration
Statement, in either case, for more than 15 consecutive Trading Days or 20
non-consecutive Trading Days during any 12 month period; provided, however, that
in the event that 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 transactions or the parties thereto that is not available or may
not be publicly disclosed at the time, the

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Company shall be permitted an additional 5 consecutive Trading Days during any
12 month period relating to such an event; or

x.      the Company shall fail for any reason to deliver certificates to a
Holder prior to the third Trading Day after a Conversion Date pursuant to and in
accordance with Section 4(d) or the Company shall provide notice to the Holder,
including by way of public announcement, at any time, of its intention not to
comply with requests for conversions of any Debentures in accordance with the
terms hereof. i.

b)      Remedies Upon Event of Default. If any Event of Default occurs, the full
principal amount of this Debenture, together with interest and other amounts
owing in respect thereof, to the date of acceleration shall become, at the
Holder’s election, immediately due and payable in cash. The aggregate amount
payable upon an Event of Default shall be equal to 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 the rate of 18% per annum, or such lower maximum amount of
interest permitted to be charged under applicable law. Upon the payment in full
of the Mandatory Default Amount on this entire Debenture the Holder shall
promptly surrender this Debenture to or as directed by the Company. 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
declaration may be rescinded and annulled by Holder at any time prior to payment
hereunder and the Holder shall have all rights as a Debenture holder until such
time, if any, as the full payment under this Section shall have been received by
it. 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, sent by
a nationally recognized overnight courier service, addressed to the Company, at
the address set forth above, facsimile number (___) __________, Attn: ________
with a copy to ______________at facsimile number (___) _____ or such other
address or facsimile number as the Company may specify for such purposes by
notice to the Holder delivered in accordance with this Section. 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, sent by a
nationally recognized overnight courier service addressed to each Holder at the
facsimile telephone number or address of such Holder appearing on the books of
the Company, or if no such facsimile telephone 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

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earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 5:30 p.m. (New York City time), (ii) the date after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section later than 5:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such 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, interest and liquidated
damages (if any) 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, and indemnity, if requested, all
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 enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, 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 any such court, 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

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

g)      Next Business Day. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day or Trading Day, such payment or
obligation shall be made or performed 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 surviving entity in a
Fundamental Transaction shall (i) assume in writing all of the obligations of
the Company under this Debenture and the other Transaction Documents pursuant to
written

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agreements in form and substance satisfactory to the Holder (such approval not
to be unreasonably withheld or delayed) prior to such Fundamental Transaction
and (ii) to 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 amounts and the interest rates of the
Debentures held by the Holder and having similar ranking to this Debenture, and
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.

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

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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.

VIRAL GENETICS, INC.

By:__________________________________________

Name:

Title:

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ANNEX A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the 10% Senior Secured
Amortizing Convertible Debenture of Viral Genetics, Inc., a Delaware corporation
(the “Company”), due on September ____, 2008, into shares of common stock, par
value $0.0001 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:

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Schedule 1

CONVERSION SCHEDULE

The 10 % Senior Secured Debentures due on September __, 2008, in the aggregate
principal amount of $____________ issued by Viral Genetics, Inc. This Conversion
Schedule reflects conversions made under Section 4 of the above referenced
Debenture.

Dated:

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

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